The establishment of Central Banks took place with the aim of uniformity. Before its inception, individual merchants would introduce their currencies with varying rates. This disparity caused quite an uproar. During the Post Civil War scenario, the National Currency Act of 1863 led to the uniforming of the monetary system. It was finally around 1913 that the economies finally reached a global uniformity. Economies worldwide reached a stage of financial stability. However, akin to all institutions, the Central Banks are instrumental in influencing the market forces as per their whims.
How do Central Banks operate?
The mandates followed by the Central Banks vary from economy to economy. They have specific tools in their Policy-Making kits to navigate towards their goals. By controlling the amount of money circulating in the market, Central Banks influence the money spending capacity of the people.
They can orchestrate Inflation or Recession simply by supplying or withholding money from the people in the economy. They can influence the flow of investments by increasing or decreasing the rates of interest. At a time when this became quite apparent, Nakamoto brought the first decentralized currency into being. www.yuan-paygroup.com delves into the details of Cryptocurrency trading. There has been quite a stir in the market ever since the beginning of Cryptocurrency trading.
The Need for Bitcoin
The Great Recession of 2008 became a testimony of poor decision-making skills on the part of the Federal Bank. The waves of this economic downfall in the U.S. caused a great impact on all economies across the globe. With people’s immense faith in the Central authority, it was challenging to keep afloat in such circumstances. Their trust dwindled, and Bitcoin was born.
In 2008, Bitcoin became the precursor of what it was supposed to become after gaining people’s confidence. It came as a surprise, a completely decentralized currency beyond the hold of any Central authority. No amount of inflation or recession in the economy could create an iota of difference in the value of Bitcoin. Its privacy and security policies have upgraded over time and make it all the more reliable. Blockchain Technology ensures the maintenance of error-free, tamper-proof data registration and its authentication by multiple users. There are various problems that Bitcoin solved as the first Cryptocurrency to exist. They are as follows:
- It solved the problem of currency counterfeiting. Each Bitcoin is unique, and it can only be earned by mining or investing, but not by counterfeiting. All currencies except Cryptocurrencies can easily be counterfeited. The encrypted data in the Blockchain blocks make it unachievable, thereby eliminating the prospect of double-spending. All transactional data remains encrypted in the blocks, hence unalterable. When money leaves a particular account, that information gets encrypted, and the same for when it enters another account. There is no scope for errors.
- For transactions to take place, it has to be approved by all nodes on the network. Bitcoin’s nodes are far-reaching due to their massive size. Even single disapproval from any node would deem the transaction invalid. This feature makes Bitcoin a trustworthy currency, despite its decentralized identity.
- Bitcoin is the first to disregard the Central authorities. Its launch threatened the banking infrastructure to the core. If people stopped trusting the Central Banks and believed in all that Bitcoin offers, the Governments would lose autonomy. Bitcoin opened up a wide range of possibilities in the financial sphere. It streamlines the process of production and distribution of the currency. It deems the Central Banks almost redundant, with the help of some more trust among the people.
Despite the raging popularity of Bitcoin and its ability to channelize market forces into bettering the lives of the oppressed, without the complete support of the citizens, it cannot replace the Central Banks.
Conclusion
Despite the raging popularity of Bitcoin and its ability to channelize market forces into bettering the lives of the oppressed, without the complete support of the citizens, it cannot replace the Central Banks.
