When you deposit money in a bank account, you may assume that the money belongs to you and is safe from any potential risk. However, legally speaking, the deposited money is not yours; it’s the bank’s. That’s right. US Dollars in a bank account are the bank’s—you’re just holding an IOU from the bank.
This may come as a surprise to many, but it’s true. When you deposit money in a bank account, you’re essentially lending the money to the bank. The bank then uses the deposited money to lend to other customers or invest in various assets, such as stocks, bonds, or real estate. This is how banks make money, by using your deposited money to earn interest and fees.
So, what happens if the bank goes bankrupt? In that case, your deposited money is not guaranteed, and you may lose some or all of it, depending on the bank’s assets and liabilities. This is where the FDIC (Federal Deposit Insurance Corporation) comes in, which insures deposits up to $250,000 per depositor per insured bank.
What happens if many banks go bankrupt at the same time? What happens if all the banks fail? The FDIC still guarantees $250,000 per depositor per insured bank, but they don’t have enough money in their name to pay everyone at the same time. Paying out their guarantees will have to come from debt-issuance or money printing.
Today, many of the banking failures and uncertainty are directly related to a significant increase in the Federal Funds Rate, which the Federal Reserve has been raising quickly to try to get inflation under control.
If the Federal Government has to issue debt or print money to back up the FDIC insurance, the increase in the monetary supply will cause inflation, which is tragically ironic given that many of the bank failures have been directly related to the interest rate hikes, which were themselves necessitated by inflation.
Now, let’s contrast this with Bitcoin, the world’s first decentralized digital currency. Unlike US Dollars in a bank account, if you have control over your private keys, you can know with 100% certainty that the Bitcoin is yours and nobody else can take or control it.
What are private keys, you may ask? Private keys are unique codes that are used to access and manage Bitcoin. They can be thought of like passwords or PINs that allow you to prove ownership of Bitcoin and subsequently send, receive, and store Bitcoin securely.
If you lose your private keys, you lose access to your Bitcoin forever. That’s why it’s crucial to keep them safe and secure.
One of Bitcoin’s foundations is its blockchain, which is a decentralized public ledger that records every Bitcoin transaction ever made. The blockchain is maintained by a network of nodes that validate and verify transactions, without the need for a centralized authority like a bank. The beauty of Bitcoin is that it’s trustless, meaning you don’t have to trust any third-party to hold, transfer, or spend your Bitcoin. You’re in control of your Bitcoin at all times, as long as you hold your private keys. No bank, government, or authority can freeze, confiscate, or manipulate your Bitcoin.
In conclusion, US Dollars in a bank account are legally the bank’s, and not the depositors, while Bitcoin, if you have control over your private keys, the Bitcoin is irrefutably yours. Bitcoin is a trustless, decentralized digital currency that offers a new paradigm of financial freedom and sovereignty. As more people become aware of the benefits of Bitcoin, its adoption and usage will increase and provide individuals the ability to opt-out of the current financial system.