Bitcoin's monetary policy (BTC): clarity and certainty

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In a world where central banks have power over money, bitcoin (BTC) offers an alternative. Instead of having to trust a few people or agencies, bitcoin can rely on public and verifiable code and database. That provides clarity in many ways.

Bitcoin and monetary policy

Money creation has been a way for central banks (and governments or kings, for example) to exercise power for millennia. People who are close to the money tap have different advantages. If you can hand out the money, you're in control.

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Cantillon effect

This phenomenon is therefore not new and was further developed in the 18th century by Richard Cantillon. Cantillon was an Irish-French economist and wrote around 1730 Essai sur la nature du commerce en général, an essay on the nature of trade in general.

In the essay he introduced, among other things, the concept of non-neutral money. The dollar, the euro and any centrally issued currency with a central authority fall into that category.

According to Cantillon, non-neutral money causes relative inflation or a disproportionate increase in prices between different goods in an economy. It's known as the Cantillon effect.

That sounds rather theoretical, but in practice it can be summarized briefly.

In addition to banks and financial institutions, there is a select group of people who also benefit from inflation and the way the money tap is turned on.

In 2020, it is clear to see: the US stock market is reaching record highs due to the influx of new dollars. This ensures that a larger portion of the money gets into the hands of a smaller group of people.

The dollars go first to the rich, people close to the money tap, and then end up in a later (and more expensive) way or not at all with the rest of the people.

Bitcoin is neutral and can be used by everyone. The protocol doesn't look at identity and doesn't have central publishers of new money: a top banker, a blogger, a random fridge or the biggest criminals: as long as you have access to your bitcoin, you can use it.

Bitcoin does not fit most common financial philosophies and theories, but there is indeed an economic school that fits this idea. Bitcoin and the Austrian School: Economic match made in Vienna?

New bitcoin

But there's going to be new bitcoin, right? Isn't there a bitcoin cash tap? New bitcoin ends up with parties who use their hardware to mine bitcoin. Through a consensus mechanism called Proof of Work, they are fighting for the new money.

Miners have a motivation to contribute to the network and earn bitcoin with it. They are closest to the bitcoin money tap. However, the big difference in this situation is: there is a constant battle between different miners to get to this new bitcoin.

There is no central bitcoin bank that can make money with a few approvals and thumbs up, you have to work for every bitcoin you try to get.

In addition, they must follow different rules of the protocol in order to have a chance at bitcoin. For example, there is a maximum of BTC 21 million.

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