Disclaimer: Opinions expressed in this article do not constitute investment advice from Bitcoin Reserve.
Up until the release of bitcoin in 2009, the world has never before had a viable alternative to the currencies governments force people to use. They have quite literally had a monopoly on money, and this period of human history is coming to an end. It is time for separation of money and state, just as there was separation of church and state.
Adoption Rate & Economics
Like any other product, if there were only one supplier for consumers to choose from, this would be called a monopoly.
When a good is in demand and has only one supplier, they can then manipulate the market however they wish. The supplier can raise prices because consumers won’t have any other option that’s less expensive, and they can lower the value of their product since there is no competitor who can provide an alternative with higher quality.
The same is true with money. It is no different from any other good or commodity in demand. Competition among suppliers leads to higher satisfaction for consumers. There has been no competition to government money until bitcoin was invented.
This has led to a meteoric rise in use. To look at just how rapidly the world is taking on cryptocurrencies in general, Deutsche Bank conducted a study comparing the adoption rate with the Internet:
“At least for now, the curves are similar after adjusting for scale. If current trends continue, there could be two hundred million blockchain wallet users by 2030."
That’s quite a statement.
It would be great if we could somehow magically determine when the world will have mass adoption of bitcoin, but we can’t. However, the more fiat currencies fail, which they inevitably will, the more people will choose bitcoin as an alternative.
Bitcoin Used in Countries with Hyperinflation
As you’re probably well aware, Venezuela has been experiencing severe hyperinflation for quite some time:
Hyperinflation basically causes a nation’s entire economy to come to a ceasing halt. It is real world proof of how important the soundness of any nation’s money needs to be.
So how is bitcoin helping?
In a research study on bitcoin use in Venezuela, the following cases are mentioned:
“Rafael, a Venezuelan, uses bitcoin to import goods that are no longer available in Venezuela and resupply his store’s shelves (Althauser, 2017). Fernando, another Venezuelan, is a bitcoin miner who uses the monthly revenue to buy insulin and other medical supplies from overseas (Armario and Sanchez, 2017). David, another Venezuelan, imports basic staples from a Miami based courier service and uses amazon gift cards as a means of exchange which he buys with bitcoins (Althauser, 2017)."
"Bitcoin ultimately allows users in Venezuela to import food, medicine, and other goods through e-commerce sites like Amazon, Walmart, and many others thus circumventing the capital controls and policies that made it impossible for Venezuelans to purchase foreign goods with the Venezuelan bolivar.”
Bitcoin is extremely useful when sending money overseas in politically difficult jurisdictions. It cannot be controlled. It cannot be stopped. It gives people the direct power to be able to transact with whoever they please, despite any governmental authority aiming to deprive people of this right.
Ironically, even the Venezuelan government launched a remittance service last year which accepts bitcoin.
Zimbabwe is another country facing hyperinflation. Not only is this country experiencing the problem now, but they also had the same issue in 2008. See the inflation rate below:
In an interview with CoinDesk titled, If Bitcoin Works in Zimbabwe, It Works Everywhere, an anonymous teacher states:
“If I have a bitcoin, I can send money to my relatives, who are in Malawi or in Namibia or in Ghana. Currently I can’t with our own currency. I can’t send money out freely and quickly. But if we can sit down as a community and say, ‘Okay, we need to buy a new borehole and we can do that just by using our phone,’ that’s an amazing thing. You know, if we look at it from a place of development, if you look at it from a place of helping the community and taking care of each other, if it allows us to take care of each other without having to create so many barriers and so much red tape to get stuff done with money, I feel like when you change that narrative, you speak to something very deep within an African.”
The individual had to remain anonymous as a result of the country’s ban on the use of bitcoin and lack of ability for free speech. However, just like the printing press, the automobile, and the telephone, bitcoin is an innovation that makes life easier for people and brings them together.
A final example of another country dealing with hyperinflation is Argentina. The nation has a long history of this issue; from 1975 to 1990, the annual inflation rate was approximately 300%. Along with this, prices rose about 1000% in the year 1989. See Argentina’s inflation rate below:
Lautaro Dragan, a lead developer for decentralized media protocol at Po.et, has experience with the Argentinian banking system as well as a first-hand perspective since he lives in Buenos Aires. In an interview, he says:
“It’s a bittersweet feeling,” he claimed, “because even though we’re happy we have Bitcoin to help us in this situation, nobody is happy about the restrictions, since they affect everyone for the worse and are a symptom of deeply-rooted economic issues.” Then further states, “Even though bitcoin is too volatile to be a good store of value right now, it’s possibly the best means of transferring value humanity has ever seen,” he said. “And that alone is such a powerful tool that makes a case for crypto on its own, but it will probably also ensure it will live long enough for it to become a good store of value too.”
The combination of these three cases/countries seems to show that bitcoin allows people to purchase what they need across national borders without dealing with any bureaucratic difficulties.
Bitcoin helps people send money to family members and buy essential goods, which are activities that would be seemingly impossible under their hyperinflated currencies today.
When a country's fiat currency fails, bitcoin then has more of a value proposition and use case.
A Final Note
As a result of the Bretton Woods agreement in 1944, the majority of the world’s most powerful countries, 44 of them to be exact, pegged the value of their currency to the US dollar. This gave the United States a dominant position of global financial power.
At this time, the US dollar was stable and retained its value since it was backed and redeemable for gold. When this happened, foreign central banks were able to redeem $35 US dollars at a fixed rate for one ounce of gold. Now, as this sentence is written, a single ounce of gold is worth $1,783.
By President Nixon removing the US dollar from being backed by gold in 1971, this caused the majority of our planet to be forced to use currencies which were then backed by absolutely nothing. Now, the world is in about $255 trillion dollars in global debt. You can watch the one minute section of Nixon’s speech here, where he states that it was a “temporary” removal from gold, and said “Your dollar will be worth just as much tomorrow as it is today.”
It is only a matter of time until this worldwide system implodes. When it does, further adoption of bitcoin will ensue, and it will provide massive value to humanity.