Can Bitcoin become a reliable currency?
There is no doubt that you’ve heard of blockchain technology, cryptocurrency, and, of course, Bitcoin. Virtual money makes it possible to secure financial operations, transfers, buying goods and services. As a matter of fact, Bitcoin, Ethereum, and other cryptocurrencies were predicted as the replacement for money in the future. But do you know what factors make digital money have value? Read on to discover.
What is Bitcoin?
In a nutshell, Bitcoin is the name of the first blockchain — a consensus network that enables a revolutionary new payment system and a currency running entirely in digital form. Powered by its users without a central authority or middlemen, it is the first decentralized peer-to-peer payment network. Users of Bitcoin often refer to it as Internet cash. Among all existing triple entry systems, Bitcoins have the largest market share.
Who created Bitcoin?
The concept of cryptocurrencies was initially described by Wei Dai on the cypherpunks mailing list in 1998. Bitcoin is the first implementation of this idea. It uses cryptography to control the coin issuance and transactions, rather than a central authority. Bitcoin was first documented and proved as a concept by Satoshi Nakamoto on a cryptography mailing list in 2009. After leaving the project in 2010 without disclosing much about himself, Satoshi has definitely disappeared. Many developers have since been working on Bitcoin, and the community has expanded exponentially.
Advent of Bitcoin
Since Bitcoin's inception, its price has risen and fallen dramatically. The cryptocurrency's value soared by nearly $19,000 in 2017, beginning the year at under $1,000 and ending the year at over $19,000, according to CoinDesk. In 2018, there was a steep fall, and then 2019 was comparingly stable. Non-believers often take the time to reflect on what drives the value of Bitcoin and why investors continue to invest heavily in it. The purpose of this piece is to try and answer this question and help us comprehend the value of Bitcoins and other cryptocurrencies.
In addition to the proliferation of e-wallets and payment applications, the number of innovations in commodities trading is almost endless. Despite the rise of Bitcoin popularity, the true value of cryptocurrencies is often underappreciated because of their high price fluctuation. Yet, fiat currencies are also volatile because consumers don't understand their value.
Factors that make cryptocurrencies have value
As an effective way to transfer funds online, Bitcoin utilizes a well-organized set of rules and regulations on a localized network. Payments are made differently through the network compared to the bank systems we are used to. There have been many concerns expressed about the value of the currency serving the system, so we have examined whether it can become a real currency.
When cryptocurrencies or any other form of money have many use cases or when they can have a stable value over time, they become useful for everyday users. We’ve got an excellent example of precious metals and commodities that were used as means of exchange and payment in many societies because they had shown a stable value.
The minted currency has evolved into something of a stable value with little expectation of devaluation, so people no longer carry weight commodities as payment. In the modern world, people rely on electronic currency and other methods of payment to transact and do business.
Considering the longevity of electronic currencies, it is curious how their value has been maintained over time without deteriorating. Experts define some main factors that affect that: authenticity, rarity, divisibility, and usefulness.
The fact that crypto cannot be counterfeited is one of the aspects that make it valuable. As long as it maintains its original value since it is scarce and it’s inevitable that people will possess them in large quantities, it becomes hard to counterfeit.
A currency's supply determines its value. Cryptocurrencies function in a system in which supply is scarce, thus maintaining value. In many economies around the world, the cost remains relevant despite the limited availability of supply of such crypto as Bitcoin.
The fact that a cryptocurrency can be divided into smaller units contributes to its retention of value. The ability to divide a coin or token is necessary for the digital asset to remain valuable. It can therefore be used to augment the number of crypto purchases. For most crypto owners it’s easier to buy a part of Bitcoin spending 20-100 dollars, for example, rather than 1 BTC for $40,000-50,000 (due to the price at the time of writing).
With the advent of crypto, it became possible to conduct secured and fast business transactions or utilize it as means of investing. Recent developments have made it easier for people to transact and purchase goods across the globe.
Adding to all the factors mentioned above, digital currencies are valuable due to their high volatility because they give you the possibility to speculate on the price by trading or exchanging them. Thus, you can choose a reliable crypto platform, like CEX.IO, and trade crypto, exchange, stake, save or trade it with margin. This way, knowing some basics of technical analysis, you could earn extra money.
Is it possible for Bitcoin to become a reliable currency?
Many finance analytics believe that Bitcoin and altcoins could become reliable currencies in the future. Maybe, businesses adopting this money as legal tenders will be able to form a mining community that would conduct transactions between members.
What if Bitcoin becomes regulated?
In the future, it is certainly possible that the blockchain will be modified to the point at which pseudonymity will be replaced by a degree of transparency.
Even so, it is possible that the measures regulators are bound to consider sooner or later, will lead to the maturity of crypto markets. Thanks to regulations and KYC procedures we can get rid of money laundering in the digital economy and minimise the risks of the innovative technology becoming a source of terrorism financing. What’s more, crypto regulation can facilitate the adoption of digital currencies around the globe.
Image courtesy of: India Today
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