(DFN) The St. Louis Federal Reserve in the U.S. issued a blog post based on a paper written by Berentsen and Schär that draws three main similarities between Bitcoin and other national currencies.

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The blog post touches on one, no intrinsic value in either, two, limited supply, and three, no middle man. Berentsen and Schär discussed how Bitcoin has no intrinsic value since it only has the code, computations, and developers behind it, but they also highlighted that “[s]tate monopoly currencies, such as the U.S. dollar, the euro, and the Swiss franc, have no intrinsic value either.” They mentioned how the USD is no longer back by gold and only has the trust of the U.S. government and its status as legal tender to back the currency.

They also discussed that there is a limited supply of Bitcoins – at 21 million coins. They did not mention the limited supply of other coins such as Dash. Importantly, they added that scarcity is what grants value to an item and even though Bitcoin’s price fluctuates a lot, there is still an upper limit to its volume. They also mentioned that the U.S. Federal Reserve technically “does not print money”, but has the ability to “increase or decrease the monetary base.”

The final point discussed that there is no middle man when using Bitcoin since Bitcoins are sent directly between individuals without any “credit relationship aris[ing] between the buyer and the seller.” They added that “[i]n that way, bitcoin was designed to be a lot like cash.”

Money Manipulations

The blog post by the St. Louis Fed based on the paper does reveal that the Fed is recognizing the role that cryptocurrencies are playing as currencies despite their volatility. The second point does deserve to be broken out further in that it relates back to point one. While it is true that the Fed does not physically print money and helicopter drop the money to citizens, it does do something similar via the Federal Open Market Committee (FOMC). The FOMC buys bonds (to inject more money into the economy) or sells bonds (to take money out of the economy) and this is all done electronically so the Fed does not actually print money, but still manipulates the amount of money in the economy (the monetary base). They can also manipulate the money supply via interest rates, minimum reserve ratios, and other tools. These manipulation can relate back to point one about the intrinsic value of Bitcoin and cryptocurrency.

As a prerequisite, the difference between intrinsic value (internal value from the item) and extrinsic value (value applied from an outside party) should be mentioned to be a blurry line. Gold is often said to have intrinsic value because it is more scarce and can be used for jewellery or computer parts, but ultimately, even that value somewhat arises from the extrinsic value that consumers place on the services of gold. So the task then becomes not to look for an intrinsic value, but to find the chief source of the extrinsic value for Bitcoin and other cryptocurrencies. Since many cryptocurrencies have their supplies written into their code, which have not been broken, the extrinsic value of cryptocurrencies when compared to fiat would arise from consumers actively preferring the inability to manipulate the money supply.

Another appeal of cryptocurrencies has not been its similarities to cash, but instead its improvements upon cash. Individuals are now able to store their own wealth for a fraction of the fees typically charged by banks without fear of losing their money through theft or natural disasters (as would be the case if personally storing all cash on hand) or having their money devalued. Some cryptocurrencies are making better improvements upon cash than others.

Dash is maximizing everyday usage

Dash has excelled in making Dash usable in everyday transactions. Dash has so far ensured consistently low transaction fees and fast confirmation times further increasing its similarities and improvements relative to cash. In addition, Dash has been able to increase merchant adoption throughout the world since Dash is more viable in everyday transactions than many other cryptocurrencies. This has led to clusters of active Dash communities like those in New Hampshire and Venezuela.

Dash has been able to accomplish this through its unique governance and treasury system, which has enabled decentralized funding and decentralized coordination of teams to create a spontaneous order of consumer solutions. Dash has been able to seamlessly upgrade its network to maintain low transaction fees and fast confirmation times. The Dash community has created outlets throughout the world to educate consumers about Dash and cryptocurrency. There have also been numerous online and physical stores beginning to accept Dash as they realize its potential. Dash is leveraging its comparative advantages to create confidence and offer consumers services that the current cash and monetary system do not offer.

 

Written by Justin Szilard

 

This article was republished with permission from Dash Force News.

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