Bitcoin as gold standard replacement

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We all know it. Fiat at one point was backed by gold and the paper money we got was in a way a placeholder for that gold. Nations got rid of the gold standard and nowadays there is nothing behind our paper money aside of a promise.

We know that this promise does only work when things go smooth. As soon as a country gets into rough water a multitude of problems arise. ATM’s stop giving YOUR money out like in Greece, inflation reaches thousands of percents and makes your money worthless like in Zimbabwe, shelf’s of supermarkets become empty like in Venezuela.

Bitcoin was created in a part as a solution to those problems and as an answer to the problems countries – and thus their citizen – face if their leaders act against logic and moralistic principles and lead with their ego and narcissism instead. And while more scientists in governments would be a solution to that problem, we might never see that materialize. After all we like to follow those who shout loudest and that might not change for a while.

So we’re stuck with Bitcoin.But nations don’t want to adopt Bitcoin and give away control over their money and we might not see that change either.And yet I do think they will not have a choice at one point.

We see it in all those failed states and those on the way, like Turkey. People bring their money into safety and choose more and more Cryptocurrencies for this. What will happen if in one of those states a critical mass is reached and so many citizen possess Bitcoin – hopefully – or another Cryptocurrency, that the black market will start to thrive by using them as primary payment method. It will create an avalanche that might very well engulf more than half of the population of such a country.

Now leaders might crack down and forbid shops to sell goods, except with the national currency, but we know how this goes. You can’t stop a black market like this. And what choice do those countries have to get out of the misery?

They will try to print more money – which of course never works, then they start to create alternative money like bond notes – which also will not work. They name outside forces and clamp down on any trade that still goes over the border to prevent subsidized items like food or fuel to be traded for money, and just make a bad situation worse.

Finally they either are in such a horrible spot that they declare bankruptcy and their citizen loose everything or try desperate measure like binding the course of their currency to the USD. Or the army – now also without payment – finally takes over the country. Or hey, they create their own crypto – which is just equivalent to printing more worthless paper money. Ha!

With Bitcoin there is another alternative. If anyways a lot of the citizen already possess and trade with Bitcoin, a failed state could just declare Bitcoin as the new gold standard for the nation. Backing the national currency with Bitcoin.

This would immediately restore some trust in the government, would allow the government to make quite some good money by buying Bitcoin reserves before any announcement and even up the wealth of their citizen at the same time, restoring a lot of buying power in one smooth move. After all, any country that announces such a step, and especially the first one doing so, will lead to quite a higher price in Bitcoin. It would most likely even make a national crypto possible and allow a country to retain some sort of control.

No, I don’t think that this is the first or plausible choice in the minds of such governments. But I do think that at one point in the future they might not have a better way out of their self-inflicted misery. I’m certain this will happen, just a matter of time.

Edit:
Just a scenario: One country buys OTC for half a billion BTC, tries to minimize their footprint. Then they declare this. Half a billion is now basically locked up and out of the markets. That alone creates a price rise. Being the first country to do so, it might tripple Bitcoins value in a heartbeat. Not only has the government of this country suddenly more money available, it stopped inflation in it’s track and their citizen who own BTC have now also tripple the buying power.

That in term might create a domino effect of other states following. Not the wealthy ones, but the poorer ones, rising the price even more. This doesn’t prevent further bad governing of course, but it is a chance for a country suffering or after a regime change to get faster back on track.

This is my most likely scenario for a wide global adoption and I see BTC as the best candidate, IF BTC can become the defacto payment standard for average citizens with their mobile phones in those countries. Simple payment apps and low fees are important. I hope lightning can deliver.

submitted by /u/JustBatman
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