Merits of Using Asset-Backed Currency
Silver crypto-currency means that the value of money used in the country is derived from the prices of silver in the country. Therefore unlike the fiat currency system where the government influence the value of the money. The good thing about silver backed currency is that the government does not play any role in the value of money used in a country. The essence of using silver backed currency is to reduce the factors that influence the value of money. Hence the silver supply in the country becomes the basis on which the value of currency is derived. The following are the merits of using asset-backed assets.
Silver crypto-currency is essential to countries that aims to regulate the amount of money in circulation in the economy at any given time. One of the causes of inflation is excessive money supply. This, in turn, leads to loss of value in the currency used in a country. Whereas low money supply leads to deflation. Inflation and deflation are two of the major concerns affecting economic growth negatively. All these things can be avoided by using silver backed currency. This is because silver as a physical commodity is a scarce resource. By controlling money supply a country is able to have a stable economy. Many of the countries experiencing unstable economies is due to using a currency system that is not backed by a physical commodity. This is where the government falls to manage the value of the country’s currency thus creating negative impacts on the economic. This creates a need to solve these negative economic conditions by using silver-crypto-currency.
Asset backed currency also helps in the prevention of economic bubbles. This is because the values of money is based on tangible assets such as silver that has fixed quantity of supply in the economy. Economic bubbles have led to collapse of economies in various countries. This is because to a sudden increase in value of an asset that many people borrow money to acquire. The lending institutions give people loans which are beyond their wealth. Then it reaches a point where the asset value makes a sudden drop in value where all the people who invested in it make very huge losses. These economic bubbles can be avoided by using silver cryptocurrency. This is because silver like other precious stones is limited in supply. Thus the value of money and assets acquired using more can only appreciate in value steadily. This means that the asset value will only rise at the rate of the stable demand avoiding instances where it doubles in value a concise period.