What does bitcoin solve?

Problems with the fiat.

Every year government prints more money. Printing more money doesn’t increase economic output — it only increases the amount of cash circulating in the economy. If more money is printed, consumers are able to demand more goods, but if firms have still the same amount of goods, they will respond by putting up prices. In a simplified model, printing money will just cause inflation.

Why is inflation such a problem?

Fall in value of savings: If people have cash savings, then inflation will erode the value of their savings. £1 million mark in 1921 was a lot. But, due to inflation, two years later, your savings would have become worthless. High inflation can also reduce the incentive to save. The reduction in the purchasing power of money is similar to a form of taxation or expropriation, reducing the real value of one’s money even while the nominal value is constant. In modern economies government-issued money is inextricably linked to artificially lower interest rates, which is a desirable goal for modern economists because it promotes borrowing and investing. But the effect of this manipulation of the price of capital is to artificially reduce the interest rate that accrues to savers and investors, as well as the one paid by borrowers. The natural implication of this process is to reduce savings and increase borrowing.

As most poor and middle-class people hold money they suffer the most from inflation.

Menu costs: If inflation is very high, then it becomes harder to make transactions. Prices frequently change. Firms have to spend more on changing price lists. In the hyperinflation of Germany, prices rose so rapidly that people used to get paid twice a day. If you didn’t buy bread straight away, it would become too expensive, and this is destabilizing for the economy.

Uncertainty and confusion: High inflation create uncertainty. Periods of high inflation discourage firms from investing and can lead to lower economic growth.

Making Trade hard :The seller does not want the currency held by the buyer, and so the buyer must purchase another currency first, and incur conversion costs. As advances in transportation and telecommunications continue to increase global economic integration, the cost of these inefficiencies just keeps getting bigger. The market for foreign exchange, at $5 trillion of daily volume, exists purely as a result of this inefficiency of the absence of a single global homogeneous international currency.

Spending culture: The reduced incentive to save is mirrored with an increased incentive to spend, and with interest rates regularly manipulated downwards and banks able to issue more credit than ever, lending stopped being restricted to investment, but has moved on to consumption. Credit cards and consumer loans allow individuals to borrow for the sake of consumption without even the pretense of performing investment in the future.

self-destructive behavior: The move from money that holds its value or appreciates to money that loses its value is very significant in the long run: society saves less, accumulates less capital, and possibly begins to consume capital; worker productivity stays constant or declines, resulting in the stagnation of real wages, even if nominal wages can be made to increase its through the magical power of printing ever more depreciating pie of paper money. As people start spending more and saving less, ue become more present-oriented in all their decision making, resulting in moral failings and a likelihood to engage in conflict and destructive and self-destructive behavior.

Interest rates and misallocation of capital: Whenever a government has started on the path of inflating the money supply, there is no escaping the negative consequences. If the central bank stops the inflation, interest rates rise, and a recession follows as many of the projects that were started are exposed as unprofitable and have to be abandoned, exposing the misallocation of resources and capital that took place. If the central bank were to continue its inflationary process indefinitely, it would just increase the scale of misallocations in the economy, wasting even more capital and making the inevitable recession even more painful. There is no escape from paying a hefty bill for the supposed free lunch that Keynesian cranks foisted upon us.

Bubbles and Illusory Wealth: The crash resulted from the monetary expansion of the 1920s, which generated a massive bubble of illusory wealth in the stock market. As soon as the expansion slowed down, the bubble was inevitably going burst. Once it burst, this meant a deflationary spiral where all the illusory wealth of the bubble disappears. The monetary expansion created illusory wealth that misallocated resources, and that wealth must disappear for the market to go back to functioning properly with a proper price mechanism. It was this illusory wealth that caused the collapse in the first place. Returning that illusory wealth to its original location is simply reassembling the house of cards again and preparing it for another, bigger and stronger fall.

Higher chance of war: First, unsound money is itself a barrier to trade between countries. because it distorts value between the countries and makes trade flows a political issue, creating animosity and enmity between governments and populations.

Second, government having access to a printing press allows it to continue fighting until it completely destroys the value of its currency, and not just until it runs out of money. With sound money, the government’s war effort was limited by the taxes it could collect. With unsound money, it is restrained by how much money it can create before the currency is destroyed, making it able to appropriate wealth far more easily.

Third, individuals dealing with sound money develop a lower time preference, allowing them to think more of cooperation rather than conflict,

Bad companies : Credit creation by central banks causes unsustainable booms by allowing the financing of unprofitable projects and allowing them to continue consuming resources on unproductive activities. The test of the free market is suspended as central bank direction of credit can overrule the economic reality of profit and loss.

Solution :

Bitcoin as a reserve currency:

Global anyone with internet can use.

Supply is fixed. Not entity can manipulate supply not even the government.

Bitcoin network has been working for 13 year without any miss transaction.

Fast and cheaper cost of transaction because of the lighting network.

No one can take away the bitcoin you own without your private key.