The invention of cryptocurrency has added a whole new dimension to the digitization of the global economy. It offers an alternative to conventional forms of central bank money, or ‘fiat’ currency. It also offers new approaches to setting monetary policy, free from political interference and the damaging consequences of hyperinflation.

1. IS CRYPTOCURRENCY
THE SOLUTION TO
HYPERINFLATION?

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5. The invention of cryptocurrency has
added a whole new dimension to the
digitization of the global economy.
It offers an alternative to conventional
forms of central bank money, or ‘fiat’
currency.

6. Fiat currency is money that is not backed
by an underlying asset or commodity but is
given the status of legal tender by law.
Legal tender is something that a business
is obligated to accept as a means of
payment. But the fiat itself is inherently
worthless.

7. It’s value is based on users’ faith
that a given nominal amount of
currency.
the face value - will entitle them to a certain
amount of goods or services in exchange.

8. It’s easy to see how it might be difficult for say,
a physician to provide their services as a
medical professional, in exchange for payment
in groceries, gas, utilities, clothing, and so on,
from their patients. The healthcare industry
would be brought to a halt pretty quickly under
a barter system. Fortunately, we have money
to smooth the process.

9. It is this aspect of money - that it enables
deferral of payment - which is key to
understanding why monetary stability, or
stability of the value of a currency, is
crucial for maintaining the integrity of
money and the economic systems it
underpins.

10. Without monetary stability the
purchasing power of a given
nominal amount of money
becomes uncertain.
And that, in the extreme, might inhibit
individuals and businesses from engaging
in supplying goods and services altogether.

11. Fiat currency may be the legal tender
in countries like Venezuela and
Zimbabwe, but that does not mean it
is fulfilling the essential function of
money.

12. Fortunately, in some other
developing economies
where there is a lack of
financial inclusion, the
technology underpinning
cryptocurrency is being
looked at seriously.

13. The government of Montserrat
has even gone so far as to enter
into a Memorandum of
Understanding with
Barbados-based fintech firm Bitt
to create a digital payments
platform for the country.

14. Of course, it is important to note that any
government backed or operated
cryptocurrency is likely to be highly
centralized in nature.

15. Governments and central banks will
feel deeply uncomfortable with the
idea of entrusting responsibility for
maintaining the integrity of the ledger
to unknown, private, third parties.
Users will, most, likely, interact only
with trusted public or private nodes
that ultimately validate transactions.

16. There is also little chance that the
governance or monetary policies
associated with any state endorsed
implementation of cryptocurrency
would be operated on a decentralized
set of rules.

17. In turn, that would probably leave them
open to the same politically motivated,
inflationary, policies that have undermined
trust in conventional fiat. It is only the truly
decentralized cryptocurrencies that can
offer an immutable commitment to
monetary stability.

18. For the citizens of
countries in which
monetary credibility has
been lost,
cryptocurrency offers a
relatively safer, more
reliable, alternative to
local fiat currency and
payment systems.

19. We in the cryptocurrency community
should continue to strive towards
the goal of offering truly
decentralized alternatives to current
economic and financial systems.

20. As they hold out a genuine prospect
of greater freedom and a better
standard of living for some of the
most oppressed and disadvantaged
people on the planet. We at BitBay
think that’s pretty cool.

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