Since the advent of cryptocurrencies in 2009, the world has seen a substantial shift in the way that people transact and manage their money online. The first cryptocurrency, Bitcoin, sparked a wave that has impacted almost every corner of the globe, significantly shifting the financial landscape as we know it. Let’s explore how crypto is expanding economic freedom on a global scale.
What is economic freedom?
Before we evaluate how this $2 trillion industry is contributing to financial liberation, let’s first establish what economic freedom is. Explained simply, the term refers to measures that grant users the freedom to manage their money, property, and labour in each country, which is then compared globally.
More accurately, the measure of economic freedom is determined by using the Index of Economic Freedom, which weighs up 12 factors contributing to a country’s overall measure. This is broken down into 4 categories, each carrying varying subcategories, such as market openness measuring a country’s trade, financial and investment freedom. The others are regulatory efficiency, rules of law, and government size, each with its own subcategories.
This index was first published in 1995 by The Heritage Foundation and The Wall Street Journal and is used around the world today. This year, Singapore, New Zealand, Australia, Switzerland, and Ireland have ranked as the most financially free countries in the world.
Crypto and economic freedom
Cryptocurrencies were first established to provide an alternative monetary solution to the global financial crisis that sent the world into disarray in 2007. Satoshi Nakamoto created the new age payment system to empower individuals to hold control over their own finances, allowing them to manage and transact their money without the control of an authoritarian entity. For the first time in history, people were able to send money overseas without incurring the usual costly and time-consuming setbacks incurred with regular, global fiat transactions.
Due to the decentralized nature in which they are run, people are responsible for managing their own crypto wallets and specialised users on the network positioned across the globe are responsible for verifying and executing transactions. After Bitcoin entered the scene a significant number of new cryptocurrencies have been launched, over 12,000 at the time of writing. While some maintain the same “medium of exchange” model, many new cryptocurrencies have emerged providing alternative solutions to the industry.
Ethereum, the world’s second-biggest cryptocurrency, for example, provides a platform on which developers can create their own decentralized apps and cryptocurrencies, while other cryptocurrencies revolve around faster transaction times, cloud storage and private transactions. Each of these projects utilizes a blockchain network that was designed to improve and innovate the crypto and blockchain space.
Spanning beyond government control and lengthy paperwork, cryptocurrencies are able to provide a global currency that operates entirely online and is not confirmed to the borders of a country. Cryptocurrencies are global, accessible 24/7 and cannot be frozen in accounts.
How crypto is driving economic freedom
Requiring only an internet connection and start-up funds, Bitcoin (and cryptocurrencies in general) allows anyone around the world to create a wallet and start trading. One doesn’t need access to a large bank branch or lengthy paperwork, one simply needs an internet connection and a smartphone.
Curling back to the factors that contribute to economic freedom, cryptocurrencies are able to seamlessly check six of twelve of the categories of the Index of Economic Freedom through their innate properties.
- Trade Freedom [Market Openness]
- Financial Freedom [Market Openness]
- Business Freedom [Regulatory Efficiency]
- Labour Freedom [Regulatory Efficiency]
- Monetary Freedom [Regulatory Efficiency]
- Property Rights [Rule Of Law]
The remaining categories however revolve around the governments running the nations in question, particularly the rule of law and government size categories. Nevertheless, cryptocurrencies can still assist in creating better-functioning economies and provide the technology that allows for a more open and free financial system.
A free and open financial system
As cryptocurrencies remove the barriers of borders, they allow people to transact their money in the same way that they communicate with each other (through the internet). As the digital age continues to evolve, we are likely to continue seeing a significant increase in the level of economic freedom that crypto provides to users around the world, empowering both the individual and the nation.
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