Since the creation of Bitcoin, a digital currency based on the Internet, there has been some speculation as to how it will affect the economy. Now that it is available and the media can cover the rise of the economy, we can draw some conclusions.
The creator of Bitcoin, Satoshi Nakamoto, is not a trained economist, so it’s hard to tell what his motives were in creating a monetary system that is based entirely on the Internet. But we do know he was computer savvy and worked for a company called PayPal in Japan. So we can at least be sure that he had a strong technical background.
Banks, which have dominated our economic system for so long, are not always the best option when it comes to the financial services provided by the government. What’s more, we are seeing more than ever the numbers of people seeking out a better deal from a private enterprise. And where are these entrepreneurs located?
In part, they are no longer located in the banks. There are people that use digital currencies like Bitcoin because they believe the banking system has failed them, and they want to do more of their own banking. As these individuals find their way into the banking industry, they will undoubtedly turn more toward the banking system, and the same will be true of the people who are trying to get in touch with the banking system.
In other words, the development of the money in Bitcoin has the potential to bring about an arms race between banks, who will work to keep prices low for those using their services. Of course, if you look at the average price in dollars, one Bitcoin is worth about two hundred and fifty U.S. dollars. One major bank can use its cheap prices to lure in customers and then sell them a package of things they need and offer them less in their shopping cart so that the prices will go down for their credit-card payments. In this scenario, the banks win.
It’s also possible that how digital currency change the economy has nothing to do with what happens with the financial institutions. Perhaps people will use their Bitcoin money to start their own company, to purchase their first house, to start their own business, and to create their own social venture. They will participate in the activities that most banks would frown upon.
We have seen this happening in the world of the Internet, where people are venturing out to do what many banks fear – a business or a financial service outside of the banking system. People are creating new companies that could bring a new life into the banking system. This is no different with digital currencies.
Once digital currencies begin to change the economic systems, maybe people will become more educated about the advantages and disadvantages of creating a company outside of the bank. Maybe people will be more willing to accept payments in Bitcoin, for example, even if it means that they have to pay higher prices in other forms of money. Perhaps the banks will be more willing to listen to the people and be flexible with their payment processing.
So, how digital currencies change the economy depends on where they are accepted. If they are only accepted at one bank, then they will simply be transferring money from one bank to another, and nothing else. If they are accepted at many banks, then their popularity will grow as other people begin to change the way they transfer money and take advantage of the lower price in the various currencies.
The other factor of how digital currencies change the economy is in the entrepreneurs who will take advantage of them. The digital currencies are a perfect way to start your own company, and once you have a product, you’ll be competing with the other banks in the banking industry. And you’ll be doing so without having to foot the bill for a bank account.
How digital currencies change the economy also depends on what happens with the financial reform bills passed in Washington, D.C. That’s right, there are now proposals to reform our current Federal Reserve, and our financial institutions and Bitcoin offers some great benefits in terms of innovation and an end to some of the practices of the banking industry.