Bitcoin’s Benefits Rise to the Top Against Not Only Inflation, but a Cashless Society Proposition Too
Bitcoin (BTC) continues to be in a bear market but it does not mean that its fundamentals are also weakening. Indeed, Bitcoin’s features besides its price continue to expand as time passes. Bitcoin can be used as a hedge against inflation in many countries such as Venezuela, additionally, it is also possible to think of Bitcoin as a tool to hedge against a cashless society.
Cash has existed for hundreds of years as a peer-to-peer private payment method. However, as digital payments continue to expand, there are some fears regarding government surveillance and control. Users do not need to carry cash on their pockets to pay for goods and services anymore. Nowadays it is possible to pay using a debit or credit card or just make electronic transfers using bank accounts or other services providers such as PayPal, Venmo and Square, among others.
The Twitter user and independent crypto researcher Hasu wrote an article in which he explains why Bitcoin is a hedge against a cashless society. He starts the article by saying that digital payments using PayPal, Venmo or bank transfers are convenient in many cases. It is fast, cheap and efficient.
Cash can be transacted without depending on a middleman and an intermediary. This is very positive since there are no parties controlling these transactions. Payments can be permissionless, censorship-resistant and private. Now, both ways of transacting funds (electronic and cash) are coexisting in a very easy way. Nevertheless, there are some countries that are moving towards completely cashless economies. Sweden is the most popular case.
In China, digital payments are used as a way to control individuals in the country. The government does not care about privacy and it violates it at all times. Indeed, in 2012, China had 96% of the payments processed using Cash. Nowadays, cash payments are just 15%.
In Europe, there are several limits to cash. For example, the European Central Bank (ECB) has banned 500€ banknotes after they were considered a tool for money launderers and criminals.
Thus, a society without cash is a society in which it is not possible for individuals to transact money without the involvement of a third party. That means that societies are losing their ability to enjoy the unique properties of cash. This eliminates privacy and places the government as the third party in every single financial event.
About the risks related to a cashless society, Hasu wrote:
“Because all transactions require the consent of an intermediary, they can easily be censored and funds confiscated. It might not be happening right now, but a good monetary system should be robust to changes in political moods. A cashless monetary system is less resistant to both the tyranny of the majority and shifts towards authoritarianism.”
Although it might not be convenient to use cash for all transactions, eliminating it is not a good solution. It eliminates the possibility for citizens to decide how they want to transact.
Bitcoin can solve this problem. The most popular digital asset is decentralized and digital in nature and it does not depend on centralized parties to operate. It is digital cash since it can be transacted peer-to-peer, is permissionless and it does not censor people or transactions. Additionally, it has a higher degree of privacy.
There are some countries such as Venezuela where Bitcoin and other virtual currencies are growing. They are being used in order to avoid a falling fiat currency and to avoid being controlled by the authoritarian government in the country. Bitcoin became in this way a hedge against inflation and also against a cashless society.