Are cryptocurrencies better money?
The crypto currency Bitcoin usually becomes an issue when the price makes another big jump up or down. This gives the wrong impression that Bitcoin is above all a toy for already wealthy speculators. Because there is more to Bitcoin: The idea of a better (financial) world. So what does Bitcoin do better than the euro in the eyes of its followers?
No matter how much or little money you have, everyone understands the basic idea behind it. Money is a medium of exchange that you use to get something in return: food, clothes, electricity, a new cell phone. This applies to both classic currencies such as the euro and crypto currencies such as Bitcoin. Nevertheless Euro and Bitcoin are fundamentally different. How exactly, that explains Roman Reher aka Blocktrainer, operator of the largest German Bitcoin channel on YouTube, in the GIGA interview.
The Bitcoin Basics: What is the Difference to the Euro?
We spoke to Roman about the difference between Bitcoin and the Euro: What makes a purely digital currency like Bitcoin that one do not touch it and put it in your wallet can? Why is it better to have a currency without a central bank as a central control body? And of course: How can I trust, now and in the future, a currency that is based on mathematics, which I barely understand, and whose inventor has remained a phantom to this day?
Roman reveals the answers to these questions in the video interview that you can find at the top of this post.
Finite Bitcoin, Infinite Euro?
The creation of Bitcoin (so-called mining) is a rather complex mathematical matter with a simple idea: the more Bitcoin there are on the market, the more difficult it is to create new ones. And mining only goes so far until the Upper limit of 21 million bitcoins is reached. No more can be created.
The euro (or dollar, or pound), on the other hand, has no upper limit. Simply put, the creation of new money depends on demand. When customers request money from their banks (loans for example), the bank first falls back on its own reserves. If they are exhausted, they can request new money from their central bank and also take out a loan for this, which is usually secured with securities. This is how new money comes into circulation, the money that already exists in the market is gradually devalued – inflation is the result.
Bitcoin, on the other hand, cannot be expanded beyond the specified upper limit of 21 million Bitcoin. The advantage: Due to this limitation, the value of a Bitcoin will inevitably increase as demand increases, which is what you can expect from the Bitcoin price development can see well – daily fluctuations and sometimes longer periods of crisis are left out, the value has risen continuously over the past few years.
The advantage of the classic financial system, on the other hand, is that the banks and central banks work together in a reasonably reliable way Stability of prices and interest is guaranteed. (Although there is also plenty of criticism of this system, for example because newly created money is not evenly distributed among everyone, this is the so-called Cantillon effect. (Source: Wikipedia)). Whether Bitcoin could also provide such stability cannot be said at the moment, because no major economy has completely switched to a crypto currency.
Luxury good bank account
Almost everyone in Germany has an adult a bank account and thus access to the monetary system. But in many other parts of the world, especially in developing countries, it is almost the opposite (see graphic above). For these people, Bitcoin can be an alternative, because a suitable cell phone is easier to get for many of these people.
This access to a financial system, which is the same for everyone and cannot be limited from a central point, is another difference to the euro and one of the advantages of Bitcoin. Bitcoin works the same everywhere and anyone can use it.
The best example of this is El Salvador. The small state in Central America had no currency of its own for around 20 years and was dependent on the US Federal Reserve. By September this year when the country Bitcoin as the official means of payment explained (source: T-Online). The team from experienced how this works Block trainer live on site.
