VBit Review: Bitcoin as the Solution to the Excesses of Fractional Reserve Banking

April 19, 2021 - Expert Commentary, How-To Articles

Bitcoin Frctional Reserve Banking

Disclosure:This article is part of VBit Technologies’ mission to break down the current world affairs and their impact on Bitcoin in an easy-to-understand manner.

In the few centuries that have passed since the industrialization era, there are once in a generation inventions that change things forever. Some take off immediately while others mature like fine wine. In the digital age, the competition is arguably stiffer than it has ever been.

Still, advances that add actual value endure. Even if the market is slow to catch on, nothing can stop a useful innovation from coming to fruition. 

Cryptocurrencies just so happen to fit into this demographic. 

A lucrative, community-driven asset that just gets better with time. There are lots of ideas on how to return to the ethos of sound finance. Unfortunately, most of them would require the powers to relinquish their control or lose the competitive advantage they have. 

However, the reality is that the existing financial quo needs reform, both to create more financial inclusion and prevent a slide towards hyperinflation.

The Problem with Fractional Reserve Banking

Banking today relies primarily on fractional reserve banking. Essentially, commercial banks accept deposits from customers and make loans to borrowers while holding in reserve an amount equal to only a fraction of the bank’s deposit liabilities.

Even though fractional reserve banking allows banks to have almost infinite liquidity, the reality remains that money is created from thin air.  If done to the extreme, fractional reserve banking wears the value of money gradually to the extent that it becomes less valuable than the paper it is printed on.

See, banks are after profits, and sometimes to extreme ends. The only way that central banks can quench this thirst is to go on a money printing spree. This has been the default in the past few years, in the name of quantitative easing.

The solution to any financial crisis? Print your way out of it. 

Countries like Zimbabwe and Venezuela tell the sad tale of money printing gone wrong. If developed countries are to rethink the issues with money printing, digitization can come in handy.

The Possibilities with Crypto

Why the clamor for crypto?

Cryptocurrencies like Bitcoin eliminate the need for arbitrary centralized printing. Bitcoin, for instance, is a self-executing currency with a fixed supply and rollout schedule. Its supply is not tweaked at will but instead depends on actual market valuation. 

As such, the era of wanton printing can be shelved with decentralized digital currencies that rely on market forces. Gold is the traditional store of value asset value because the government cannot print value out of it. Bitcoin has taken the role of digital gold because of the independence it has from centralized institutions.

At press time, Bitcoin is about nine times more valuable than the price of an ounce of gold!

This is ridiculous, but only for those who haven’t been following this coin for years. 

Bitcoin relies on sheer market forces and its vibrant community. The coin has been gaining legitimacy over the years as a medium of exchange and speculative asset despite zero government backing. 

Now, it has become a lucrative asset for traders and those seeking to store value. Getting Bitcoin by trading is one way to acquire it. However, a better way lies in the generation process: Bitcoin mining.

Central banks are gradually whittling down the value of national currencies.  Imagine having saved everything in cash. The value of $1,000 in the ’70s and today is different because the printing of money without regard to its sustainability creates inflation over time. There is little return on investment on cash saved for decades, in comparison to assets and equity markets.

Mining Bitcoin as a Shield Against Wanton Money Printing

Bitcoin mining is automated. It only relies on computers, albeit more powerful ones. It is the process by which Bitcoin transactions get confirmed and get added to the blockchain. 

For their efforts, miners get newly generated Bitcoin as rewards. This is a process that exemplifies the utility of technology. Mining does not require human involvement at all. 

The chance to become a miner is still available. Bitcoin has yet to exceed its total supply and there will be Bitcoins to mine for years. Equipment resellers like VBit Technologies enable a person to acquire equipment and get started on this journey. 

Anyone can join the fray and mine Bitcoin as a diversification strategy. The COVID-19 Pandemic has shown the importance of a broader financial base. Reliable businesses can go under overnight when such supply-chain shocks hit.

Bitcoin mining is, therefore, as pure an example of technological ingenuity as it gets. The essence of technology is to make work easier. It doesn’t get easier than this.

The Maturity of Bitcoin

Bitcoin was one of the best-performing assets in the past decade. Well, that had a lot to do with the fact that it grew from scratch, but the numbers are still incredible. When one views Bitcoin from the perspective of a self-made asset, it is the story of persistence, a focused community, and the power of technology.

Initially, some thought that Bitcoin could disappear overnight. Bitcoin has now reached a level of decentralization that it would be incredibly difficult to attack externally. Even those who sat on the sidelines for long are beginning to see the essence of this asset.

With institutional players set to get into Bitcoin meaningfully in the near future, its value will only get more tailwinds.

It is, therefore, not an overstatement to claim that Bitcoin is here to stay. This coin has done incredibly well to get this far and will only keep maturing with time. Those who predicted that Bitcoin was a passing fad are left licking their wounds again as Bitcoin is on a trajectory to reach its all-time highs soon.

Purchase Equipment from VBit to Start Your Mining Journey

A common misconception about Bitcoin mining is that it is the preserve of nerds and geeks. 

Far from it. 

Anyone and everyone can participate in the vital role of securing the Bitcoin blockchain. Since it is computers doing the heavy lifting, the owners don’t need to be Computer Science majors mine Bitcoin.

That said, there are certain variables that must be in place. For one, it is impossible to mine Bitcoin using simple computers. To remain competitive, you need sophisticated ASIC rigs.

The other variables are that Bitcoin mining equipment has some logistical requirements. One of them is that mining equipment consumes high amounts of electricity. The second is that the equipment produces considerable amounts of heat and requires constant cooling. 

What’s the solution for this?

A source for the right equipment and a suitable place to take care of the power and cooling needs of the equipment.

It is almost impossible to check all these boxes at home. VBit Mining fills the gap for prospective miners. We provide equipment reselling services because of our direct line to a leading equipment manufacturing company, Bitmain.

Moreover, VBit has data centers located in areas of North America with natural cooling and cheap renewable power. You have an equipment sourcing and hosting solution in one stop.

Don’t hesitate to reach out to us at VBit for information on our mining packages, and everything else you need to know about mining Bitcoin.

Check our Mining Shop to get started in this exciting journey today!

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