Bitcoin enthusiasts have often portrayed the digital currency as the one with special powers that will heal our global financial system. Our financial ecosystem is burdened with huge debt with the world’s largest economy China having a debt to GDP ratio of more than 250%. Nations such as Greece are on the brink of Grexit as they fail to service their national debt.
The Bitcoin community asserts that Bitcoin could prove to be potentially reformative in this domain. However, this might not be all true since Bitcoin does not completely eliminate the debt from the system. Sorry to break it to you!
We all can agree that Bitcoin is essentially an improvised-to-perfection, extremely fast, cheap, and a reliable mode of payment. However, what the Bitcoin community doesn’t consider is that the payments do not record the terms and conditions of the transfer.
Allow me to explain this in simpler terms. When you transfer funds in Bitcoin to another party, all that blockchain, which is a public ledger of all the transactions, records is the amount that has been transferred. Blockchain is merely concerned with a debit in one account and a credit in another account.
And this is a serious problem. Why? Because it doesn’t log in the terms of remittance. Suppose that person X loans Y bitcoins to person Z for 30 days (interest payment is not included for simplicity purposes). Now, person Z loses the Y Bitcoins in a Bitcoin casino and has nothing to return to person X. With blockchain technology, the person X will then follow the transaction trail and turn up at the door of the casino owner asking for his Bitcoin funds. And yes, he has the right to seize his property back under the United States’ UCC code (uniform commercial code) which states that till the time Bitcoins are treated as general intangibles, every Bitcoin casino owner runs the risk of person X coming to their doorsteps asking for their rightful funds. The eventual loser is the casino owner, and the instability factor has been induced in the system.