In a new article released by Foreign Policy, the author David Gerald says that storing Bitcoin is as safe as keeping funds in a sock “under someone else’s bed.” However, fiat currencies have their own problems and this phrase does not really describe how virtual currencies work at all.
If there is hyperinflation, nobody would be willing to store fiat currencies under the mattress. And it is not necessary for a country to have hyperinflationary rates for citizens not to store funds under their mattress. When a currency loses its value at very high rates, nobody wants it.
And indeed, with hyperinflationary rates, people are not able to store thousands and thousands of banknotes under any bed. Or even in a big room. It is not worth it.
Governments in countries such as Zimbabwe or Venezuela, individuals perfectly know what Hyperinflation is and in Argentina, citizens are used to living with high inflation. The currency of these countries is worth every single day less.
Banks and governments print money with the intention to help individuals, but this is something that does not work at all. They just create more inflation and poverty.
People that held thousands of Bolivares (Venezuela’s currency) under their mattress for a year, they might now have just a few cents. Even when their banknotes shows thousands of Bolívares, they are really worth nothing.
Gerard wrote about Bitcoin:
“Bitcoin, its advocates keep saying, is the future. But in practice, it looks a lot like the distant past. Back then, you could lose your savings if your banker ran off with your money or died without revealing where it was stored. Today, there are numerous protections in place for customers – unless, that is, your cash is in Bitcoin.”
In some countries, such as Argentina, banks have declared bankruptcy without being able to repay individuals their life savings. Millions of individuals lost everything they had, and Argentina entered a period of crisis since that moment.
Nowadays, lowering inflation is becoming a difficult task for president Mauricio Macri. Just in 2018, the inflation rate was close to 48% and the country does not grow since around 8 years.
Bitcoin and virtual currencies have been helping people in Venezuela and Zimbabwe survive. In Venezuela the situation is terrible. People have moved abroad and poverty rates have reached 90%. The country was once the richest country in the region. Using virtual currencies, including Bitcoin, people are able to purchase more goods (if they find them) and pay for medicines in the black market.
Of course, there are some issues that virtual currencies must solve before they are able to reach a larger portion of the world. Just a few weeks ago, the QuadrigaCX exchange announced that it was experiencing a liquidity issue. The owner and CEO of the platform, Gerald Cotten died in December without leaving information about the cold storage wallets of the exchange.
Because of this reason, users that had accounts at the platform lost around $150 million in virtual currencies. Now, the firm is trying to recover the funds, or at least know where they are stored.
Clearly, users and investors in virtual currencies should know that these virtual assets were created with the intention of eliminating third-party interference in users’ private finances. Individuals that handle cryptocurrencies should always store their funds in cold storage wallets and protect their funds against any situation that could affect them. Exchanges are very vulnerable to hacks and attacks, thus users are not able to control their funds.
Clearly, Bitcoin did not die because of the hack experienced by QuadrigaCX exchange. Bitcoin did not even die when Mt. Gox was hacked back in 2014. At that time, the crypto exchange was the largest in the market, handling around 70% of the total Bitcoin in circulation.
Bitcoin has many things to modify and lots of challenges ahead. Nevertheless, there are many positive things about this virtual currency. After more than ten years of operating in the market, Bitcoin has proven to be a resilient and innovative virtual currency.
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