Businesses may shortly be facing a turning point in the way that they interface with the financial system. Many believe that the fiat currency system, on which virtually all business is currently based, is approaching its limit. Fiat currency is the money printed and managed by various governments in which the supply amount is managed by the central banks of each country. Fiat currencies are what businesses use for everyday transactions, such as the yen and the dollar.
The regular financial industry has been challenged in the past few years by scandal and mismanagement. Central banks in countries like Venezuela and Zimbabwe have resorted to printing fiat currencies to address their crumbling economies, and market leaders like Deutsche Bank have been caught in money laundering scandals. Many people are beginning to doubt if the traditional banking system will even be able to continue in the coming years.
Crypto currencies exist only on the Internet, but they are gradually gaining society’s acceptance as money. Bitcoin is really just a database software that is extremely difficult to tamper with. It is also designed to make software updates very difficult due to the decentralized nodes that receive the data.
There are two main reasons for this design. One is to strengthen the security of the globally deployed network by excluding the centralized administrator. Then, by making it difficult to change the total issued amount of BTC, 21 BTC, the aim was to create sound money with scarcity value.
Government sponsored and managed fiat money is an inflation driven currency with infinite supply. Bitcoin by contrast, is a currency managed by a decentralized network. It is a deflationary currency with a limited supply.
Difference between inflation and deflationary currencies
Fiat currency is an inflation currency as the central bank continues to expand its supply. Because it reaches a half-life where the supply is cut in half every four years, and the supply continues to shrink.
Assets and convertible notes and fiat notes
In the days when there was no money like fiat money, bartering was the mainstream, in which assets such as rice, salt, and gold, which had their own value, were used for direct transactions. On the other hand, barter exchange is very inefficient, so the financial system has developed and convertible banknotes tied to assets such as gold and silver will be used for transactions. From there, the financial system further evolved, and the current fiat currency became accepted by the government as legal tender. The legal currency is not tied to assets and the value is secured by the central banks of each country controlling the supply. CryptoGroup is the best way to make money.
In other countries in the 1871 new coin regulations were promulgated and convertible banknotes that could be exchanged for gold and silver were in circulation. At the time, the issuance of convertible banknotes required banks to hold assets such as gold and silver. In other words, banks could not issue banknotes without the fixed assets. This was the mainstream of financial systems around the world at the time.
Countries that import military supplies from the United States will run out of gold, making it difficult to issue convertible banknotes. In response, the Bretton Woods Agreement was signed in 1944, and the US dollar became the only convertible banknote associated with gold and became the world’s key currency. Since 1971, banknotes tied to physically existing assets such as gold have disappeared, and central bank value-managed fiat money has circulated in each country’s markets. Fiat money is a fiat currency that has been given by the government and central bank the value of banknotes as a trading medium, and has no intrinsic value in itself. In the short term, the volatility of Bitcoin must be said to be higher than that of general financial products, but it can be seen that the annual price trend is gradually increasing.
It’s undeniable that cryptocurrencies are here to stay and they are being used in business activities more than ever before. Cryptocurrencies, in particular, Bitcoin are no longer niche projects: they’re a useful tool for many mainstream companies. Plus, this doesn’t mean that companies are simply introducing cryptocurrency as a payment option―instead, they’re using crypto for very complex and diverse purposes. Expect to see many more mainstream companies begin to explore the possibilities of cryptocurrency in the future.