Cross Currencies – Coinstec

Bitcoin is good for society because sound money aligns people’s preferences toward building a better future.

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Almost all money used today (USD, EUR, JPY, CNY, etc.) is fiat money. That is, creation of the money is dictated by some central authority.

This means, in general, that fiat currencies can and do get inflated. Largely, this is because entitlements and benefits are popular but taxes are not, so politicians tend to inflate through deficit spending. This is a lot like charging money on your credit card, but not having to pay off the principal for 30 years or so.

This means that a dollar today will not have the same purchasing power as some dollar 10 years from now. This makes sense since inflation is the act of increasing the money supply. In other words, we live under a monetary system where the ultimate supply of the currency is at best unknown and at worst uncapped.

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Bitcoin, on the other hand, has a capped, known supply. There will never be more than 21 million BTC. This is even better than traditional sound money like gold as the potential supply of gold is unknown.

Fiat currency, because of its inflationary property, encourages spending. Spending money now vs. later changes the mentality of people in a particular way. Specifically, they are less motivated to be prudent with their money.

Now in of itself, spending money to get some good or service is not a bad thing. That’s how markets work. When inflation enters the picture, however, the motivation to spend increases and thus, the demand for goods increases. This means that in general, goods and services become more expensive. The preferences change so that people are more motivated for things now vs. things later.

Bitcoin decouples money and state. Bitcoin can thus be sound money. Sound money motivates people to be more prudent. As a result, civilized society can be planned for and improved upon instead of made worse through neglect or ransacking future generations.

When you trade a digital coin, you are trading it against another asset of value. This can be fiat money or other Cryptocoins. The most popular trade is Bitcoin against the US dollar known as BTCUSD, you can also trade bitcoin against the euro and Ethereum. A cross currency is the right side of the quoted pair.

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