Welcome back to the Tribe! In this post we are going to discuss a prospective idea of the Bitcoin standard.
In short, this just means the adoption of Bitcoin as more than a reserve currency. Currently, that is all it still stands to be, but there is an argument for more that we are going to dive into in this article.
Nothing should be considered investment or financial advice. Enjoy the ride!
This phrase “Bitcoin Standard” used to be shouted from the roof tops by anyone and everyone who owned even a part of a Bitcoin. It even made it way into several memes on Twitter and Reddit.
Soon you will not trade your Bitcoin for Cash, because you won’t have to! It will be the currency. – NEO meme
While this sounds like an ideal conclusion to Nakamoto’s ultimate dream, it really has stronger implications than originally perceived.
In order to even dive into this idea, we need to take a few steps back and evaluate the currently economic status.
Today at the end of 2021, the world is having a huge issue.
Well, not an issue that is impeding current progress, but an issue more like the early signs of cancer that could end up bringing it to a grinding halt.
You see, banks and nations around the world are continuously spending more and more money. They are doing this by increasing their budgets through multiple channels like borrowing money, printing more money, or simply by just spending less in some situations.
This ultimately funnels down to the consumer as they are repeating the process by leveraging credit cards, taking advantage of cheap mortgage rates, and using more investment vehicles than ever.
Although, with the entire world leveraging debt there is one point of failure that has already historically proven its faultiness. That point of failure would be the banks.
Traditional Banking Problem
The traditional banking problem goes like this:
- Banks receive money from account holders
- Banks then lend out said money to companies or contractors
- Sometimes they will directly invest reserves if returns are guaranteed
- In the end, they make money by receiving payments back on said loans and investments along with other products
Here’s the catch.
Banks are lending money that is currently getting heavily devalued year after year.
In fact, their lending and spending power is decreasing monthly with inflation at all time highs. Therefore, slowly their cashflow will no longer account for their liabilities and assets which they are holding to secure a profit.
Due to this, banks are forced to lend more money which was the original problem because those SAME loans and investments will become devalued at the current rate even faster.
To put it simply, they are applying band aids to the long-term short comings of the financial system. Short-term what we see is this increase in wealth creation, followed by insane highs across the market for assets which looks good from the outside, but what most people soon realize is a bubble.
Unfortunately, the federal government (specifically the U.S.) is doing nothing to taper this. Instead they are playing the “I don’t see it” card and increasing their own budgets while continuing to print more money only extending the problem globally.
Is Bitcoin The Solution
While there isn’t a permanent fix to this process, there could be a better one.
One more controlled by the market and less manipulated by the financial system trying to stay on the top of the pyramid.
But what would this new system look like? Well, to be frank it would be volatile for a while. The stresses of economic turns would directly effect the market instead of being pushed to later dates by methods like quantitative easing.
Although, Bitcoin has not yet reached market maturity, and the layer 2 solutions needed to curtail the necessity of everyday spending are not quite scalable.
Simply, the Bitcoin Standard will not fix the monetary system. Why?
Well, soon the institutions will catch up to the new market. Eventually, launching an ICO on Ethereum will be more regulated than traditional IPOs due to accessibility, exchanges will become heavily targeted and regulated internationally, and in the fourth generation of the market, the para-chains allowing accessibility cross-chain, will become regulated and centrally owned for our “protection”. This is just how things go, and the government and governing bodies will slowly start to overtake the freedom that Bitcoin once offered.
Even so, Bitcoin will still serve to solve transparency. It will also give accountability to those thoughtlessly creating wealth.
The wealth that leaves debt for the future generations to end up paying for.
In addition, it will eventually allow for faster access to funds cross borders, decrease payment processing costs across the world, and allow those that were previously unbanked to join the economic world.
Bitcoin Standard Post
Thanks for reading this post on the Bitcoin standard. While we do believe Bitcoin will continue to become more widely adopted, anything beyond simple utility involving data storage, payments, curtailing the current payment process fees with layer 2 solutions, and additional reserve structures, are speculative.
In the end, projects like Ethereum will need to come to bat to help Bitcoin tackle some of the larger problems involving the web 3.0 and financial service industries.