Bitcoin as a bank

There is a new bank in town. By depositing your money in this bank you will get:

1) reassurance your deposits won’t be devalued by inflation In a world where 25% of all USD money supply was created in the last 12 months that’s pretty nice

2) protection from the government freezing your assets In countries like Venezuela that’s pretty nice

3) Fixed-fee cross-border transfers that are very low In a world where sending money abroad is expensive that’s pretty nice

4) guarantees that the bank will never go bankrupt because it takes 0 risk with your money. It just keeps it safely in its vault In a world where banks every so often go bankrupt that’s pretty nice

5) a small long variable term interest rate In a world with 0 interest rates that’s pretty nice

What’s the catch? You need to handle your own security measures.

I bet you guessed this bank is not a bank. It’s bitcoin.

Let’s go point by point through these and argue why my propositions above apply to bitcoin

1) guarantees your deposits won’t be devalued by inflation That’s an easy one. There will be no more than 21 billion bitcoins ever produced

2) protection from the government freezing your assets No one can turn off bitcoin for the same reason no one can turn off the internet. Bitcoin is a decentralised network.

3) Fixed-fee cross-border transfers that are very low It doesn’t cost you more than 5 USD to make a bitcoin transfer.

4) guarantees the startup will never go bankrupt because it takes 0 risk with your money. It just keeps it safely in its vault The bitcoin network does not put your bitcoins at risk to generate interests. It just holds it.

5) a small long term interest rate. In the long run bitcoin will be deflationary because people loose bitcoin all the time. When the supply of something decreases that something gains value.

There is a catch. You need to secure your bitcoins yourself. If you’re not careful someone can steal all your bitcoin. Remember Mt Gox?