Ghost money is an old term often used to define money or currency, which exists only in the financial system. Tangible assets do not support these. Ghost money is developed using fractional reserve banking, where you can find banks lending more money than they have to offer. With this, you can find a situation where there is a considerable amount of money in the financial system that further helps in leading issues like inflation and currency devaluation.

The existing financial system in any country is based on fiat money and trust in banks and governments. These agencies help maintain the stability of the fiat money or local currency. However, earlier in the past, we found numerous instances where trust was broken. The breach led to severe economic collapses and financial disasters for companies and individuals.

For instance, the severe financial crisis and recession in 2008 is a classic example of how fiat-based currencies have issues, and it prolongs to give too many other problems. So, if you are planning to invest in Crypto, you may also consider knowing about the crypto engine.

Understanding Ghost Money 

As discussed earlier, we see ghost money as a perfect currency, which remains the critical unit of account and the exchange medium. However, it has a store of value that remains a big account in the market. Also, it can offer you a ghost that can help in enjoying the store of value feature. Also, ghost money includes a couple of other currencies like quasi-money, political money, and many more types of currencies in the market.

Several known historians and economic experts have talked a lot about this money that works, like Bank of America and others talking about it. However, the Bank of Amsterdam, the Netherlands in the 17th century was the first to talk about the same. It acts like a complete central bank that is more involved in bookkeeping activities for many more transactions. It is redeemed many more balances for a fixed level of money in the market. 

We have seen the money in the books and other resources discussing the presence in vaults. However, the advent of Bitcoin changed the equation. It came with the idea to defy all the challenges fiat money, or ghost money has given before the people. The fiat-based financial system is pitted with several issues like inflation, hyper valuation of money, and recession.

At the same time, Bitcoin also gave an extra layer of security, which the fiat currency lags behind in many ways. Security in ghost money is too fragile and derails the market in many ways. The recession during 2008 was severe and brought Bitcoin to market by the group led by Satoshi Nakamoto in 2009. 

How Bitcoin Saves Ghost Money? 

Bitcoin offers a tangible solution to ghost money’s problems and even the current fiat-based financial system. Being decentralized digital money, BTC is free from the clutches of government agencies or central banks. No authority controls the currency except the network that takes care of the currency in a big way. It only means no one can manipulate the currency and its supply.

It helps in making the monetary system more predictable and secure. It is also possible with its next advantage of transparency. Transactions work on a public ledger driven by a technology called Blockchain. It has a perfect record of giving people benefits like transparency and privacy. However, this differs from the fiat-based financial system as it relies more on trust in banks. The government ensures stability to the currency using the syndicate of banks. However, if banks fail, which is the usual phenomenon, companies and people lose their money and wealth. 

And this is not the case with Bitcoin. Thanks to the scarcity of Bitcoin, which acts as a hedge against the problems of fiat currencies like inflation and currency devaluation? Also, we know Bitcoin has a limited supply of 21 million coins, and the mining process slows down with time, reducing the coins’ production. It means that the supply of Bitcoin remains intact and is not inflated by anyone, unlike the fiat currency, which gets the same from governments or other central authorities.

Thus fiat currency-based systems fail, annoying the commoner. Bitcoin offers a high level of protection and security. BTC transactions can work smoothly with cryptography, which makes it impossible for anyone to hack into the system. Thus you have no one to steal the money, unlike the ghost money. You enjoy better security in a hostile financial environment.