The issue of whether Bitcoin (BTC) can replace Fiat currency issued and administered by the central banks across the globe is raging for some time now. There are many positives and negatives related to Bitcoin, and one has to take a holistic approach towards the issue in order to arrive at a fruitful conclusion.
Recently, we have witnessed a debate between George Selgin who is acting as the director of the center for Monetary & Financial alternative, Cato Institute, and Saifedean Ammous, a well-known economist and author of the Book, The Bitcoin Standard: The decentralized alternative to central banking. While Selgin elaborated all the reasons why Bitcoin can’t possibly replace the central currency of any nation, Ammous emphasized that only BTC has the ability to free the monetary system from the clutches of the central banks around the world. The debate was primarily focused on three main issues: Speed of transactions, cost related to transactions, and the safety and security aspect related to transactional procedures.
Argument and Counter-argument:
Selgin argued that the overall cost of transactions and their final settlement cost are far higher in case of Bitcoin than other fiat currencies. The expensive mining procedure of BTC has the cost implications, and that’s why probably we witness the higher net cost of a final settlement through the use of BTC and some other cryptocurrencies. The argument of the Ammous, on the other hand, remains focused on the ability of BTC to settle the payment faster than any other conventional currency available today. Ammous also emphasized that BTC is the only way through which the monetary and financial system adopted by various countries can be freed from the clutches of government controls and central banks. He said that there is no other way out to achieve the objective of decentralization and BTC is the only hope that could accomplish this primary objective. However, turning the tables on Ammous, Selgin drew the attention towards high security and safety threats associated with cryptocurrency exchanges. According to Selgin, around one-third of the total Bitcoin exchanges operating in the world are hacked at one or another point in time which comes across as a serious security threat for investors. This is indeed a genuine concern and one of the most critical stumbling blocks when it comes to the wider adoption of cryptocurrencies including Bitcoin. However, it must be noted that technology has evolved over the years and thanks to the highest scrutiny and tighter controls, the incidents of online frauds have come down considerably.
Pulling it together:
Both sides presented their arguments, and in terms of key takeaways, one can easily acknowledge the power of the decentralized system adopted by Bitcoin and other cryptocurrencies to change the world. But at the same time, many concerns need to be addressed before BTC becomes a mainstay of financial transactions and money exchange.