This is an opinion piece by Andrew Hetherington, a Bitcoin Magazine contributor.
Since the Nixon shock of 1971, wealth inequality has reached levels not seen for more than a century. The dollar was no longer exchangeable for gold but was instead backed only by faith. Without the limitations of a backed currency, those in power had the ability to create as much fiat currency as they wished, with little or no consequences. Destined to lose trust through abuse, fiat currency was doomed from the start.
Bitcoin seeks to address the inequities of fiat currency. Bitcoin is decentralized, fungible, permissionless, and finite; it does not allow central authorities to profit from stealing the value of its holders’ assets through inflation. Furthermore, it does not restrict access to those who need it most, providing financial services to those who cannot access traditional banking services.
A tale of two cities
Inequality in America has reached unforeseen heights in recent decades, with only the income and net worth of those in the highest income brackets increasing.
According to data from the Pew Research Center, the net worth and incomes of high earners have exceeded those of the average worker. From 1981 to 2018, the top 5% earners topped all other income brackets. Additionally, from 1983 to 2013, median household net worth only increased in the top income bracket.
As the elites continue to see their incomes and net worth soar, the average worker struggles to feed their families due to an increasingly manipulated economy. Fueled by an abusive monetary policy, wages have not increased in purchasing power since 1971.
First discovered by Richard Cantillon in the 18th century, the uneven expansion of money disproportionately benefits those closest to the source. This creates a theft of purchasing power from those in the lower income brackets, directly in the hands of the elite. Only by using their currency can they do this. With the superior monetary qualities of bitcoin, it will eventually replace fiat as the standard medium of exchange. As Bitcoin adoption increases and slowly makes fiat money less important, the printing of new fiat money by nation states will hamper their ability to manipulate the purchasing power of the working class.
Thanks to the decentralization of Bitcoin, for the first time in human history, monetary expansion will no longer disproportionately benefit a central government or authority. Currency expansion will now become a business, benefiting participating businesses and individuals able to secure the network profitably. More importantly, unlike the overprinting of fiat currency, the expansion of bitcoin currency from block rewards will not only benefit those closest to the creation of digital currency, such as miners and exchanges, but also to the holders of bitcoin itself thanks to the increasing scarcity and security of the network. This absence of manipulation by a central authority allows Bitcoin to reduce inequalities.
Not your typical bank
According to the Center for Financial Inclusion, approximately 1.7 billion people are unbanked. Increasingly, research presents evidence that mobile money services are improving financial conditions in developing countries. According to this study by Tavneet Suri and William Jack, estimates suggest that around 194,000 Kenyan households have been lifted out of poverty through the expansion of a mobile money service known as M-Pesa. The study cites increased financial resilience, savings and career choice – especially for women – as the most important improvements brought about by mobile money services.
Bitcoin offers all the opportunities of mobile money services like M-Pesa with much lower fees and greater accessibility. Those who use it as a means of storing wealth can do so with no account fees and minimal transaction fees. In February 2022, Kenyans living abroad sent home over US$300 million. According to the World Bank, the average cost of sending remittances to Kenya is 9.54% in 2020. If Kenyans abroad used Bitcoin rather than traditional remittance services, millions of US dollars would be saved per month.
Apart from the financial benefits, Bitcoin is easily accessible as it requires as little as a smartphone to get started. According to the World Bank, approximately 1.1 billion people worldwide lack legal identification. Without government-recognized identification, these people are unable to access the traditional financial system. Even without identification, these people are still able to access the Bitcoin network. Bitcoin provides modern financial services to those who need them most, without restrictions.
With all of the aforementioned advantages of bitcoin over traditional finance, adoption has exploded in Africa, with cryptocurrency usage growing by more than 1,200% in the last year according to Chainalysis. Kenyan founder of Health Land Spa, Tony Mwongela, has been accepting bitcoin as a form of payment since 2018. As businesses are frequent victims of payment fraud, Mwongela cites the safety and security of bitcoin as the main reasons for deciding to accept it as a means of payment.
By continuing to bank the unbanked, Bitcoin adoption provides opportunities for those left behind by traditional banking. With more security, accessibility and reliability, Bitcoin leads us towards a fairer world.
This is a guest post by Andrew Hetherington. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.