Dashmaximalist
Well-known member
https://medium.com/@maptags.dev/why...ur-super-complex-monetary-system-fc55ba2d1c0e
what doesn’t kill you makes you stronger … This iconic quote from fight club is so true when it comes to the relationship between cryptocurrencies and governments.
Unless you are living under a rock you probably know what bitcoin is , you also probably know govts world wide hate it. There has never been a financial instrument that have received such a strong regulatory force ,sabotage from govts. Many repressive govts world over have banned bitcoin , many imposed some of the strictest regulatory frameworks over it and they are constantly finding new ways to suppress it further.
Unfortunately it has failed miserably with cryptocurrencies aggregate rising by over 5000% in just 2017 (sounds crazy). Money raised through ICOs ( Initial coin offerings or new crypto tokens) now have overtaken money raised through Venture capital.
There are lot of critics out there , who have tried to bash bitcoin and its crypto ilk time and again. They said govts will crush it , ban it or its simple deflationary economics will destroy it from within ( according to me economists are the most useless creatures on this planet ). These guys never learn , they said bitcoin will crash and burn but it hasnt in fact it just keeps growing stronger and stronger.
Now the real reason why cryptocurrencies will never crash and burn.
from a regulatory standpoint ,every book in the law has already been thrown at bitcoin, strating from KYC to AML to anti-margin trading ( which is regulatory overreach) , neverthless the cryptosphere continues to thrive.
Some folks think govts will ban all crypto exchanges , which in turn will crash and burn bitcoin, but this in fact is a boon to long term traders, once a thriving cash based local exchanges are established all around , most traders don't need to worry about KYC/AML/ Capital gains tax crap and don't have to worry about privacy issues.. so in effect its a short term pain with long term gain for cryptosphere ( which is exactly why smart govts haven’t banned crypto exchanges and they never will).
Now there is another far stronger economic reason why cryptocurrencies will thrive, it's really very simple math. bitcoin/ dash are have scarcity with 21 million coins at the top , whereas there is no limit on amount of money govts can print.
What happens when a unlimited supply of fiat currencies starts chasing limited supply of crypto tokens ?
price of crypto tokens rises
What happens when price of crypto tokens keeps rising for long term?
More and more and people get in , fueling further rise in the price.
What happens when say 5–10% of a country’s population switches to crypto?
here's where the real fun begins.
you see govts have a funny way of creating money, they believe in growing money supply along with a growing economy. but they never try to contract the money supply as believe deflation is destructive to the govt budgets, now this philosophy works as long as underlying economies continue to grow which occasionally fails in places like zimbabwe.
to make it really simple , image this
Think of a country with just 100 people doing 100 transactions every year, govt initially creates 100 dollars ( it also has to pay interest on this 100 dollars ). Now say 10 new people migrated to the country, govt now prints an additional 10 dollars so everyone still has one dollar or so going around.
now imagine 10 people left the country, technically govts should contract the money supply and bring it back to 100 dollars , but they never do this, as contracting money supply creates deflation which collects lower taxes and make its much harder for them the pay the interest on the 100 dollars that govt still needs to pay interest.
So govts always love inflation and hate deflation.
Enter the ( crypto )dragon.
for cryptocurrencies however inflation works in their favour, with rising prices of general stuff prices of cryptos rise too ( as they are limited in supply).
Now imagine the same country with 110 people but 10 of them using only crypto for all their transactions, hence 110 dollars are being used by 100 people. So we have 1.1 dollars for every person using the dollar which is a 10% inflation technically ( which in turn triggers a price rise in crypto tokens).
Remember this however , when the underlying dollar economy contracts ( because of more people turning into crypto) govts are supposed to contract the money supply as well, however they never to do this for the aforementioned reasons.
This means with more and more people turning to crypto not only does the price rise ( because of general buying effect), when 10% or more of country start transacting in cryptocurrencies it creates a inflationary spiral that pushes the prices further.
Now one another strong reason for business turning to crypto is hiding taxes is much easier with crypto ( along with the fact that getting a business bank account involves cumbersome regulations ). So generally speaking if lot of businesses start using cryptocurrencies , tax collection will come down by some degree, unfortunately when taxes come down govt spending usually can't come down along with it ( cutting govt spending is never an easy political move if you know that). For this reason when taxes come down govts usually prints more money which knock knock creates further inflation. if you have read this far, you know that inflation is a dear friend of cryptocurrencies.
To sum it up,
incase we cross the critical barrier of 5% of population using cryptocurrencies we enter the phase of death spiral for fiat currencies.
what doesn’t kill you makes you stronger … This iconic quote from fight club is so true when it comes to the relationship between cryptocurrencies and governments.
Unless you are living under a rock you probably know what bitcoin is , you also probably know govts world wide hate it. There has never been a financial instrument that have received such a strong regulatory force ,sabotage from govts. Many repressive govts world over have banned bitcoin , many imposed some of the strictest regulatory frameworks over it and they are constantly finding new ways to suppress it further.
Unfortunately it has failed miserably with cryptocurrencies aggregate rising by over 5000% in just 2017 (sounds crazy). Money raised through ICOs ( Initial coin offerings or new crypto tokens) now have overtaken money raised through Venture capital.
There are lot of critics out there , who have tried to bash bitcoin and its crypto ilk time and again. They said govts will crush it , ban it or its simple deflationary economics will destroy it from within ( according to me economists are the most useless creatures on this planet ). These guys never learn , they said bitcoin will crash and burn but it hasnt in fact it just keeps growing stronger and stronger.
Now the real reason why cryptocurrencies will never crash and burn.
from a regulatory standpoint ,every book in the law has already been thrown at bitcoin, strating from KYC to AML to anti-margin trading ( which is regulatory overreach) , neverthless the cryptosphere continues to thrive.
Some folks think govts will ban all crypto exchanges , which in turn will crash and burn bitcoin, but this in fact is a boon to long term traders, once a thriving cash based local exchanges are established all around , most traders don't need to worry about KYC/AML/ Capital gains tax crap and don't have to worry about privacy issues.. so in effect its a short term pain with long term gain for cryptosphere ( which is exactly why smart govts haven’t banned crypto exchanges and they never will).
Now there is another far stronger economic reason why cryptocurrencies will thrive, it's really very simple math. bitcoin/ dash are have scarcity with 21 million coins at the top , whereas there is no limit on amount of money govts can print.
What happens when a unlimited supply of fiat currencies starts chasing limited supply of crypto tokens ?
price of crypto tokens rises
What happens when price of crypto tokens keeps rising for long term?
More and more and people get in , fueling further rise in the price.
What happens when say 5–10% of a country’s population switches to crypto?
here's where the real fun begins.
you see govts have a funny way of creating money, they believe in growing money supply along with a growing economy. but they never try to contract the money supply as believe deflation is destructive to the govt budgets, now this philosophy works as long as underlying economies continue to grow which occasionally fails in places like zimbabwe.
to make it really simple , image this
Think of a country with just 100 people doing 100 transactions every year, govt initially creates 100 dollars ( it also has to pay interest on this 100 dollars ). Now say 10 new people migrated to the country, govt now prints an additional 10 dollars so everyone still has one dollar or so going around.
now imagine 10 people left the country, technically govts should contract the money supply and bring it back to 100 dollars , but they never do this, as contracting money supply creates deflation which collects lower taxes and make its much harder for them the pay the interest on the 100 dollars that govt still needs to pay interest.
So govts always love inflation and hate deflation.
Enter the ( crypto )dragon.
for cryptocurrencies however inflation works in their favour, with rising prices of general stuff prices of cryptos rise too ( as they are limited in supply).
Now imagine the same country with 110 people but 10 of them using only crypto for all their transactions, hence 110 dollars are being used by 100 people. So we have 1.1 dollars for every person using the dollar which is a 10% inflation technically ( which in turn triggers a price rise in crypto tokens).
Remember this however , when the underlying dollar economy contracts ( because of more people turning into crypto) govts are supposed to contract the money supply as well, however they never to do this for the aforementioned reasons.
This means with more and more people turning to crypto not only does the price rise ( because of general buying effect), when 10% or more of country start transacting in cryptocurrencies it creates a inflationary spiral that pushes the prices further.
Now one another strong reason for business turning to crypto is hiding taxes is much easier with crypto ( along with the fact that getting a business bank account involves cumbersome regulations ). So generally speaking if lot of businesses start using cryptocurrencies , tax collection will come down by some degree, unfortunately when taxes come down govt spending usually can't come down along with it ( cutting govt spending is never an easy political move if you know that). For this reason when taxes come down govts usually prints more money which knock knock creates further inflation. if you have read this far, you know that inflation is a dear friend of cryptocurrencies.
To sum it up,
incase we cross the critical barrier of 5% of population using cryptocurrencies we enter the phase of death spiral for fiat currencies.
