Bitcoin proponents often assert two things: that it solves the problem of trust and its failure by introducing certainty into the monetary system, and that it makes the system democratic by removing hierarchies between users.
Even though we find both these statements questionable, the relationship between Bitcoin and the trust economy is often an elusive concept that people hardly take a look at.
There are three periods of currency: commodity-based, politically-based, and now mathematics-based.
It is the summary of what is seen as a form of history of the monetary system in the modern world of Bitcoin.
You may not comprehend all about it even if you are an experienced trader at bitcoin prime, which is why we are here to help you.
The Turning Point Of Bitcoin
The year 2008 was a watershed moment since it was then that we received the first Cryptocurrency based on the then-unknown Blockchain technology.
Right before the start of the last financial crisis, it appeared that we had developed a technology that would allow financial institutions to operate in a decentralized, directly democratic, and transparent manner.
A reality check quickly revealed that this was not the case.
When we look at what has actually happened with Cryptocurrencies over the last decade, we can see that they were mostly utilized by financial speculators, who saw them as a way to launder money and cheat taxes.
However, decentralization and direct democracy are not yet sufficient reasons for fundamental change in financial entities concerning the capitalist production mode by analyzing two of Bitcoin’s main slogans, which are:
“In cryptography, we trust” and “Technology is free from politics.”
Power dynamics inside new technologies are not erased but somewhat altered, as the instance of Bitcoin demonstrates.
Hence, the concept of trust is critical for the construction and legitimization of the thesis on new technology (Bitcoin) progressives, as it complements and enhances the idea of their ostensibly apolitical nature.
Bitcoin And Trust Economy
The third currency is thought to have arisen as a solution to the problems and inadequacies of the second currency era, just like the second currency came into place because the first currency was not good enough for all.
One of the primary reasons for eliminating the gold standard was strict legislation that did not make the monetary policies as flexible as they could.
The following are the primary complaints of current financial systems:
- First, the centralization makes them more vulnerable to attack.
- Second, millions of people are left out of the global economy.
- Third, some monetary transactions are still extremely slow.
- As intermediaries, they increase the costs of individual transactions unnecessarily.
The concept of trust is essential to the debate surrounding Cryptocurrencies and Blockchain technology.
Electronic payments are now fully reliant on financial institutions acting as third parties through which electronic payments are performed. This is because even though most of the transaction system is functional, it still requires someone to ensure that transactions are completed.
In mature capitalism, money takes two primary forms.
According to the Marxist Monetary Theory: the first is ‘fiat money,’ which is produced by individual governments to create their individual tax system and pay their bills. Thus, fiat money is the consequence of a two-hundred-year-old and increasingly complex capitalist trade process; it has no fundamental worth and only acts as a symbol of commodity money.
Credit money is the second type issued by private financial entities when loans are approved.
Simply put, when we transfer money today, we are not physically moving money from one account to another; instead, the bank where our money is housed simply modifies a data entry in our account and the account of the person to whom we wish the money sent.
The Bottom Line
A monetary transfer cannot take place without the involvement of an intermediary.
Now, if a bank does not mediate the transaction, it must be completed via an Internet payment provider.
The intermediary is the one who, in the end, ensures that our money exists, that it is where it is meant to be, and that the transaction will be completed.
The same concept applies to a Bitcoin transaction, and if we are to choose it as the daily transaction medium someday in the future, Bitcoin companies must gain our trust.
So, if you want to know more about Bitcoin and Trust Economy, let us know in the comment box. We will get back to you with an answer in no time.