Can Bitcoin work alongside Traditional Currencies?

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Image from Deposit Photos

By Alain Guillot

Special to Financial Independence Hub

Compared with fiat money and other legal tender, can Bitcoin work to benefit our everyday lives? This is a loaded question, to say the least, with some complex answers, mainly due to the nature of crypto itself. Can BTC beat inflation? And how can you use it in life? Here, we explore.

Bitcoin and Fiat Legal Tender

Fiat money is a currency that is declared legal tender by a country. Think the British pound, the US dollar, and the Euro. These are mainly backed by the country’s gold reserves, known as the gold standard, except for the US dollar, which is backed by the United States’ oil reserves. Yet Bitcoin is becoming legal tender in some countries because of its inherent value. This article by Jonathan Martin explores the backing of Bitcoin in El Salvador if you want to know more.

Will Bitcoin Work to Beat Inflation?

Inflation has been almost out of control for a while now and shows little sign of slowing in some countries. Yet Bitcoin can be something of a hedge against inflation as its price often decreases with high inflation. This makes for interesting investments as you wait for the price to rise and offset any inflationary losses during the period and over the long term. However, it is also notable that Bitcoin itself does experience its own times of inflation but cannot be manipulated.

Beating the Banks

If you have ever sent money overseas, then you know it can be expensive and isn’t always quick. All banks place a relatively high fee on international bank transfers, and it can be slow at the weekend and during holidays. Bitcoin doesn’t experience these issues. And while there is often a fee, it is comparatively low, and transfer is almost instant at any time. This makes Bitcoin an excellent method of both paying for goods and services and receiving money for your own.

The Pros and Cons of Bitcoin Today

Bitcoin can be a great alternative to traditional fiat payments and is widely known as a good investment. But it isn’t without its risks. So, here are some documented pros and cons:

Pros

  • Bitcoin offers a high degree of anonymous data for its users and is transparent.
  • There is no centralized banking system controlling Bitcoin or cryptocurrency.
  • The returns on an investment can be massive if you invest at the right time.

Cons

  • The investment opportunities of BTC are extremely volatile, with long, low periods.
  • There is no government oversight as to how Bitcoin and crypto operate.
  • Even today, there is limited use potential for Bitcoin for most everyday people.

Bitcoin has its uses and is somewhat more secure than money. Given it is relatively new, there are limitations as to how you can use BTC and other cryptocurrencies in daily life.

How Accessible is Bitcoin?

Bitcoin is known as a very accessible medium of payment. Anyone can use it, and anyone can trade it. This is because there is no single entity that controls Bitcoin, even centralized global banks. However, while most developed nations allow Bitcoin, it is worth noting that Bitcoin is banned in some countries. Rather unsurprisingly, these include China and Saudi Arabia. It is also regarded that last year’s dramatic drop in BTC value was caused by China’s actions.

How Does Bitcoin Work for Everyday Life?

You can use Bitcoin just as you would any other type of money. Of course, you use it in different formats, but the systems are the same. For example, you can use Bitcoin to pay for goods and services online. However, rather than your bank card, you load a Bitcoin wallet or card with the cryptocurrency. It is worth noting, though, that acceptance of Bitcoin is not as widespread as some would like. But even established brands like Burger King, Tesla, and Starbucks accept it.

The Future of Crypto Against Fiat

Fiat currencies are well-established and will probably not lose out to crypto because of their relative stability. Crypto, especially Bitcoin, is well known for its volatility. This means the value fluctuates a lot. However, there is the potential for crypto to co-exist alongside fiat currency, but this all depends on world governments’ willingness to accept it. Will it happen? Who knows? But the more people use it, the more world leaders and banks will have to take notice.

Summary

Legal tender and Bitcoin work together when the groundwork is laid. However, there are still issues with BTC, such as its decentralized system and minimal oversight. That being said, if world governments and banks are willing, Bitcoin and crypto can co-exist with fiat legal tender.

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