Does bitcoin have any relevance in our society? That question seems to be a hot topic these days and I’ve decided to weigh in on it. Before I start, I’ll be the first to admit that I don’t know all of the ins and outs of bitcoin, nor do I even care. I’m simply gonna focus on bitcoin as an alternative currency in our society. To do that, here may be a good point to give a definition of bitcoin. I quote…..
A type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
I’m gonna cut to the chase and say that I don’t see bitcoin becoming what many of it’s proponents claims it will become. I see bitcoin as being a good alternative strictly for private party dealings. I’d never discourage the use of a form of money between private parties, but as it currently stands, one thing that will hurt bitcoin’s chance of being widely used by the public is the fact that the transaction costs of using bitcoin is way too high for everyday use. It’s like — why pay more money to use another form of….”money”? That defeats the purpose. And, from the looks of it, bitcoin is good mainly for use by the criminal underworld who conducts their business on places like the dark web. I’ve heard about businesses raising capital through bitcoin because it helps them to avoid certain regulations that could make life hard for them. If bitcoin were to take on that sort of role, it could take on a bigger role in our society.
Let’s be honest, bitcoin is only on the public’s radar because of all of the press that bitcoin has received due to it’s exponential price rise. We’ve been inundated with countless stories about how much money one would have made had they bought bitcoin at some lower price x-amount of years ago. Everyone whom I hear discuss bitcoin is never talking about using it for transactions, they’re talking only about investing in bitcoin in hopes of cashing in on bitcoin’s rising price. The fact that bitcoin has been presented to the public in such a fashion tells me that bitcoin is nothing more than a speculative mania. It’s not unlike, but nowhere near as bad as, Tulipomania or John Law and the Mississippi Bubble.
J.P. Morgan CEO Jamie Dimon has even come out and said that he believes bitcoin to be a fraud and a bubble. I don’t disagree with him but I question his motives. I’ll be honest though. The harsh backlash that Dimon has received for his statement(s) actually increases the likelihood that bitcoin is a bubble. During bubbles and right before their bursting, mostly everyone is optimistic and anyone who questions the herd instinct is called an alarmist and maligned in other ways.
The most important thing is that while bitcoin may function as a private currency, it is not legal tender for the payment of debt and taxes. Legal tender money functions primarily on the faith of those that use them, which is based on the government who backs that currency. Bitcoin hasn’t built up that level of trust and won’t do so anytime soon. For that reason, bitcoin is simply a form of money that is used between private parties and some businesses — and there’s nothing wrong with that if it is to remain that way. Keep in mind that “money” is whatever we agree to use as to facilitate trade, or as some would put it, a medium of exchange. If you and I are going to conduct a private transaction, we don’t need legal tender money in order to conduct our business. As long as both parties agree to accept it. We’d need legal tender money only to pay taxes or debts.
Many of bitcoin’s cheerleaders believe that bitcoin is going to become the reserve currency of the world (whatever), but I don’t see that happening. It’s highly likely that more and more of our “money” is going to become electronic but bitcoin will hardly replace the currencies of countries. They’d have to become legal tender (good for the payment of debts and taxes) in order to do that and I don’t see any government deeming bitcoin as legal tender.
Conclusion: People who advocate for alternative currencies may realize that there is a problem with our monetary system, but like most people who come to this realization, they’re confused about the solution. This is not the article to discuss solutions to the world’s monetary ills but bitcoin is not the viable solution that we are seeking. Bitcoin, I believe, serves as a distraction to the real monetary problems that we face. Instead of us dealing with the real problems, we’re now discussing cryptocurrencies vs. cash. I believe that bitcoin is just another historical fad that may wound up fading into oblivion.