One of the biggest benefits of cryptocurrencies is that they offer unprecedented financial freedom. Bitcoin is completely decentralized. This means that there is no central authority in charge of the currency, no bank and no government that can start making decisions about the currency.
The issues with printing more money
Here’s why this is so important: imagine that there is a country with a currency with 1 million country dollars in circulation. Because of the events in the country, the value of the currency drops by 50% and now you need to pay $2 for what you were able to by previously for $1. The government decides to fix the situation by printing another $1 million dollars of the currency. In this situations many people would assume that because the value of the currency dropped in half, printing another $1 million would stabilize the situation. Real-life examples of such scenarios show that printing additional money often worsens the problems and doesn’t solve them. In this scenario, there has been an additional $1 million injected in the economy, but if that’s all that the government has done, you will still be paying $2 for what you’ve been paying for $1 before. This means that with a million has been added, but the value of the currency stayed diluted. Because there is now more money in circulation than before, the value will probably continue to decline. The original $1 million did not gain any additional value from the second $1 million coming into circulation. In the end, printing more money is likely to create a domino effect that will add tremendous debt to the economy of the country.
Recently, such an effect has occurred in Zimbabwe. The country experienced tremendous currency devaluation from the mid-1990s until 2009. The peak of inflation in Zimbabwe was in 2008, when the rate of inflation reached 79.6 billion percent, which is why the country announced that it would stop printing its own money altogether and would switch to using the US dollar instead. A scenario like this is simply not possible with bitcoin because the number of coins is limited and no party can decide to add more coins to the pool.
Cryptocurrencies and financial freedom
Because no government can regulate bitcoin, the currency offers incredible financial freedom to individuals. This freedom comes in a number of different ways. One of them is freedom from depending on the governments and their currencies. Another one is freedom from any existing infrastructure such as bank branches with their limited banking hours. Yet another one is freedom from artificial fees and mental freedom of being in control of your own funds.
If all merchants all over the world were to start accepting payments in bitcoin, the system would be as convenient as the modern fiat currency system. The system would also offer a number of benefits to people because they would be the ones in charge of their funds, not banks or governments.
A better financial ecosystem
There is a number of ways how bitcoin and other cryptocurrencies create a better financial ecosystem for all people. If people in developing countries could pay with bitcoins, it would free and empower them. The possibilities of the blockchain technology also spread to contract and agreement management. Theoretically, it is possible to use the technology in democratic elections to make the process completely transparent and fraud-free.
Financial freedom is a two-sided equation. Businesses need to accept payments in bitcoins but users also need to be willing to use cryptocurrencies to pay for products and services. A large part of the adoption of new technology is about habits. The current financial system has done a great job of making it a habit to not carry cash and pay for products and services with debit cards and credit cards. The next evolutionary step is mobile payments. Currently, most mobile payments are linked to bank accounts even though bitcoin and other cryptocurrencies also offer mobile wallets.
PayPal was the most popular mobile payment method in the United States in 2016. While PayPal does offer a physical debit card to its customers, many people transfer funds to their PayPal accounts without having a debit card for the account. This means that switching to money without being able to access it in an analog way is just one step away for most people.