Could bitcoin exist without fiat currencies?
In theory, Bitcoin could continue to exist even if all fiat currencies in the world disappeared.
Why Bitcoin doesn’t need fiat currencies
To make Bitcoin payments, there is no need to use fiat currencies at all. Fiat currencies are only necessary to buy Bitcoin for the first time on crypto exchanges if one does not have other cryptocurrencies for example.
In a world where fiat currencies no longer existed, each of us would receive income directly in Bitcoin or cryptocurrencies, so in theory we could do without using fiat currencies.
However, this is likely to be only a theoretical, but unrealistic scenario, as Bitcoin is a currency with a deflationary nature, while the current economic system is based on inflationary currencies.
A distinction must be made between theory and practice, i.e. between scenarios that are possible, though unlikely, and those that are very likely.
The scenario in which fiat currencies disappear and Bitcoin remains belongs to the theoretically possible but hardly probable scenarios.
Bitcoin’s role in the current economic system
The answer to the question of whether Bitcoin could theoretically survive the extinction of all fiat currencies is certainly yes, but it is probably more interesting to focus instead on the role Bitcoin can play within the current global economic and financial system, as no such revolution seems to be on the horizon at the moment.
The current economic system is largely based on debt, i.e. where consumers, companies and states can borrow money to make expenses or investments that they are unable to pay for with their current funds.
A debt is only sustainable if the debtor can repay it in full on time, but the real value of a monetary debt changes over time. Its nominal value always remains the same, although it decreases as the debt is repaid, but its real value changes all the time.
The fact is that, because of changing prices, the purchasing power of money is always changing, year after year. For fiat currencies, which are inflationary, purchasing power always tends to decrease, as prices tend to increase. This is also due, in part, to the expansionary monetary policies of the central banks issuing fiat currencies.
Purchasing power is actually the real value of money, so if it decreases, the real value itself decreases. Inflationary fiat currencies tend to decrease their purchasing power, and therefore their real value, and this also applies to debts. Taking on debt in inflationary currencies helps to repay it, especially when there is sustained inflation.
The deflationary nature of Bitcoin
Bitcoin, on the other hand, is deflationary in nature, as its monetary policy becomes less and less expansive, until at some point it simply ceases to be expansive altogether. Its value therefore tends to increase over time, unlike fiat currencies, so borrowing in BTC is at serious risk of being a bad idea.
For example, someone who borrowed 1 BTC four years ago, when it cost less than $7,000, in case he were to pay it back today would still have to return 1 BTC, but worth almost $70,000.
In a debt-based economic system, you need inflationary currencies, while those with a deflationary nature tend not only not to be useful for borrowing, but may even be harmful. They do, however, have other uses, such as trying to protect savings from the risk of loss of purchasing power due to inflation.
In conclusion, one should not ask whether Bitcoin could theoretically survive without fiat currencies, because the answer is obvious but unrealistic, but one should instead ask whether fiat currencies will be removed from Bitcoin. In this case, the answer seems to be no.