Bitcoin’s recent price surge may mislead some into viewing it as a luxury for the wealthy, but it symbolizes a vision for a fairer financial system. In an interview with Roman Reher, he contrasts Bitcoin’s fixed supply and decentralized nature with the Euro’s limitless creation. Bitcoin mining culminates at 21 million coins, potentially increasing value as demand rises. Additionally, Bitcoin offers financial inclusion, especially in developing regions where access to traditional banking is limited, exemplified by El Salvador’s adoption of Bitcoin as legal tender.
When Bitcoin’s price experiences a meteoric rise, as observed recently, it can create a misleading perception that Bitcoin is merely a plaything for the affluent. However, Bitcoin represents much more than that; it embodies the vision of a more equitable financial landscape. So, what aspects make Bitcoin more appealing to its advocates compared to the Euro?
No matter the financial standing of an individual, the fundamental purpose of money is universally understood: it acts as a medium for exchanging goods and services. This principle applies to both established currencies like the Euro and digital currencies such as Bitcoin. However, there are significant distinctions between the two. What are these differences? Roman Reher, known as Blocktrainer and the host of Germany’s largest Bitcoin channel on YouTube, sheds light on this topic in our exclusive interview.
Understanding Bitcoin: How Does it Differ from the Euro?
In our conversation, Roman elaborates on the contrasts between Bitcoin and the Euro. What makes Bitcoin, a purely digital currency, stand out? Why is it advantageous to possess a currency free from central bank oversight? And importantly, how can one place trust in a currency grounded in complex mathematics, especially when its creator remains anonymous?
Roman addresses these intriguing questions in the video interview, which you can view above. (Note: The interview was first published in 2021.)
Bitcoin’s Finite Supply vs. Euro’s Infinite Creation
The process of creating Bitcoin, known as mining, involves intricate mathematical calculations but is based on a straightforward concept: as more Bitcoin enters the market, the difficulty in generating new coins increases. Mining will eventually cease once the maximum cap is reached, meaning no additional Bitcoin can be produced.
Conversely, traditional currencies like the Euro, Dollar, or Pound do not have a ceiling on their supply. In simple terms, when customers seek funds from banks (such as through loans), banks initially draw from their reserves. Once depleted, they can request additional funds from the central bank, often through loans backed by securities. This mechanism introduces new money into circulation, leading to the gradual devaluation of existing currency—resulting in inflation.
Bitcoin, however, is capped at a total of 21 million coins. This limitation means that as demand for Bitcoin grows, the value of each coin is likely to rise, a trend that has been evident in Bitcoin’s price trajectory over the years, despite occasional fluctuations and downturns.
On the other hand, the traditional financial system offers a degree of stability through the interaction of banks and central banks. Nonetheless, this system is not without its criticisms, particularly concerning the uneven distribution of newly created money, a phenomenon known as the Cantillon effect. Whether Bitcoin can provide similar stability remains uncertain, as no major economy has transitioned entirely to cryptocurrency thus far.
Bitcoin: A Gateway to Financial Inclusion
In Germany, almost every adult possesses a bank account, but this is not the case in many regions, particularly in developing nations. For these populations, Bitcoin may present a viable alternative, as obtaining a suitable mobile phone is often more feasible than accessing traditional banking.
This open access to a decentralized financial system is another significant distinction from the Euro and serves as one of Bitcoin’s key advantages.
A prime example of this is El Salvador, a Central American nation that lacked its own currency for nearly two decades and relied on the US Dollar. In September 2021, El Salvador made headlines by recognizing Bitcoin as legal tender. The Blocktrainer team witnessed this historic moment firsthand.