By Ryan Velez
If you’ve been following bitcoin at all, you’ve seen how it’s currently been outperforming expectations by leaps and bounds. Early investors are blissful, those who initially passed it over may be kicking themselves, and economists are baffled. In an article for Medium, writer Maria Bustillos explains that those who consider bitcoin to be an illusion could say the same about the American dollar.
“U.S. dollars are not backed by anything other than the faith of the fools who accept it as payment and of other fools who agree in turn to accept it as payment from them. The main difference is that, for the moment at least, the illusion, in the case of dollars, is more widely and more fiercely believed,” she opens. A powerful statement to make, but there is some logic at work.
“In fact, almost all of our U.S. dollars, about 90 percent, are purely abstract — they literally do not exist in any tangible form. James Surowiecki reported in 2012 that “only about 10 percent of the U.S. money supply — about $1 trillion of the roughly $10 trillion total — exists in the form of paper cash and coins.” (The number now appears to be about $1.5 trillion out of $13.7 trillion.),” she explains. Bustillos harkens to the idea of the U.S. dollar as a “fiat” currency. Fiat is Latin for “let there be.” Technically, a country can manufacture as much money as they want, and inflation is a consequence. For example, $1 in 1959 is now a little under 12 cents.
“Saying that “bitcoin is a fraud” because bad actors have ripped people off is exactly like saying “the financial services industry is a fraud” because Jamie Dimon’s company is crooked. Bitcoin was used on the dark web to buy and sell drugs! Well…most hundred-dollar bills bear traces of cocaine, so if you object to hundred-dollar bills on that account, please, send your surplus my way. Does the fact that it’s used in criminal transactions delegitimize cash? No. The truth is that money is tainted in its very nature,” Bustillos continues. In her eyes, while blockchain technology may be in the shadows at the moment, investors across the world are beginning to invest time and energy into businesses that use them.
“Whatever the defects in the system Satoshi Nakamoto launched in 2009 — and they are still substantial — he proved that there really is a way for people to create foolproof, guaranteed records of human transactions, entirely without reliance on outside authorities such as banks or governments. There’s no going back from that,” Bustillos concludes.