I came across an interesting article on Palladium Magazine: Facebook’s Libra Is Half A Century Late And A Navy Short. The essay makes a good point about money security. Governments are the backers of their currencies. When a government is powerful, its currency is more credible. The US dollar is an example. The most dominant military power in the world issues it. Therefore, it is the most trusted currency. Minting money is just a process. With quantitative easing and modern money theory, we now know that there is no limit to how much the US government can print.
People argue that fiat currencies are worthless. They are not hard money. But the USD is the most credible because it has a lot of backings.
- The largest economy.
- The most diverse cultural melting pot.
- The largest talent pool.
- The most dominant military.
The 2008 financial crisis exposed a lot of problems in the US economy. The US government addressed the crisis by implementing quantitative easing, a process of pumping money into the economy. Instead of fleeing away from the US economy, the world became even more reliant on the USD. This development reveals a structural advantage of the US economy. The US dominates the world economy because of its military.
Bitcoin technology security
Bitcoin is secured by its technology and operations. Beyond its technology, nobody is in charge of securing your bitcoins. You are on your own. A decentralized money requires everyone to take care of their security. There is no military to go after the bad guys, at least up until now, not yet.
Bitcoin is full of scam because it lacks a social mechanism to provide security beyond technology. There is no police, no judge, no court, no military.
Bitcoin social consensus security
To secure your bitcoins, you have several options. You can rely on a third party (e.g. an exchange) to store your bitcoins. Using an exchange has a severe drawback. Your exchange can get hacked. You will lose your coins.
You can use hardware and offline wallet to store them. But then, you need to find a secure place to store your wallet and key. You can put them in a safe in your house or a safety deposit box at a bank. Either way, you are still at risk of losing your coins.
Contrary to popular crypto opinion, Bitcoin would benefit from some centralization. Using an exchange has benefits. Your exchange secures many people’s coins. They can be better than your do-it-yourself security. In the case of a hack, you are on the same boat with other people. A community can work together to go search for the lost coins. This is a level of security that goes beyond Bitcoin technology stack. It is social consensus security.
Some level of centralization is good for Bitcoin.
Bitflate is a cryptocurrency with constant inflation of 7% per year.