[2016-04-09]What Would a Bitcoin Gold Standard Look Like?

If you spend some time in Bitcoinland, you’ll notice that a vocal section of the community strongly dislikes central banking. In their view, the digital currency is the solution to central banking’s many problems, including a lack of transparency, a close relationship with the global power elite, and the central banks’ ability to conjure money from thin air. For these people, using bitcoin is a way to disempower central banks—and empower the individual.

So what would happen to the world’s central banks if bitcoin replaced national currencies? Turns out it would look a lot like a return to the gold standard, which was abandoned a long time ago, according to a recent staff working paper from Warren Weber at the Bank of Canada, the country’s central bank. And most people wouldn’t necessarily be better off in a bitcoin world. In fact, they could be left more vulnerable to financial crises.

In the paper, Weber “imagines a world in which countries are on the Bitcoin standard, a monetary system in which all media of exchange are Bitcoin or are backed by it,” and compares this imagined future to a real past (1880-1913) when gold performed the same function.

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