With all different types of digital money these days and accounts represented electronically, people often wonder what’s the difference between traditional electronic currency issued by banks and permissionless cryptocurrencies like Bitcoin.
The Big Push for a Cashless Society
Over the past few years, there’s been a lot of discussion concerning the world’s progression towards a cashless society. Furthermore, bureaucrats and government authorities worldwide have also bolstered the idea further by removing individual notes of tender from circulation by demonetizing cash reserves. Before the seventies, cash was a dominant form of money, but since then most people now transact with an electronic representation of their local currency in their day to day lives.
For instance, only 8 percent of the world’s money is represented by physical notes, and everything else is a form of digital fiat. Countries everywhere around the world have slowly been progressing towards a cashless society. In the U.S. the practice of electronic deposits into bank accounts became popular in 1975, and a decade later people were using these balances with debit cards.
Now throughout a few particular countries, large denominated notes like the $100, $500, and $1,000 bills are becoming rarer as governments are removing them from circulation. One country, in particular, India is suffering from a cash crisis as leaders started a demonization process last year. The use of cash within India is becoming less visible as Indian authorities are pushing hard for a cashless society by replacing it with digital fiat.
The Glaring Differences Between Electronic Fiat and Cryptocurrencies
There are significant differences between the traditional digital currency in your bank account and cryptocurrencies like Bitcoin. One of the biggest contrasts between the two is bitcoin’s deflationary attributes which is backed by the currency’s 21 million capped supply. Many economists believe this is a great benefit as the public knows that there are only so many bitcoins, which causes people to save, and purchasing power usually increases.
With traditional digital fiat reserves, there is no telling how much money is circulating, and no one knows if the central banks are printing money on a whim. Economists who are against this type of monetary practice, such as those from the Austrian school, believe the world’s citizens are experiencing a silent robbery called inflation due to central planners printing vast amounts of fiat reserves. Sometimes central bank’s like the Federal Reserve tell the public they are creating more money with concepts like quantitative easing and the recent bank bailouts.
Another reason the world’s traditional fiat currencies are no good is because the electronic form is also used to monitor the public’s wealth. Cash is harder to track, and governments can keep a keen eye on funds moving around their electronic databases. Furthermore, other government agencies such as the UK’s GCHQ, the NSA, the FBI, and the CIA have been known to being spying on citizens and the world bank’s monetary movements.
With this power, central authorities can censor people’s privileges to move money in any way they see fit. There are clear examples of banks, credit card companies, and Paypal freezing peoples funds or halting operations because of reasons they don’t particularly agree with.
Censorship Resistance and Unstoppable Tax Protests
With bitcoin, people can move their wealth in a permissionless way using their individual sovereignty. Bitcoin users can utilize the decentralized currency for operations that are typically frowned upon by third party forces. This includes online storefronts selling pornography, illicit drugs, and other black market activities. Cryptocurrencies can also be used to avoid taxation as it leaves the decision of reporting to tax officials up to the user.
The infamous whistleblower Edward Snowden has agreed with this sentiment explaining to his Twitter followers on November 13 stating;
Coincidentally, new technologies raise the possibility of unstoppable tax protests.
Because the public is embracing bitcoin and blockchain-based permissionless currencies authorities worldwide are trying to co-opt the technology. Rather than be disrupted, central monetary planners believe adding the word “blockchain” to the incumbent databases used today will lure more people towards a cashless society. One that will still be monitored, controlled with censorship, and even “editable” for those trying to erase fraudulent behavior.
There is a big difference between the electronic money used by banks today and bitcoin, as the latter is far superior for those who embrace freedom.
What do you think about electronic fiat currency in comparison to cryptocurrencies like bitcoin? Let us know in the comments below.
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