The Fiats Predicament

The normalization of fiat extremity has become increasingly common, especially in light of the federal government breaking another record by crossing the $33 trillion national debt threshold in September. A decade ago, the USG’s borrowings already outpaced the US’ annual GDP, establishing a dynamic of increased borrowing with no real way to patch up budget deficits with tax revenue alone. This year, the USG had to pay $711 billion on net interest payments, with the Congressional Budget Office (CBO) projecting a 2% federal debt increase per year.

Destabilized Legacy of Modern Money

As the Weimar Republic led to World War II, the Bretton Woods Agreement was put in place in 1944 to establish the dollar as the world reserve currency. It has resulted in a state of unsound money globally, as borrowings for OECD nations increased and borrowing costs more than doubled since 2021. The net result is economic output goes primarily to debt service. The spiral currency devaluation puts pressure on seeking venues to preserve wealth and outpace currency erosion, given the fiat instability.

bitcoin‘s Decentralized Promise

bitcoin broke through the historical monetary landscape, offering borderless payments, without entangling any bank or foreign exchange bureau. As money issuance and management are detached from the government, it achieves legitimacy, making money both government and nation-agnostic. With its record of accounts maintained in a decentralized manner, it offers a reimagined monetary system outside of central banking. bitcoin‘s public Ledger is auditable yet anonymous, making it a potential solution for sound money outside the moral hazards of central banking and politicking.

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Removing Moral Hazards: Path to Sound Money

Incentives govern behavior, and with fiat money in place, the constant desire for the government to spend extravagantly leads to money printing at the expense of taxpayers. As central banks shift monetary policies, they tend to generate financial bubbles. This results in a spiral currency devaluation that puts a pressure to seek other venues to preserve wealth and outpace the money erosion. For individuals and nations both, bitcoin becomes a potential self-sustained wealth machine outside the moral hazards of central banking and global politicking.

The Path Forward: Institutional Adoption, Speed, Efficiency and AI

After many market busts and custodial learning opportunities, cryptocurrency at large is on the verge of a legitimacy breakout, exemplified by BlackRock’s application to launch a bitcoin exchange-traded fund (ETF). Nonetheless, for global mass adoption, the bitcoin blockchain’s 7 transactions-per-second capacity would have to improve to offer near-instant payments. Enter the bitcoin scaling, the most popular example being the Lightning Network. Utilizing smart contract programmability, the Lightning Network has also integrated artificial intelligence (AI), opening a whole new arena of applications without resorting to credit cards or fiat for payment rails.

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By Team