Libertarian supporters of cryptocurrencies argue that fiat money is nothing more than scraps of paper with a state monopoly. What weight do they have if they are not backed up by a real asset like gold, silver, or oil? The same question was asked many years ago by the founding fathers of the United States.

As early as 1786, Thomas Paine wrote: "Gold and silver are the emissions of nature: paper is the emission of art. The value of gold and silver is ascertained by the quantity which nature has made in the earth. We cannot make that quantity more or less than it is, and therefore, the value depends upon the quantity, not on man . . . But the evils of paper money have no end. Its uncertain and fluctuating value is continually awakening or creating new schemes of deceit."

The founding fathers of America opposed the national central bank and for decades fought with its creators. Today history is repeating itself.

Bitcoin and National Currencies

Skeptics argue that the value of Bitcoin will eventually disappear, but they overlook some important points.

National currencies lose most of their purchasing power over time. Governments around the world have historically been unable to stabilize them. For example, the U.S. dollar lost almost 98 percent of its purchasing power when compared with 1913, when the Federal Reserve Act was passed.

Here are a few countries with the highest annual inflation in 2017:

 Venezuela: 652 percent

 South Sudan: 182 percent

 Congo: 41 percent

 Libya: 32 percent

 Angola: 30 percent

And those who want to save their capital in the current conditions turn to Bitcoin.

Venezuela ranks fourth in the total trading volume in Bitcoin (11.2 percent), and Nigeria is seventh (4 percent). The world is starting to slowly understand that many of the national currencies are just a paper with steadily declining purchasing power. Governments, reserve funds, and national banks are not able to protect the financial viability of citizens.

Over the centuries, central banks and governments have regularly developed schemes for the confiscation of people's wealth by devaluing national money.

During this period, paper money (cash) failed as a means of exchange, as it is not backed by a basic asset of real value. Initially, the U.S. dollar was backed by gold, but under the Gold Reserve Act of 1934, the government forcibly withdrew gold from the population in exchange for paper debt of the Federal Reserve System (today's U.S. dollar).

It was a universal scam. The law of 1934 forced Americans to buy paper money for gold. And this was a clear violation of the U.S. Constitution.

Over more than 80 years, the purchasing power of the dollar has only fallen. In the 50s, a bottle of Coca-Cola was worth $0.05. Today, it is already a couple of dollars for a drink bought in a vending machine. And this is not because Coca-Cola is in short supply, as the company sells more than 1.9 billion servings per day. The price increased from the 50s only because the dollar depreciated.

Bitcoin as an Alternative

If the base value of Bitcoin is zero, as skeptics believe, why is it traded in the thousands of dollars per unit? Why is Bitcoin not traded at $10 or $50?

Bitcoin is of great value because people around the world have lost confidence in their national currency, including the dollar (the global currency). Secondly, the U.S. dollar lost most of its purchasing power. The high price of Bitcoin reflects its economic role as digital gold, as well as the degree of decline in confidence in national currencies.

If the dollar were strong, Bitcoin would not be worth as much as it is currently.

In the world of economic crises and the reality of depreciating fiat, key cryptocurrencies, such as Bitcoin, can withstand the pressure and maintain their own positions, unlike broken financial systems.

Examples of Turkey and Venezuela, which have both experienced financial turmoil in recent months, make us think about the value of Bitcoin and other altcoins, which can become very useful in a situation in which the national sovereign currency fails. Simply put, people in these countries realize that they have access to an alternative, and this alternative is Bitcoin. And now it is proving its ability to save them.

And although Bitcoin fell in price this year, its fall was not as dramatic as the depreciation of a number of national currencies, which are supported by banks and governments.

Cryptocurrencies are very risky and unstable, and it is true that they have an uncertain future. They already constitute fierce competition to fiat currencies, however, which are being devalued because of the incompetence and corruption of central banks and governments. Especially in banana republics, in which the entire economy suffers from high inflation.

What Gives Value to Digital Gold

So why do gold and silver have value? Throughout history, our ancestors used goods as a form of payment. These included salt, precious stones, shells, gold, cattle, crops, weapons, and other precious items that have almost universal utility. Cash is the same money, but it is just printed paper which has no practical application.

Gold and silver require labor, equipment, and other resources for extraction and storage. Like these precious metals, Bitcoin has a limited supply. The central bank or government cannot simply turn on the printing press and significantly expand the supply of Bitcoins, in contrast to what the U.S. Federal Reserve does with the dollar through a monetary policy known as "quantitative easing" (QE).

As of mid-2018, there are only about 17 million Bitcoins in circulation. The total amount is strictly limited to 21 million coins. And this is the advantage of Bitcoin over any national currency, which the central bank or the government can easily devalue by printing it directly in pursuit of personal power and wealth.

In addition, if decentralized currencies work better than centralized systems controlled by the authorities, then this option certainly provides a rosier prospect for the future.