How does Bitcoin deal with inflation?
Inflation is one of the most frequently mentioned terms in the mass media and has become a threat to the economy today. Bitcoin, the cryptocurrency that is concerned to be a new currency, has many prominent advantages and is seen as a solution to inflation. Let’s find out more about Bitcoin and this new economic solution.
Inflation is a big issue nowadays
Inflation and fears from economists today
Inflation, in general, can be interpreted as the price of commodities increases relative to the initial price. The rise here is taking place on a large scale and many items. The increased value of goods means the buying power of money lost – with the same amount of money, consumers will buy fewer goods than before. In terms of the usual concept, inflation means money continuously its value. . When comparing economies, inflation is the devaluation of the local currency against other currencies.
Main reason that leads to inflation:
Inflation may also be due to the increasing volume of money circulating in the economy as the government can not manage the amount of total money supplied. They release more money to offset the budget deficit, while the amount of social goods produced is still not rising. At this point, there will be overproduction, which stimulate people to shop a lot as commodity prices rise.
Inflation may also be due to external factors such as foreign money pouring into the domestic currency, or the rise in prices of commodities in the world such as crude oil. The other reason is the government’s salary increasing policy … and many other reasons.
Around the world in 2017 inflation generally tends to increase. And if inflation cannot be controlled, the consequences are enormous, affecting the entire socio-economic life of every country.
Therefore, in the mass media, we often see information such as the priority to tackle inflation, solutions to curb inflation … But in fact, the inflation is happening in many countries and has great impact on the lives of people as well as their economy. And in the solution to the problem caused by inflation, there are some ideas, though not much to say that bitcoin is a good one which we should apply. So, does Bitcoin have the capacity to tackle inflation and how does it help solve all the consequence ?
The way Bitcoin deals with inflation
Can Bitcoin solve the inflation problem?
This is what happens with real money being circulated so widely with mathematical calculations – bitcoin? Bitcoin will lead to inflation, bitcoin inflation will be how … Investors have a very positive view and comment on this issue.
There are even more ideas that inflation can push consumers to switch to math. The evidence at the end of 2017 in Zimbabwe is hyperinflation, seriously affecting politics and economics. The inflation was so bad that the country had to quit the Zimbabwean dollar and move on to other currencies including the dollar. People are turning to Bitcoin to make a lot of money. Bitcoin prices in the world on November 20, 2017, is about $ 8000 per unit but in the country is about $ 13,000. This partly reflects the capacity to tackle inflation in this currency.
Another example is Venezuela is one of the worst economies in the world. Here in 2016, there is a time of hyperinflation of up to 700%, the country is in debt. The currency of the country at the time of peak inflation is losing half its value. At that time the government was forced to announce the removal of the country’s largest denomination. The government carried out a series of measures, including removing large sums of money, limiting access, closing the border with Colombia on Monday to prevent capital outflows. In a country like Venezuela, Bitcoin is considered the top solution.
Venezuela is ranked second in the Bitcoin Market Potential Index (BMPI) which is a condition for the application of Bitcoin. Moreover, this is also a currency suitable for the current situation of the country: borderless, not subject to government management, anti-inflation, limited supply, decentralization, anti-censorship. In the state of inflation, some people think about changing money to dollars, but this is very difficult because their assets are stuck. And a lot of people have used bitcoin to save and secure their money. This currency is thus becoming popular in this country.
The way Bitcoin solve inflation
How does Bitcoin deal with inflation?
Many argue that in addressing the pre-inflationary inflation, more specifically Bitcoin is the more perfect and transparent solution than the US dollar is thought to be the world’s main reserve currency.
They argue that currencies that are widely circulated today are very complex in distribution and management policies and that it is not as transparent as what is proclaimed and what we think. And if Bitcoin is accepted as a world reserve currency, it could create an environment where inflation can be better. In fact, low inflation can be a good signal and Bitcoin can curb inflation until the index is at a safe level.
Bitcoin is made up of solving algorithms, circulating, storing, transacting without the need for a formal organization but just through the internet. Transactions will be managed safely, the tax will be passed from income as current currencies to a much more equitable cost system. People will be encouraged to be creative, work more.
Moreover, differently from the mainstream currencies are now always expanded, bitcoin is limited. Only 21 million Bitcoins exist, once they are dug out, no new coins are created. It is the limit that will make the currency not dumped, but the price of bitcoin will increase over time. On the one hand, the number of bitcoins is limited to only 21 million, on the other hand, the number of bitcoins produced is also less and less. Approximately once every 4 years the amount of digging bitcoin is reduced by half. Initially, each block will contain 50 bitcoin, then reduced to 25 bitcoin and by 2020 it will be reduced to 0.25 Bitcoin.
While governments continue to increase their funding, bitcoin is continually decreasing. That’s not to mention many Bitcoins are lost that cannot be recovered. This reverse operation helps bitcoin reduce inflationary pressures.
It is expected that by the year 2140 all bitcoins will be fully excavated, at which time the value of Bitcoin will increase. And even if the new bitcoin was not created, the diggers still benefited from the extraction. And to charge the bitcoin enough to encourage the diggers to maintain the bitcoin’s value, it must increase.
While other currencies have unlimited supplies and the government can increase supplies, Bitcoin will only increase to 2140. The supply is tightly controlled and predictable, thus helping to solve the problem. Inflation is more efficient than other currencies.