Why inflated countries should adopt Bitcoin to help boost their economy.

[Youngkhngdiddy]

 If you interview a lot of people about Bitcoin, some would tell you it's a crypto currency used for digital transactions, some could also say it's a digital currency that operates independent of the central bank. You could also here others say it's a digital currency that could serve as an alternative to fiat currency, well they're all right in their different perspective of description. However I also think Bitcoin could be refered to as the future of money. It is the mother of all crypto currency, and has inspired the birth of a lot of other crypto currencies. Well it might take a while before everyone accepts it as a legal tender, but it has the potential of replacing fiat money in the future.
  Bitcoin have a lot of benefits and could affect a countries economy positively due to it's transparency and inflation hedge, however my major point of focus is on inflation. Alot of countries are undergoing inflation currently especially in countries with bad governance, high crime rates and war. Sometimes it's takes a long while for some countries to get out of inflation. But Bitcoin is known for it's volatility and can serve as an inflation hedge to their  economy if only they could adopt it's use for transactions or as an Alternative to fiat. It could be beneficial in several ways because.
1. It is the fastest way to combat inflation, due to it's limited supply, making it more scarce and costlier, which could help strengthen a countries economy.
2. Bitcoin has a transaction cost making it easier for financial industries and traders to carry out transactions without worrying about high cost of transaction fees.
3. It's transaction rate is quicker and can help, business men, traders and individuals transact very quickly.
4. If a government accepts Bitcoin as a alternative to fiat
it could make currency exchange effortlessly and it cannot be influenced by corrupt governments officials.
5. I've seen no reason why some countries would be fighting against Bitcoin instead of adopting it into their system, I think any country doing that is fighting a lost fight and would be forced to accept it on the long run.
 Other countries should use see El Salvador that invested in it and adopted it for transactions as an example of how Bitcoin could affect an economy positively. It's helped  them to improve their enocomy by reducing the rate on inflation in their country, though it didn't occur as fastly as speculated, but in the bull season when the halfing fully comes as speculated their economy could become very robust, since it's adopted over there.

[legiteum]

Please see this thread for a discussion about whether Bitcoin enthusiasts should be asking for the central government's help in forcing people to adopt Bitcoin.

[Frankolala]

Accepting bitcoin as a legal tender wouldn't change the economy state of a country. Moreover, bitcoin must not be a legal tender before citizens will benefit from it, as long as bitcoin is not banned in a country, and it is legal to use it, then it will still serve its purpose. You should also note that it will be impossible for bitcoin to replace fiat in future, because it is limited in supply and cannot be used daily by everyone with the large number of population in the world.

Bitcoin was created to be an alternative payment method to fiat, which is that purpose that it will serve. El Salvador adopted bitcoin as a legal tender, it has not change their economy, but it will do that in the long run, since the have the country's fiat reserve in bitcoin. Bitcoin is a hedge to inflation, but you should also think about the high volatile nature of bitcoin. Bitcoin is still facing a challenge of high transaction fee that do happens from those garbage that uses bitcoin blockchain, that will be the worst for bitcoin users when those token pop up again.

[Rockstarguy]

Accepting bitcoin as a legal tender wouldn't change the economy state of a country. Moreover, bitcoin must not be a legal tender before citizens will benefit from it.

It may not really help the economy of the country especially  when we have incompetent leaders but I think bitcoin can help individuals in some countries that their currency is losing value steadily. I know of a country that is having serious problems with their currency, depreciating everyday. If I'm to be in a country like that I don't think I will keep my money in the bank    because doing this after sometime you will notice that the money won't have value due to inflation. I will prefer to convert my money to bitcoin, l the price of bitcoin is increasing which is going to add some value to the money I already have than keeping it bank and I won't be able to solve my problem due to inflation.  

Countries having serious economic Challenge right now, bitcoin can serve as a store of value right now because we are in a season the market is going up.

[pooya87]

I disagree.
For starters bitcoin is too volatile to act as a good hedge. It is a hedge on a small scale and for individuals, but not on a bigger scale for the whole country and its economy. You are also forgetting the bear periods where it continues going down like 2018 (price went from $20k down to $3k in a year). You can't shut down the entire country's economy because bitcoin is on a downtrend for a whole year and a massive downtrend at that (85% drop).

Additionally using bitcoin to solve economic problems including inflation is like sweeping the problem under the rug. It is not going to solve it, at best it may only alleviate it in short term before it shows itself again.
Solving such issues should start by first finding why the issue exists (like why is there inflation) then fixing that root problem. For example in a lot of cases inflation exists because the government refuses to reduce its expenses and faces a big budget deficit which then in order to solve it they print money hence create inflation! To solve this example (although I'm simplifying things) you should fix the budget, eliminate extra expenses, where money is being wasted, etc. and as budget deficit shrinks so does their money printing and consequently the inflation.

El Salvador is an excellent example for this ONLY IF it is studied correctly not based on some news titles you read. This means the economic situation of this tiny country didn't improve because they adopted bitcoin as legal tender, it started improving because a million different things their government did over the past couple of years (attracting foreign investors, improving tourism economy, fixing the budget, battling corruption, crime and gangs, etc.).

[Dunamisx]

Countries suffering from poor economy development can adopt bitcoin as a legal tender, but before they can do so, they have to sit and plan for the possible means they can make their best achievement in this, there must be a proper plan on ground that could be of help to the people and this can only be possible when the leaders are interested in the peoples welfare, growth and development than their own selfish interest, then they could be able to present something nice like bitcoin adoption to its people, just as in the case of El-Salvador, Nayib Bukele have put in more efforts in seeing that the bitcoin adoption turns into a testimony today and we can see from how he has been moving the country forward from one aspect to another in the development of the economy through same bitcoin adoption.

[dzungmobile]

Countries with poor economy and also other infrastructures like politics, laws will need to resolve those problems first.

Bitcoin can not, never be able to help such countries to boost their economy and it was not created and designed to do this. In reality, after many years since 2009, even Bitcoin already is no longer a baby, matured enough, got better adoption, at the moment it does not have that power to fix national economical, financial problems. It will not have that power in future too, forget about it.

[Fiatless]

Why inflated countries should adopt Bitcoin to help boost their economy.

All the benefits of Bitcoin you have mentioned relate to individuals and not nations. An individual can use the currency as an inflation hedge and one could make money from Investing in Bitcoin. There are several causes of inflation and it can be tackled using multiple economic measures. Some of the ways the government tries to fight inflation are by increasing taxes, changing interest rates, and reducing government spending. Favorable Bitcoin policies could be part of the measures but not the only solution.

Other countries should use see El Salvador that invested in it and adopted it for transactions as an example of how Bitcoin could affect an economy positively. It's helped  them to improve their enocomy by reducing the rate on inflation in their country, though it didn't occur as fastly as speculated, but in the bull season when the halfing fully comes as speculated their economy could become very robust, since it's adopted over there.

The government of El Salvador has made some profit from their Investment in Bitcoin but I doubt if only the gains made from Bitcoin will help the nation reduce inflation. Investing in Bitcoin should be part of the measures to diversify the economy of the nation in a bid to reduce inflation. There is no proof or data that proves that Bitcoin has helped El Salvador to come out of inflation. The view or belief that Bitcoin is the savior of a nation's economy is a utopian one.

[Fivestar4everMVP]

@op your point number 2 and 3 is actually a lie in times when the bitcoin network become congested and the transaction fees rises up to the roof, just as we all saw and experienced it do in the last couple of months, in times like that, a country that adopted bitcoin to boost their economy would still have to turn back to their fiat to continue transacting normally as before.

And besides, I do not think a country will have to adopt bitcoin and make it a legal tender before it serves as a source of improvement in that country's economy, countries simply converting their foreign reserves to bitcoin rather than continue with the depreciating fiat could as well do the magic.

And for a fact, I do not think we have come to the point where bitcoin can totally and completely replace fiat, not everyone is savvy with how to carry out transactions on the internet, not to talk of doing it with and through bitcoin, most especially, if we go to the villages and remote places, people there know nothing about bitcoin or how to transact in it, and most won't be able to learn it because they are not educated, so, this is idea of bitcoin completely replacing fiat should not be discussed when ever a topic like this comes up.

[avikz]

I disagree to the points raised by OP. Bitcoin is not built to boost any country's economy. It is not built to handle mass transactions. It is also not built to replace the mainstream economy. Bitcoin is a currency that thrives in parallel economy. Its purpose will be ruined if Bitcoin is adopted by centralised entities and forces people to use it. Bitcoin honestly cannot handle a mainstream transaction volume. It will just jam the network and push the transaction fees to an an unacceptable level where the existing users will also suffer.

[uneng]

I totally agree Bitcoin can be helpful for a country's economy when adopted as public long term investment by the government. However, not as the sole investment, neither as official main currency. Look the example of El Salvador: they did the adoption in the right format.

Even though the digital currency is legal tender there, Bitcoin didn't replace dollar, which remained as the main currency of the country. At same time, they took advantage of the best Bitcoin could offer to the country. They have been buying the dip, that is, investing considerable amounts of money from the public vaults in BTC along past years and now that we are approaching a new bull run, they are ready to profit from their investments.

Of course they risked money, but it was done in a calculated way, what means it wasn't going to completely compromise the country's economy if something went wrong. On the other hand, if they had adopted Bitcoin as the exclusive currency of the country, I fear it could end really badly, because Bitcoin is heavily volatile and prone to manipulation by whales. It's crazyness for a country to put all their tickets in BTC, even if it's done with a good intention of fighting inflation back.

[kryptqnick]

I have some thoughts on Bitcoin and inflation. I agree that Bitcoin should be legal, so that people can avoid losing their savings to inflation by investing in Bitcoin if they choose to do so. But I also understand why some countries can be especially vulnerable when they are hit by inflation, and they might introduce restrictive policies to help stabilize their local fiat. It can be reasonable and very important because salaries, taxes (and thus the budget for all sorts of essential services) are usually in fiat, so if inflation gets too high and doesn't stabilize, lots of people and the economy get hurt.
Bitcoin, in the meantime, can grow a lot, but if a lot of people start using it, it can create a congestion, with the fees spiking and transactions getting stuck. For a country that's already struggling economically, such complications can be an even bigger nightmare than inflation.

[iBaba]

Accepting bitcoin as a legal tender wouldn't change the economy state of a country. Moreover, bitcoin must not be a legal tender before citizens will benefit from it, as long as bitcoin is not banned in a country, and it is legal to use it, then it will still serve its purpose. You should also note that it will be impossible for bitcoin to replace fiat in future, because it is limited in supply and cannot be used daily by everyone with the large number of population in the world.

I also don't really see that happening and whether there is possibility of it happening , it will not be anytime soon. We cannot foresight what Bitcoin will look like in the next 100 years however following the decentralized technology in which the bitcoin is designed , it will be very difficult for it to replace the centralized system since it can also function effectively as an alternative.

Bitcoin was created to be an alternative payment method to fiat, which is that purpose that it will serve. El Salvador adopted bitcoin as a legal tender, it has not change their economy, but it will do that in the long run, since the have the country's fiat reserve in bitcoin. Bitcoin is a hedge to inflation, but you should also think about the high volatile nature of bitcoin. Bitcoin is still facing a challenge of high transaction fee that do happens from those garbage that uses bitcoin blockchain, that will be the worst for bitcoin users when those token pop up again.

I also don't think having bitcoin as a legal tender is enough to change the economic hardships bedeviling any country, rather it can bring about succor to the worsened financial crisis of the country which will sort of be a short-term plans to lessen the inflation and depreciation in the local 'fiat' currency of such country. The country can also decide to use the equivalent of the Bitcoin for his forex market in the sense that any money coming in and out of the country will be valued by the Bitcoin exchange rates whereas transactions and businesses done within the domestic market will be carried out by the local 'fiat' currencies.

[The Cryptovator]

As crypto enthusiasts, we love Bitcoin and want to see it as a legal tender. But we always consider Bitcoin as a currency, and a few also consider it an asset. I agree with both; primarily, it's a currency, and when we store it, we may also consider it an asset since it has a store value. In this perspective, I don't think Bitcoin could play a role in reducing the inflation of a country. Most of the inflation happens due to corruption. So Bitcoin won't stop the corruption or war. Bitcoin could just serve as a currency, even if it becomes legal tender. Trading Bitcoin will be easier, but due to the high transaction fees, merchants will face difficulties accepting Bitcoin. However, we want Bitcoin to become legal tender so we can use it everywhere. 

[legiteum]

I feel as though I should point out an important point about macroeconomics here.

Inflation is really bad for the economy. It makes it hard for business to predict the prices they should charge, and puts the squeeze on average workers when their salaries don't keep up with inflation. Periods of high inflation are associated with economic instability and political unrest.

But as bad as inflation is for the economy, there is something far worse than inflation: deflation.

Deflation, in short, is a total disaster for an economy because every consumer will suddenly be incentivized to stop spending any money, leading the a massive contraction in GDP.

This is why no country in the world is on any sort of "gold standard" or anything equivalent.

And I get that we're just talking theoretically here when discussing replacing sovereign currencies with Bitcoin (because I think we all know it would never happen for a number of reasons), but if by some miracle a country tried it, they would instantly wreck their economy.

Now, lets be clear: most people don't envision replacing a sovereign currency with a digital one, but rather they usually mean to use a digital currency as a more streamlined means of transacting in their sovereign currency. (For the Haypenny system, we actually just let people trade in "USDE" or "USD equivalent" to make it easier for them to work with).

But make no mistake, if a country switched to Bitcoin to replace their own currency, it would be an absolute disaster.

[famososMuertos]

Things are not so simple to be on the same page as adoption; on the other hand, inflation is not an exclusive issue for poor countries; the American example is the best.

On the other hand, it is not necessary for what exists to disappear, in reference to the current financial system, what is needed is for the laws to be fair with bitcoin and there is no attempt to govern its use to the classist interests of the old financial system.

Ah!!, Just because bitcoin is deflationary does not mean that it is "medicine" for economies that suffer from inflation. (Imho)

[Zaguru12]

As crypto enthusiasts, we love Bitcoin and want to see it as a legal tender. But we always consider Bitcoin as a currency, and a few also consider it an asset. I agree with both; primarily, it's a currency, and when we store it, we may also consider it an asset since it has a store value. In this perspective, I don't think Bitcoin could play a role in reducing the inflation of a country. Most of the inflation happens due to corruption. So Bitcoin won't stop the corruption or war. Bitcoin could just serve as a currency, even if it becomes legal tender. Trading Bitcoin will be easier, but due to the high transaction fees, merchants will face difficulties accepting Bitcoin. However, we want Bitcoin to become legal tender so we can use it everywhere. 

Exactly I think OP is mistaken when he actually said a country in inflation can be saved by using bitcoin as legal tender yes bitcoin is an hedge against inflation but only on one aspect which is to curb excess supply of the fiat currency which usually leads to the devaluation of the currency Bitcoin fixed supply can definitely safe that. But there are many ways that get countries into inflation like the high demand of products and goods or low supply or manufacturing capacity by commpanies due to raw materials shortages. This are definitely not a legal tender problem that bitcoin can solve

[tabas]

I would only agree about being an individual investor and seeing it as a good hedge against inflation. But if it's about the government leaning towards it as their hedge against inflation, I don't think that most of them are going to thrive. Especially that you've tackling this with countries that are have high numbers of inflation, it's not going to solve their problems with it. Yes, it's easy to say that Bitcoin is a deflationary asset but they just can't put their country's wealth into this asset and wait until it pumps and sell. That's not how it goes for a government for it to benefit from investing in Bitcoin. Actually with what the El Salvador is a commendable thing even if Bukele has seen that there will be a lot of backlashes and they seem not yet prepared for it. Look at the Central African Republic, I think they've declared Bitcoin as a legal tender but then later on reverted that decision, IIRC.

[Moreno233]

Countries with poor economy and also other infrastructures like politics, laws will need to resolve those problems first.

Bitcoin can not, never be able to help such countries to boost their economy and it was not created and designed to do this. In reality, after many years since 2009, even Bitcoin already is no longer a baby, matured enough, got better adoption, at the moment it does not have that power to fix national economical, financial problems. It will not have that power in future too, forget about it.

You have said what I feel is the reality that many Bitcoin lovers have not understood. Bitcoin might seem so nice for countries to adopt but in reality, it has its peculiarities and challenges especially when put to test  as payment solution to the ordinary citizens who may not have the knowledge to use Bitcoin and also protect themselves from theft. Think about the aged, the children and the disabled, fiat will be far easier for them than Bitcoin. This is why I think adopting Bitcoin by countries will be feasible if it work side by side with fiat payment systems. This way, it will become a thing of preference for the citizen and also make it more democratic.

[thecodebear]

I feel as though I should point out an important point about macroeconomics here.

Inflation is really bad for the economy. It makes it hard for business to predict the prices they should charge, and puts the squeeze on average workers when their salaries don't keep up with inflation. Periods of high inflation are associated with economic instability and political unrest.

But as bad as inflation is for the economy, there is something far worse than inflation: deflation.

Deflation, in short, is a total disaster for an economy because every consumer will suddenly be incentivized to stop spending any money, leading the a massive contraction in GDP.

This is why no country in the world is on any sort of "gold standard" or anything equivalent.

And I get that we're just talking theoretically here when discussing replacing sovereign currencies with Bitcoin (because I think we all know it would never happen for a number of reasons), but if by some miracle a country tried it, they would instantly wreck their economy.

Now, lets be clear: most people don't envision replacing a sovereign currency with a digital one, but rather they usually mean to use a digital currency as a more streamlined means of transacting in their sovereign currency. (For the Haypenny system, we actually just let people trade in "USDE" or "USD equivalent" to make it easier for them to work with).

But make no mistake, if a country switched to Bitcoin to replace their own currency, it would be an absolute disaster.

Honestly you are misunderstanding some things there. The idea that deflation is disastrous comes from the fact that deflation happens BECAUSE OF economic collapse. If there is an economic collapse that means people don't have money to spend, so they spend less, so there is less demand for things, so prices go down (and therefore the value of the currency goes up in relation to consumer goods) and you get deflation. But its the result of an economic collapse, not the cause.


Also, to point out the obvious, the reason money being linked to gold is called a "gold standard" is because many nations did this! You act like it never happened. The gold standard ended, which means it used to literally be the standard. It never caused economic collapses simply by existing, otherwise it never would have become the standard. The reason why no country in the world is on a gold standard ANY MORE is because politicians realized they have far more control and power when they are literally in charge of the monetary supply. I'm not saying I know what would happen economically if say countries started adopting a bitcoin standard (and I don't think that is something that will ever actually happen), but the idea that using a hard currency rather than a weak inflationary currency would cause economic collapse is honestly just modern monetary propaganda to make people think having a weak currency that gives govt/central bank tons of extra power is the only sort of monetary standard that could work. When obviously history shows that claim to be a complete lie.


There are some things that are better about being on a hard currency standard (like all nations used to be), and some things that are better about being on a weak currency standard (like all nations are today). It's not that one is good and one is bad. They each have good parts and bad parts. I think the main problem is that since the gold standard was abandoned the world hasn't had a hard currency to use as an outlet for the good things it provides. Once Bitcoin becomes massively widespread globally so anyone can save and spend it with ease that's essentially, as someone people have called it, an escape hatch that people can choose to get away from weak currencies.


There would be bad economic consequences if either inflation or deflation got out of control. But while hyperinflation occurs due to horrible monetary policy by the politicans and central bankers who just keep printing money because they have to in order to stay ahead of their debt, I believe a deflationary spiral would only happen if an economy fell into a depression that it just couldn't get out of. Because think about it, the only reason people are going to not buy goods is if they literally can't because they don't have jobs. People having jobs is going to balance out a deflationary currency because people want to buy things and they are not just going to stop buying things when they have the money to buy things. So it isn't deflation at all that is the problem. It is economic collapse that is the problem. Whether a currency is weak (fiat) or strong (bitcoin) people are going to spend money they have. I think the main difference is that with fiat currency the economy is debt driven because printing money and handing it out as debt is how the economy grows, while with a hard currency the money is limited so there is slower growth because its much riskier to take out debt when the currency is strong.

I'm no expert in these things but it seems to me inflationary currency leads to high growth but very unstable economies, the must eventually collapse because govts are by human nature going to print more money and continuously wrack up more and more debt until its unsustainable and the economy reaches a break point (which is what a lot of people are afraid is going to happen in the coming decades, which I beleive people refer to as the "great monetary reset"). While being on a deflationary currency standard would mean less growth but a much more stable economy. People taking far fewer risks, so slower growth, but also much fewer monetary-related problems because the base monetary unit increases in value so saving is possible without taking on risk, and things can actually stay affordable rather than being destined to become more and more unaffordable.

That's my take, which may or may not be totally right. But for sure your statement that a deflationary currency would automatically cause economic collapse is totally wrong, as explained at the top of this comment.