The Ethics of Banking and Bitcoin

If you have not heard of Bitcoin, it is a peer-to-peer digital currency, also known as a cryptocurrency. Bitcoins were created in November of 2008 by an anonymous person called Satoshi Nakamoto. Bitcoin relies on a network of miners who process these digital transactions, and in return they are rewarded with a few of the coins themselves. The interesting thing about Bitcoin isn't that it is a digital currency, but that is a deflationary currency. Deflationary meaning that it will never inflate, because there are a finite amount of Bitcoins that will ever exist. You can never print a Bitcoin, because the network of miners constantly validates all of the Bitcoins, and if you try to duplicate them the miners will flag them instantly and render the transaction null.

So, now on to banking. Bitcoin has the power to destroy the banks, and I'm going to tell you why that's a good thing. Right now, the US Federal Reserve Bank controls all of America's money. The dollars sitting in your bank account, my bank account, and the United States Treasury are all property of the Federal Reserve Bank. That alone doesn't sound particularly out of place, I mean that's why the government created the Federal Reserve, right? Wrong, the Federal Reserve is privately owned and has absolutely nothing to do with the United States Government, other than provide the currency for it. So, how does the Federal Reserve make money? Taxes. Taxes don't go to the Government, they go to the IRS, which then goes directly to the Federal Reserve. So, already you can tell that something's wrong with America's finances.

But wait, there's more. The nation's banks who store and loan money for you are also contributing factors to this issue. This is due to Fractional Reserve banking. Fractional Reserve banking means that a bank doesn't have to hold all of the cash it says it has in it's vault. For example, I take out a loan for $200,000. The bank will give me $200,000 dollars even if they don't physically have that much money. Essentially creating that money on the spot to give it to me. Now, let's say I don't pay it back. If I don't pay it back, the bank writes in $200,000 onto their books as if they never lost any money from my inability to pay back what they gave me. This means that another $200,000 instantly enters the economy out of thin air. This is what's driving inflation rates. The power to just create money out of thin air is just far too powerful to trust the banks, or anyone for that matter with.

So, how does Bitcoin fit in to all of this? Well, if you noted what I said in the first paragraph, Bitcoins cannot be duplicated nor can they be printed. Also, the fact that it's peer-to-peer means that it can be traded and used without being tied to the government. This makes it an excellent candidate for a Global Currency, similar to the way gold worked hundreds of years ago.

In conclusion, Bitcoin has the power to destroy the banks as we know it and we should let it.