This is how cryptocurrencies are revolutionizing the financial system.

Our current currency system for the Swiss Franc, also known as a fiat currency system, is centralized and controlled by the Swiss National Bank (SNB). This means that the state and the SNB have the authority to create money and manage its value. Unlike a gold-backed system, our fiat currency is not tied to the value of a physical asset like gold. Instead, its value relies on public trust in the state as the issuer of the currency. Over time, states have increasingly put money into circulation, which can lead to potential debt or be used for political purposes. The regulation of this process is the responsibility of the SNB, which acts on behalf of the government and is subject to political interests. In this article, you can find more in-depth information on the topic.

Problems of Centralization

You can see the weaknesses of the fiat money system: the control by central authorities and unlimited money creation. This makes our monetary system unstable. If the government prints too much money, there is a risk of inflation. This means the currency loses value and prices for goods and services rise. Inflation is essentially another word for rising costs. You are experiencing this yourself in many countries in Europe and even in Switzerland. When the prices of food, housing rents, train tickets, clothes, or gasoline become increasingly expensive due to inflation and you don't have a corresponding increase in income, you can afford less with the same amount of money. The government or central bank intentionally targets a steady, mild inflation rate. For example, the SNB aims for a 2% inflation rate, which devalues the Swiss Franc every year. Many people don't understand this and only realize later in life that their savings have lost their value. You can read more about inflation and how cryptocurrencies can stabilize it in this article.

Certain countries may also exploit their central power for their own purposes by expanding the money supply indefinitely and wasting money. When mistakes are made, national monetary systems can collapse. An example of this is Venezuela: Venezuelans have completely lost faith in their currency and institutions. In 2020, Venezuela's central bank reported an inflation rate of nearly 3,000 percent. Imagine that! With such a price increase, the Venezuelan currency is virtually worthless. This impacts millions of people in the country severely. Do you think that's fair? These alarming figures highlight the drastic effects that flawed monetary policies can have and how they affect the lives of millions. Venezuela's unstable currency has not only led to extreme price increases but also to a collapse of the economic system and worsening social inequality. As a result, many Venezuelans are seeking alternative ways to protect their assets and safeguard themselves from hyperinflation.

What is needed is a long-term stable currency system that is not subject to the control of individual central authorities. This led to the groundbreaking idea of a decentralized monetary system. Bitcoin, the first cryptocurrency, laid the foundation. With Bitcoin, there is no central institution that can control or arbitrarily change the money supply. The amount of Bitcoin is fixed at 21 million, meaning no central party can print more Bitcoin and thus devalue it. This also means that Bitcoin's inflation is pre-programmed to remain stable. These characteristics make Bitcoin an attractive alternative to traditional fiat currencies, especially during times of economic uncertainty and political instability. Unlike fiat currencies, which are controlled by state institutions and central banks, Bitcoin offers its users high security and independence from governmental interference.

The blockchain technology on which this currency is based revolutionizes the way transactions are processed and information is stored. Its decentralized nature provides a high level of security and transparency. Each block in the blockchain contains a chain of transactions that are cryptographically linked and verified by a network of nodes. This makes data manipulation nearly impossible. This article will show you how blockchain works and how the technology is already being applied in our daily lives.

The future of cryptocurrencies remains exciting, as they not only offer the potential to revolutionize the existing financial system but could also challenge traditional banks and payment providers. Companies like PayPal and Square have already begun integrating cryptocurrencies into their services, further driving acceptance and adoption. Additionally, major technology companies like Facebook are working on their own digital currencies with projects like Libra (now Diem). All these developments indicate that cryptocurrencies could increasingly become part of our daily financial lives.