• The article examines the different ways in which fiat money has led to terrible incentives at the individual, corporate and national levels.
• It provides historical context by talking about the Bretton Woods Agreement from 1944.
• It explains how this agreement established a new monetary world order with an indirection of gold redemption and how it led to currency being backed by other currencies rather than gold.
The Incentives of Fiat Money
Fiat money has had a major impact on the global financial system, leading to numerous negative incentives for individuals, corporations and governments alike. This article looks at those negative incentives in more detail, starting with some historical context.
Bretton Woods Agreement
The Bretton Woods Agreement of 1944 was a pivotal moment in setting up what later became known as „a new monetary world order“. The agreement was an attempt to address issues from World War I (WWI) such as reparation payments and loopholes around the then re-established gold standard that had caused so much havoc across economies and eventually led to World War II (WWII). As returning to pre-WWI gold standards were too difficult for countries accustomed to central banking monetary control, a new level of indirection of gold redemption was proposed instead.
Gold Backed Currency
Prior to WWI, most currencies were backed by gold and could be exchanged directly at banks. For example, one ounce of gold could be exchanged for $20.67 USD or £4.25 GBP respectively. Gold-backed currency meant foreign exchange was easy and stable since it was tied directly to an asset that held its value – i.e., gold – making it scarce. The advent of central banking changed this as some central banks began printing their own money without backing it against an actual asset like precious metals such as gold or silver. This resulted in inflationary pressures as more money entered circulation without any real assets behind it creating a devaluation in the purchasing power of fiat currency over time due to increased supply relative to demand – essentially meaning each dollar is worth less over time due to inflationary pressures caused by central banks printing more money than is necessary thus driving down its value relative to other assets like precious metals or commodities such as oil or foodstuffs whose supply remains static relative to demand regardless of market fluctuations..
Global Fiat Money Incentives
As a result of these changes brought about by Bretton Woods, governments have become increasingly dependent on their own national fiat currencies backed by other nations‘ reserve currencies instead of relying on their own assets such as precious metals or commodities like oil or foodstuffs for wealth preservation purposes – essentially meaning that if one country’s currency devalues relative to another’s reserve currency then all other countries will suffer from decreased purchasing power when dealing with said nation’s goods & services even though they may not be actively engaged in any form of trade with them directly – this is known as ‘currency wars’ where nations compete against each other through competitive devaluation policies in order gain competitive advantage over rival nations . Additionally, international debt obligations can only be paid back using either US dollars or euros – no other currency is accepted – thus forcing those countries who owe debts into using either USD or EURO reserve currencies even if they would prefer not using them due their potentially weaker value relative alternative available options..
By incentivizing nations into relying solely on reserve currencies such as USD & EURO alongside actively engaging in ‚currency wars‘ through competitive devaluation policies like quantitative easing (QE), Bretton Woods effectively created global financial incentives which favor certain countries while disadvantaging others based solely upon their ability/inability access certain types reserve currencies– ultimately leading us towards a future where economic inequality between nations increases further whilst political unrest spreads globally unless something drastic happens soon .
•Fiat money gives governments the ability to become more authoritarian through welfare/warfare states and surveillance/police states.
•Central banking allows governments to circumvent the usual trade-offs of sound money by running deficits on their budget with minimal consequence.
•The power of fiat money has created an unprecedented destructive power in governments over the last 100 years, leading to tyrannies and oppressive regimes.
Fiat Money and Government Authority
Fiat money is a type of currency that is created and backed by government order, rather than commodity or gold reserves. It gives governments the ability to control economic activity through central banking, allowing them to spend without constraint beyond what would be possible under sound money. This has resulted in an increase in government authority and power over the last century, leading to oppressive regimes and tyrannies around the world.
At the individual level, fiat money has resulted in higher time preferences due to ubiquitous debt and lack of savings vehicles. This encourages people to live for today rather than plan for tomorrow, which can have devastating consequences for their long-term financial health.
At the company level, fiat money has encouraged larger companies that replace families as sources of communal support and economic stability. These artificial structures create zombie-like societies where individuals are unable to reach their highest potentials without relying on corporate entities.
Nation State Level Incentives
At the nation state level, fiat money has given rise to authoritarian regimes through welfare/warfare states and surveillance/police states. The unchecked power of these governments has led to untold destruction over the last century as they use their monetary powers for ill purposes such as oppression and tyranny on an unprecedented scale.
The incentives created by fiat money have had a profound effect on our lives at all levels – from individuals up through nation-states – resulting in higher time preferences, artificial communal structures and oppressive regimes around the world. It is essential that we understand these incentives if we are ever going to move towards a better future with sounder monetary policies that will benefit us all instead of just those in power
• BlueWallet, a Bitcoin wallet with apps in both the iOS and Android stores, is ending its custodial Lightning wallet service by April 30, 2023.
• Users are requested to remove funds from their BlueWallet custodial Lightning wallets as soon as possible.
• Regular BlueWallet Bitcoin wallets and self-custody Lightning wallets will not be impacted by this change.
BlueWallet Announces End of Custodial Lightning Wallet Service
Sunsetting of Lndhub Node
BlueWallet has announced that it will end its custodial Lightning wallet service by April 30, 2023 due to the availability of more mainstream services offering scalable solutions. This means that creating new or refilling existing Lightning wallets on LndHub node will no longer be possible.
Request to Remove Funds From Wallets
Users are requested to remove funds from their BlueWallet custodial Lightning wallets as soon as possible before the cut off date. Regular BlueWallet Bitcoin wallets and self-custody Lightning wallets will not be impacted by this change.
Availability of Lndhub Software
Lndhub will still be available as a software and self-hosted solution which users can connect to their own LndHub from BlueWallet or other software that supports the LndHub API specification.
Benefits for Bitcoin Users
This news may sound like bad news but it ultimately benefits bitcoin users as going forward, BlueWallet will only support self-custody solutions which is a good thing for both bitcoin and BlueWallet users.
Overall, while this move signals an end to custodial blue wallet lightning services, there are still plenty of options available for users who wish to take full control over their funds with self-hosting solutions such as lndhub software.
Overview on Digital Wallets
• There are two types of wallets: custodial and non-custodial.
• Custodial wallets give control of the private key to a third party, while with a non-custodial wallet, you have full control.
• Custodial wallets can be used more easily but come with certain risks such as asset loss during bankruptcy or wallet freezing.
Custodial wallets allow users to store their bitcoin without having to manage their own private keys, thus providing convenience in exchange for relinquishing control over the assets. By trusting a third party to safeguard your private key, you are exposed to certain risks, including potential asset loss during bankruptcy or wallet freezing by the custodian at their discretion.
Benefits of Using Custodial Wallets
Using a custodial wallet is convenient as all that is required to transact is logging into the wallet with a username and password, and then inputting the public key of the intended recipient; furthermore, if you forget your password there is often an option to reset it.
Drawbacks of Using Custodial Wallets
As stated previously, by relinquishing control over your assets to a third party you are exposed to risks such as asset loss during bankruptcy or wallet freezing at the discretion of said custodian. Additionally, due to its centralized nature any security breaches could lead to significant losses for all parties involved.
In contrast with custodial wallets, non-custodially held Bitcoin provides users full control over their digital assets without exposing them to any additional risk associated with relying on a third party service provider. These types of wallets require users create and store their own private keys which can be done using hardware solutions like Ledger nano S or through software solutions such as Electrum Wallet . While this may provide added security when compared with other options available in the market place it also adds complexity which could potentially deter some users from utilizing it fully.