How Bitcoin will conquer the world

On Halloween 2008, a month and a half after the spectacular collapse of Lehman Brothers, Bitcoin started the currency revolution we are now witnessing. Bitcoin has shown that various monetary arrangements are possible with technology: Money does not have to be controlled by a government or restricted to a sovereign territory.

Thirteen years later, and after Bitcoin hit new all-time highs again and again despite bans and curses, Bitcoin is here to stay. Perhaps not exactly like the “peer-to-peer electronic cash system” presented by Satoshi Nakamoto, but neither as a wasteful speculative good with no social value. Bitcoin can instead be the world’s billing currency.

The potential for Bitcoin as an international payment system has always been there. At its core, it contains an iron decentralized infrastructure that can process and record transactions around the world, also known as the Bitcoin blockchain.

In about a decade, and without a central authority coordinating efforts, channeling investments, or partnering, Bitcoin has created a global network that is always available to anyone with access to a smartphone or computer. From that perspective, it took Visa decades, countless business agreements, and a massive investment of money and talent to build the amazing network that is used by billions of cardholders today.

The downside is that Bitcoin, the network’s native money, is still volatile. Bitcoin can be attractive to investors looking for higher returns, but it can give a break for those looking to use their money to pay rent and buy groceries. Bitcoin’s volatility thus limits its general attractiveness and thus its use as a widely accepted medium of exchange that can facilitate everyday transactions.

On the other hand, the very characteristics that give Bitcoin volatility – the lack of support and a managing issuer – also enable it to offer what no other currency, public or private, can offer today: seamless portability across borders and Legal systems. A bitcoin can travel around the world through various digital wallets while a bank customer figures out how to initiate a foreign exchange transaction.

How then can these contradicting properties be reconciled so that Bitcoin can function as a true global currency? First, by welcoming speculators, not denigrating them. People and institutions willing to make a quick profit by buying and selling Bitcoin not only bring liquidity to the Bitcoin market, but they also help set Bitcoin prices and (it seems preposterous) extremes Reduce price fluctuations. The more people trade Bitcoin, the more predictable Bitcoin becomes.

In addition, the Bitcoin network of a transactional nature, a “peer-to-peer electronic cash system”, is not just a safe place to store valuables. With that in mind, Bitcoin can be seen more as a monetary vehicle for global change that allows anyone to send or receive money anywhere, rather than as digital gold bars carefully kept out of sight.

The second step in improving the use of Bitcoin as a global currency is to have as many trustworthy exchanges as possible ready to buy and sell Bitcoin in different jurisdictions. Unhosted wallets are certainly invaluable to those looking for monetary privacy that are also nifty enough to create and maintain their digital wallets and private keys well.

For the non-tech-savvy person whose primary goal is to make safe, fast, and affordable international money transfers and wire transfers, the most important thing is to find a reliable custodian that will help them meet their needs easily. And that’s what credible exchanges can do, especially those with an international presence that can receive local currency in one country, move Bitcoin across borders, and deliver local currency to another country.

In these circumstances, Bitcoin could become a powerful option not only for international senders and receivers, but also for regulators. Since Bitcoin can quickly switch from one digital wallet to another, no matter where they are, the sender and recipient do not have to face any volatility. In a liquid market and with exchanges open around the clock, you can buy and sell Bitcoin as soon as the international transaction is completed – that means “in minutes” and not in days, as is the case in the current correspondent banking system.

The volatility would be left to home and destination investors and speculators willing to take more risks in search of higher returns. Speculation could therefore subsidize international payments. And the exchanges in these two countries would take care of moving the Bitcoin and offering each counterparty their preferred engagement, be it state money (sender and recipient) or Bitcoin (investors and speculators).

The regulatory authorities, in turn, could track national and international money flows in real time regardless of their jurisdiction, as all transactions are recorded in the Bitcoin blockchain. By brokering exchanges that would be responsible for identifying buyers and sellers, cross-border payments with Bitcoin can offer a neutral, resilient and compliant alternative with lower transaction costs. No other solution, whether public or private, can beat this.

This is a guest post by Marcelo M. Prates. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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