This is an opinion editorial by Andrew Hetherington, a contributor to Bitcoin Magazine.
Since the Nixon Shock of 1971, wealth inequality has soared to levels not seen in over a century. The dollar was no longer redeemable for gold but was instead backed only by faith. Without the limitations of a backed currency, those in power were given the opportunity to create as much fiat currency as they desired, with little to no consequence. Destined to lose faith due to abuse, fiat currency was doomed from inception.
Bitcoin seeks to remedy the inequalities of fiat currency. Bitcoin is decentralized, fungible, permissionless and finite; it does not allow for central authorities to benefit from the theft of its holders’ asset value through inflation. Furthermore, it does not restrict access from those who need it most, providing financial services to those incapable of accessing traditional banking
A Tale Of Two Cities
Inequality in America has risen to unforeseen heights in recent decades, with only the income and net worth of those in higher income brackets growing.
According to data from the Pew Research Center, the net worth and earnings of the upper income earners have soared above that of the ordinary worker. From 1981 to 2018, the top 5% of earners outpaced every other income bracket. Additionally, from 1983 to 2013, the median household net worth only increased in the upper income bracket.
As the elites continue to see their earnings and net worth soar, the average worker is struggling to feed his or her family due to an increasingly manipulated economy. Fueled by abusive monetary policy, wages have not increased in buying power since 1971.
First discovered by Richard Cantillon during the 18th century, the uneven expansion of currency disproportionately benefits those closest to the source. This creates theft of buying power from those in lower income brackets, straight into the hands of the elite. Only by using their currency are they able to do this. With the superior monetary qualities of bitcoin, it will eventually replace fiat as the standard medium of exchange. As Bitcoin adoption increases, and slowly renders fiat currency less important, the printing of new fiat currency by nation-states will hamper their ability to manipulate the buying power of the working class.
Thanks to the decentralization of Bitcoin, for the first time in human history, currency expansion will no longer disproportionately benefit any government or central authority. Currency expansion will now become a business, benefiting participating corporations and individuals who are capable of securing the network in a profitable way. Most importantly, unlike fiat currency’s excess printing, bitcoin currency expansion from block rewards will benefit not only those closest to the creation of the digital currency, such as miners and exchanges, but also the holders of bitcoin itself through increasing scarcity and network security. This lack of manipulation by a central authority allows Bitcoin to reduce inequality.
Not Your Typical Bank Run
According to the Center for Financial Inclusion, approximately 1.7 billion people are unbanked. Increasingly, research is presenting evidence of mobile money services improving financial conditions in developing nations. According to this study by Tavneet Suri and William Jack, estimates suggest approximately 194,000 Kenyan households have been lifted out of poverty with the expansion of a mobile money service known as M-Pesa. The study cites increased financial resilience, savings and occupational choice — particularly for women — as the largest improvements provided by mobile money services.
Bitcoin provides all of the opportunities of mobile money services like M-Pesa with far lower fees and greater accessibility. Those using it as a means of storing wealth can do so with no account fees and minimal transaction fees. In February 2022, Kenyans living abroad sent home over 300 million U.S. dollars. According to the World Bank, the average cost to send remittances to Kenya is 9.54% as of 2020. If Kenyans abroad were to use Bitcoin as opposed to traditional remittance services, millions of U.S. dollars would be saved per month.
Alongside financial benefits, Bitcoin is easily accessible as it requires as little as a smartphone to get started. As reported by the World Bank, approximately 1.1 billion people globally have no legal identification. Without government-recognized identification, these people are incapable of accessing the traditional finance system. Even without identification, these people are still capable of accessing the Bitcoin network. Bitcoin provides modern financial services to those who need it most, without restrictions.
With all of the aforementioned benefits of Bitcoin over traditional finance, adoption has been soaring in Africa with cryptocurrency use growing over 1,200% last year according to Chainalysis. Kenyan founder of Health Land Spa, Tony Mwongela, has been accepting bitcoin as payment since 2018. As companies are common victims of payment fraud, Mwongela cites the safety and security of Bitcoin as his primary reasons for deciding to accept it as payment.
Continuing to bank the unbanked, Bitcoin adoption is providing opportunity to those left behind by the traditional banking industry. With greater security, accessibility and reliability, Bitcoin is leading us to a more equitable world.
This is a guest post by Andrew Hetherington. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.