Governments worldwide have been printing more money to cover their debts and fund their day-to-day operations in recent years. The result has been unprecedented inflation in many countries. A new trend of rising global inflation threatens everyone’s standard of living, and Bitcoin can act as a hedge against inflation for investors seeking to protect their money from devaluation. However, for ordinary investors, inflation lays great havoc on them. Majority of the folks are searching main difference between bitcoin and fiat currencies.
But with decentralized cryptocurrencies like Bitcoin, it is now possible to tackle inflation and make intelligent investment choices. For instance, you can hedge against rising inflation by keeping your money in Bitcoin instead of traditional money like the USD, Euro, and pound sterling. You can entertain better returns over time and protect yourself from inflation threats by investing in Bitcoin. Few pointers detailing how Bitcoin acts as hedge inflation are detailed here.
The main difference between bitcoin and fiat currencies
Decentralized Nature
A decentralized currency means that no central authority controls it, and it does not depend on any government to keep running. It can be created, used, and stored without a centralized authority backing it. Even if there is a power vacuum in the country or some expansive government, Bitcoin can still be created and used by anyone. For example, if a coin has been stolen from an exchange or hackers stole private keys to the system’s operation, they cannot steal the currency because of its decentralized nature. While fiat currencies tend to inflate under hard times, cryptocurrencies remain unaffected.
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Adopting A Bottom-Up Economic Model
Bitcoin is an open-source project requiring developers and expert users to build, use, and store it. The user base of Bitcoin is also growing regularly with time due to its high value per transaction and stability in price. Furthermore, the use of Bitcoins by non-technical users and high adoption rates among businesses in recent times make it an ideal investment for investors seeking a safe place for their wealth against inflation.
No Transaction Fees
Bitcoin transfers are free, unlike financial transactions in the world today, where fees like bank charges. As a result, Bitcoin is much better suited to ensuring greater financial inclusion and easier access to international remittance than fiat currencies. You can inject as much liquidity as you want into Bitcoin without having to worry about any transaction charges.
Limited Supply
Bitcoin has a limited supply of 21 million coins. This is not like fiat currencies, where the issuance of new currency by the government can be quickly done. This makes Bitcoin more deflationary than fiat currencies and more challenging to fall substantially with time. A limited supply ensures no effect of bitcoin of any kind due to the rising level of inflation.
No Government Interference With The Currency
Any government entity does not control the value of Bitcoin. Therefore, it is free from any control or interference from a central authority. This makes it a haven for investors looking to protect their wealth from inflation. With more and more people worldwide learning about Bitcoin, its value is constantly increasing in one way or another.
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Adaptive Nature
Bitcoin has been designed to adapt to changes in demand and supply as well as control volatility levels. For example, if many new users start buying Bitcoin, the price will rise further. The reverse is also true. In case the number of Bitcoin users decreases, the value of Bitcoin will also reduce and stabilize. Since there is a finite supply of Bitcoins, its value s expected to increase with time since there won’t be any more new bitcoins mined in the future.
Sustainable Network
Bitcoin is powered by miners (users who use their computers to solve complex mathematical problems). They are rewarded for their effort by getting a small number of Bitcoins when they add new blocks to the blockchain (a public ledger). The total number of coins that can be rewarded to miners is capped at 21 million bitcoins, and this number will never be increased forever.
The longer governments and central banks continue to print money to cover liabilities. The less stable your wealth is going to be.
Trading in Fiat currencies will not protect you from the risks of inflation and centralization. Bitcoin can act as a hedge against inflation in this sense. People looking for a safe place to park their wealth better invest in Bitcoin now and start buying Bitcoins before getting out of price range. If you need the latest updates related to the cryptocurrencies then you should check 5minutecoins where you will get latest information about it.
