Let me tell you a tale about Ecuador, that abused its currency so much the people completely rejected it and adopted a new currency. States can mismanage their currency so badly that the people adopt a completely different currency.

Have you heard the tale of Darth Ecuador the Wise... err, let me tell you about the awesome people of Ecuador, and the tragedy of the Ecuadorian Sucre.

After years of central-bank mismanagement during the 20th century leading up to 80% inflation in 2000, the Ecuadorian government did perhaps the smartest thing it could possible do at that time, it gave up and adopted the US dollar as its official currency.

Here's the tale in long form if you are interested:

https://www.wsws.org/en/articles/2000/01/ecua-j13.html

A record of their currency changes:

https://en.wikipedia.org/wiki/Currency_of_Ecuador#2000_Dollarization

http://www.coha.org/examining-the-effects-of-dollarization-on-ecuador/

And the tale told briefly by someone from Ecuador:

https://www.life-in-ecuador.com/ecuador-currency.html

Since then, the US dollar has been the official currency of Ecuador. And just like that, no more crazy inflation disturbing the economy and hurting the poor most of all.

However, the US government still inflates the dollar, but it does so at a fairly even and controlled rate compared to many places in the world. So moving to the dollar was still a positive improvement for Ecuador's people.

The US shoots for a 2% inflation target. But since the natural rate would be about 3% deflation, in actuality the US is inflating somewhere around 5% a year in order to hit that 2% target.

You can't make a political issue over such small amounts of inflation because people simply don't understand it, not until it reaches hyperinflation levels such as Ecuador and other places experienced, and such as Venezuela is going through now, and places like Argentina have suffered in the past.

Bitcoin cash too is short-term inflationary but unlike fiat currencies such as the dollar, BCH is long-term deflationary and has a hard cap on the number that can ever exist: 21 million BCH. BCH is currently inflating at a rate of about 4%, so not much better than the US dollar, but that will change soon.

Next summer that rate will halve yet again during the 2020 Halvening event, and hit 2%, then four years later it will hit 1%, and only go down from there every four years. This will begin to significantly outperform all world currencies when it comes to inflation schedule.

Since BTC doesn't want to be a payments system and has conceded that position to BCH and others, BTC won't get used. Nor likely will BTC+Lightning get used as it is a usability nightmare unless you want to trust a 3rd party to do everything for you, not to mention the high cost of opening Lightning channels in both time and money.

Ethereum, the current #2, isn't designed to be a currency at all, and thus won't likely be used. Nor Ripple, which frankly isn't even a cryptocurrency and doesn't deserve to even be considered on the rankings.

We will also see the price of BCH grow in response to this new scarcity, necessarily. Every halvening thus far has resulted in tremendous price growth afterwards.

But I just wanted to highlight the experience of Ecuador, to show that states can mismanage their currency so badly that the people accept and adopt a completely different currency.

It can happen, it has happened before, and it can happen again. And when it happens again, cryptocurrency will be the next natural currency to move to rather than the dollar.

submitted by /u/Anenome5
[link] [comments]

source https://www.reddit.com/r/btc/comments/c6cfbf/let_me_tell_you_a_tale_about_ecuador_that_abused/