The fierce advocate of Bitcoin, David Friedman, an academic economist who teaches at a law school, says that the Bitcoin system has both the advantages and the disadvantages of a commodity money or hundred percent reserve banking system. He adds that the disadvantage, relative to a fiat money or fractional reserve system, is that the creation of money consumes real resources—time and effort to mine gold, computer processing time to mine Bitcoins.
David’s father Milton was one of the first to envision a mathematical ‘Monetary Rule’ which makes central bankers unnecessary. Now David is following what his dad said decades’ ago and says that as the value of the money depends on factors not under the control of any government or central bank, it could be a major advantage.
He adds that as Bitcoin is a decentralized currency and it solves the concerns of those who think central banks or governments will do bad job of managing a currency e.g. inflating for short term political benefits, as a way of funding government via money creation, or as a way of inflating away government or private debts. He seems accurate when we see how the Fed is printing dollars to meet its requirement.
Is Bitcoin The Last Virtual Currency to Come?
In very short span of time Bitcoin has become the largest network of virtual currency; however, there are some limitations in Bitcoin system that gives a scope for other virtual currencies. As David Friedman says a fully anonymous digital currency makes money laundering laws unenforceable, the U.S. government is worried about Bitcoin’s use for the purpose and has often lambasted it.
After Bitcoin came to existence similar other virtual currencies like Litecoin, Namecoin, PPCoin, etc. came in; however, none could replace Bitcoin or challenge its dominance. These currencies could not copy the success Bitcoin got; however, here Bitcoin has a major challenger now in the form of Ripple, one of the main contestants for the title of Bitcoin successor.
Will Ripple Provide an Alternative?
As Ripple provides fast transactions and there is no requirement for shaky third-party exchanges, many observers feel Ripple can provide a better alternative to customers. Additionally, launched by OpenCoin, now Ripple Labs, a company founded by Chris Larsen in 2012, Ripple is both a currency and a payment system.
Ripple promises to create a frictionless and transparent method for instantly transferring money anywhere in the world and in any currency and is being seen as a suitable alterative for migrant workers.
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