Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
By Jay Patel
Introduction
The definition of money is evolving. From bartering to banks and now Bitcoins, money has changed a lot of forms throughout history. While many economists believe Bitcoin is “the 21st-century gold”, critics argue it doesn’t have what it takes to be a viable alternative to fiat currency.
Nothing is far from the truth. Bitcoin is just like traditional currency — but better. In the coming years, it may be a global payment method that’s convenient, widely accessible, and highly scalable. If you are new to the Bitcoin ecosystem, now is the right time to embrace the currency of the future. Sign up with a Bitcoin payment processor to start accepting Bitcoin payments.
In this blog, we will take a peek at the future of money and explore how Bitcoin can influence our day-to-day transactions and potentially transform our financial system. Let’s start by understanding “money” and see how it shares a lot of traits with Bitcoin.
Money & Cryptocurrency: two sides of the coin
Money is simply a medium of exchange or a stable store of value. Its main purpose is to facilitate seamless trade of goods and services. However, in developed economies, money is also used for borrowing, issuing a bond, and investing.
Now, if we contrast the role of money with cryptocurrency, you will notice a lot of common characteristics. Like money, Bitcoin (the world’s 1st cryptocurrency) can be used as a payment method; it can also be used to buy stocks or as a hedge against inflation. Some governments even allow their citizens to pay their taxes via Bitcoin.
So, how are they different? Let’s explore the key differences between traditional money and crypto.
How is Bitcoin different from traditional currency (like the dollar and euro)?
Bitcoin and fiat currencies are different in many ways. Let’s understand how they contrast with each other.
Valuation
Fiat money is issued by the government and is not backed by any physical commodity like gold or silver. It works because citizens have faith in the government that issued the currency. The government has full control over the currency, its issuance, and distribution.
Bitcoin’s worth is determined by its demand and supply. Unlike fiat money, Bitcoin has no physical form. It only exists in the form of transaction entries on a shared ledger that is transparent, immutable, and decentralized.
Inflation
The government issues fiat currency, and hence, they have full control over its issuance and distribution. The government can print money at will, which makes fiat money vulnerable to inflation and, in some cases, hyperinflation.
Zimbabwe became one of the few countries that experienced hyperinflation in 2008. Their peak month of inflation was estimated at 79.6 billion percent month-on-month and 89.7 sextillion percent year-on-year in mid-November 2008.
Bitcoin, on the other hand, has a limited supply. There will be only 21 million coins to ever exist in the Bitcoin network. No one can generate additional coins at will. New Bitcoins can only be introduced in a limited quantity at regular intervals by a process called mining. This makes it scarce, valuable, and inflation-proof.
Safety and Security
The financial industry is among the top three most targeted industries by hackers — according to a report by Proxy. In February 2016, hackers stole $81 million from Bangladesh’s central bank in a matter of minutes. In fact, 92% of ATMs are vulnerable to hacks. Banks are certainly not the safest place to park your hard-earned money. Even hoarding large amounts of cash can be dangerous as it is vulnerable to theft, loss, or getting destroyed.
On the contrary, Bitcoin wallets are highly secure. No one can initiate transactions on your behalf without your private key. Moreover, all the payments made via Bitcoin are irrevocable and permanent. This also nullifies the chances of chargeback or fraud.
Transferability
Transferring fiat currency can be challenging, especially when you are seeking to send money abroad or to a remote location. Through traditional payment methods, it may take weeks or even months for the transaction to complete. Moreover, the cost of transferring fiat currency is significantly higher as multiple intermediaries are involved.
However, Bitcoins can be transferred to any part of the world in minutes. The fees associated with Bitcoin transactions are negligible when compared to bank transfers. And because Bitcoin transactions are peer-to-peer, no one can block or freeze your funds. You will always remain in control of your money and can use it however you please.
Bitcoins can overcome the critical flaws of fiat currencies. They are widely accessible, easily transferable, and inflation-proof, thus making them a viable alternative to traditional payment methods. But can Bitcoin replace existing payment options? Let’s see how far Bitcoin can go when it comes to day-to-day transactions.
Can Bitcoin be a viable means of payment?
Economists and financial experts are optimistic about Bitcoin’s potential to become the future of money.
The director of the Financial Crimes Enforcement Network, Jennifer Shasky Calvery, suggests Bitcoin could become “a significant player in the financial system.” Others express confidence in Blockchain technology and its potential. For instance, Nassim Taleb, a Lebanese-American essayist, mathematical statistician, former options trader, and risk analyst, believes, “Bitcoin is the beginning of something great: a currency without [a] government, something necessary and imperative.”
Bitcoin has all the characteristics of money: it can be a reliable store of value, is highly divisible, and can be traded for goods and services. Here are a few traits that make it a viable means of payment:
Highly scalable
Bitcoin is capable of handling millions and billions of transactions per second, thanks to the Lightning Network, a payment protocol built on Bitcoin. That’s significantly more than any other payment method on the planet.
Global reach
Anyone from any part of the world can create a Bitcoin wallet via their smartphone. They can send, receive, and store Bitcoins in their private wallet. No need to go through strenuous verification processes or carry a high credit score to use Bitcoin.
Privacy and anonymity
While a Bitcoin transaction can be traced back to its origin via a Blockchain explorer, no one can ever associate your real-world identity with a Bitcoin address. This gives Bitcoin users privacy and anonymity that no other payment method can offer.
Transaction speed
Bitcoin can be transferred to anyone, anywhere, in just a few minutes. Traditionally, if you would like to transfer money, it may take days for the funds to reach the recipient, especially when it is an international transaction. Transaction speed can be crucial when you are donating to a cause or amidst crises.
Transaction fees
Transacting via Bitcoins is significantly cheaper than credit card payments or other means. In 2021, a transaction worth $2 billion was processed for a fee of only 0.00001713 BTC. That’s just $0.78.
If you were to receive the same amount via credit card or bank, it would cost you approximately 200 million dollars, not to mention the weeks of processing time, regulatory limitations, and other concerns influencing your transaction.
Bitcoin’s global adoption
Bitcoin’s value has grown from roughly $1 in February 2011 to an all-time high of $68,789 in November 2021. It is the oldest and most popular cryptocurrency that has seen a lot of ups and downs throughout history and yet emerged stronger after every fall.
In September 2021, El Salvador became the first country to adopt Bitcoin as a legal tender. The Central African Republic followed suit by declaring Bitcoin as a legal tender. That’s not all. Many countries, including Switzerland, allow their citizens to pay taxes in Bitcoin.
Leading NGOs across the world, including the Bill & Melinda Gates Foundation, Internet Archive, The Water Project, and many more, accept Bitcoin donations. That’s primarily because Bitcoin donations are transparent, borderless, and instantly accessible.
Bitcoin is the only currency that can bring financial inclusion and stability to every one. Millions of users have already adopted Bitcoin as their primary currency. The numbers are bound to grow exponentially in the coming years.
Bitcoin and the future of money
Predicting the future of money amidst today’s rapidly disrupting economy is almost impossible. A decade and a half ago, eBay was the only dominant eCommerce marketplace on the planet, and Amazon sold books. However, today, Amazon has grown to become one of the most profitable companies on the face of the earth.
Likewise, Blockchain technology has immense potential to transform digital payments. With advancements like the lightning network and smart contracts, Bitcoin transactions will become more efficient, cost-effective, fast, and secure.
For businesses, this means peer-to-peer payments that are cheaper to process, work worldwide, and can help prevent fraudulent chargebacks. Giant corporations, including Microsoft, Etsy, Virgin Galactic, and hundreds of others, have already started accepting Bitcoins.
Blockware Intelligence, a research arm for Blockware Solutions, recently published a report that forecasts the global adoption of Bitcoin. According to them, “Bitcoin adoption will break past 10% in the year 2030.”
With wider adoption, Bitcoin will be a dominant currency in the coming years. This doesn’t mean people will stop using fiat currencies altogether. They both have their utility. However, Bitcoin can bring equality and financial inclusion to many.
Having said that, if you are new to the Bitcoin ecosystem, now is the right time to embrace the currency of the future. Download a Bitcoin wallet and start transacting.
Author Bio
Jay is a serial entrepreneur, a Bitcoin evangelist, and CEO of Speed - a leading Bitcoin payment processor. He spends most of his time building Speed, through which he aspires to make Bitcoin payments accessible to everyone worldwide. And when he is not doing that, he is busy reading and traveling the world.
Twitter - https://twitter.com/jayneel
LinkedIn - https://www.linkedin.com/in/jayneelpatel/
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.