In 2009, Zimbabwe’s hyperinflation problem had become so bad that they had to print $100 Trillion dollar bills to make even using their currency, the Zimbabwean dollar, feasible for regular citizens.
As inflation approached 79,600,000,000% in November 2008 (98% daily), leaders knew drastic measures were in order. In April 2008, the country’s reserve bank declared the U.S. dollar its official currency.
This allowed Zimbabwe to reign in inflation due to their own poor monetary policies and national events for a time, but put the people of Zimbabwe at the mercy of the governments of the United States, South Africa, Japan, China, and a few other countries that had fiat currency circulating in Zimbabwe.
Similar monetary crises have happened in:
- The Weimar Republic after World War I
- Mexico in 1994
- Russia in the late 1990s
- East and Southeast Asia in 1997
- Argentina in 1999-2002
- Venezuela in 2016
It was the 2007 global financial crisis that motivated Satoshi Nakamoto to publish the Bitcoin whitepaper. The need for a decentralized currency that wasn’t under the control of a central bank was growing.
What is Bitcoin?
Bitcoin is a decentralized digital currency that is based on a peer-to-peer network. Unlike traditional currencies, Bitcoin is not controlled by any central bank or government. Instead, transactions are recorded on a public ledger called the blockchain, which is maintained by a network of users we call miners.
Satoshi Nakamoto developed Bitcoin as a trustless digital alternative to fiat currencies that the issuing government couldn’t manipulate. Satoshi Nakamoto programmed Bitcoin to have stable inflation and users only need a Bitcoin wallet to send or receive it. Bitcoin has retained market dominance because of its fundamental security and decentralized nature.
As cryptocurrency grew in popularity over the last decade, developers have introduced tens of thousands of projects that have added use cases, improved existing ideas, or hoped to compete as a viable Bitcoin alternative. Mostly, developers have compromised Bitcoin’s vision, or have eschewed Bitcoin altogether in favor of their own native token.
We built Mintlayer to allow users to use their native Bitcoin for a wide range of financial uses, to further avoid moving their Bitcoin into a centralized system to use or extract value from. Mintlayer doesn’t require a token bridge or wrapped token to use Bitcoin, so users do not have to trust a third-party to secure their deposit.
Bitcoin is Adopted First
Despite strong competition, Bitcoin’s market leading position has been cemented through several market cycles. As Bitcoin’s market cap and institutional investment have grown over the years, it has started to become a viable alternative to small state issued currencies that are controlled by national governments.
El Salvador and the Central African Republic have both adopted Bitcoin as an official legal tender. El Salvador has gone so far as to enact a Bitcoin law that requires merchants to accept Bitcoin as well.
In the time since El Salvador enacted their Bitcoin law, the cryptocurrency market has taken a dive, but there are three areas where dividends are paying off.
- Remittance savings
Tourism has grown by 30% since El Salvador’s Bitcoin adoption. Combined with the President’s high popularity rating, this shows that there is at least a portion of the world population that supports using decentralized currencies.
In the first eight months, 1.9% of the $400 million in remittances to El Salvador were sent in Bitcoin. Citizens saved half of their transaction fees using Bitcoin during this time, which added up to $4 million (about 1,100 average annual incomes in El Salvador).
We conceived Mintlayer to advance Bitcoin’s use cases while adhering to the core axioms of the Bitcoin community. The same fundamental tenets that make Bitcoin the obvious choice for government adoption as a currency can be found in the model and architecture of the Mintlayer sidechain. Mintlayer is an obvious choice for dapp development for any organization or state that intends to operate with Bitcoin.
Advantages for Nation State Adoption of Bitcoin
One of the key advantages of Bitcoin is that it is a borderless and global currency, which makes it well-suited for developing countries. For example, in countries with weak currencies or high inflation, Bitcoin can serve as a hedge against currency devaluation.
Additionally, Bitcoin’s decentralized nature also makes it resistant to government censorship or interference, which can be a significant issue in some developing countries.
Another important advantage of Bitcoin is that it has a low barrier to entry, meaning that anyone with a smartphone and internet access can access and use Bitcoin. This makes it a good option for individuals who are unbanked or under-banked. In developing countries, where traditional banking infrastructure is often lacking, Bitcoin can provide a valuable alternative for people to store and transfer money.
Existing Hurdles for Widespread Adoption
Bitcoin has the potential to serve as a valuable alternative to national currencies in developing countries, particularly in places where traditional banking infrastructure is lacking and where currency devaluation is a concern. Despite its volatility, it’s already stable enough for citizens to use as a day-to-day currency.
In order for Bitcoin to become widely adopted as a replacement for national currencies in larger countries, it would need to become less volatile and more widely accepted. We could achieve this through the growth of institutional investment and merchant adoption.
Bitcoin’s volatility needs to be controlled by investment, regulation, and tempering speculation. While it’s a long-term and complex process, the potential benefits of Bitcoin in developing countries make it worth further exploration.
Mintlayer will give institutions and states that wish to adopt Bitcoin a trustless platform with unlimited potential to revolutionize ordinary government administration. Tax remittance, government issued IDs with NFTs, NFT voting systems, education grants, and many other services could be developed on the Mintlayer blockchain.