Bitcoin vs Fiat Currency
Every day, when we go to the market to buy goods, we need money to purchase things. This money is known as paper currency or fiat currency.
Now imagine you buy a soap for 100 taka. The same soap one year later cannot be bought for 100 taka anymore; it costs 200 taka. Naturally, we say that the price of goods has increased.
But the real question is—has the price of goods actually increased, or is there something else behind it? Let’s understand.
How prices are determined
According to basic economic principles, the price of any product depends on demand and supply.
- If supply is greater than demand → price decreases
- If demand is greater than supply → price increases
- If demand and supply are equal → price remains stable
For example, imagine a beverage company producing millions of drinks every year, and demand is also very high. So supply and demand are balanced.
In such a case, the price should remain stable. But in reality, a drink that once cost 50 taka may now cost 100 taka.
So what is the reason behind this?
The decrease in the value of money
The main reason is that the value of money changes over time.
The medium we use to buy products (money) does not have a fixed value—it is changeable.
When the value of money decreases, prices appear to increase.
Why does fiat currency lose value?
Let’s understand this with an example.
Imagine a chair that exists only with you in the entire country. It is rare, useful, and has high demand. Naturally, its price will be high because supply is extremely limited.
Now imagine the same chair is mass-produced and becomes easily available everywhere. Its rarity decreases, so its value also decreases.
Similarly, old antique items are expensive because they are rare and limited in supply.
Now apply this concept to money.
How fiat money is created
Paper currency is made from paper, and paper is made from trees.
As long as natural resources exist, paper money can be produced. This means money creation is practically unlimited.
Governments or central banks can print money whenever needed.
Is money unlimited?
Money is counted using numbers, not physical paper.
When we say we have 500 taka, we are referring to value, not the number of notes alone.
But numbers themselves are unlimited. This is why money supply can also expand endlessly.
When the amount of money increases but goods remain the same, the value of money decreases. This is called inflation.
Simply explained
If suddenly a large amount of money enters the market:
- People have more money
- But the amount of goods remains the same
So prices rise, and the value of money decreases.
What is Bitcoin?
Bitcoin is a digital asset with a fixed supply of only 21 million coins.
It is not controlled by any single person or authority. Instead, it operates on a mathematical system.
Because of this, new bitcoins cannot be created freely.
Why Bitcoin is different
Bitcoin has some key characteristics:
- Limited supply
- Cannot be manipulated or printed
- No central control
Because of this, its supply does not increase like fiat currency.
Many people consider Bitcoin a “digital gold” because it can preserve value over time.
Final thoughts
While fiat currency can lose value over time due to unlimited supply, Bitcoin works differently because its supply is limited and fixed.
Bitcoin is something that, when used properly, can help build a strong economy and a safer financial system.