Just as the Internet of Things (IoT) is getting famous with the advancement of technology, Bitcoin christened as the “Internet of Money” is getting tremendous popularity and acceptance with each passing year. As we step into the most talked about year ‘2020,’ we see notable changes in the economy of the countries and the adoption of the technologies.
Bitcoin and other cryptocurrencies are a branch of the digital and cyber realms. After having bloomed in 2009, a decade down the line, Bitcoin and cryptocurrencies are not yet widely known by masses. And, if known, Bitcoin is interpreted in numerous ways viz., currencies, securities, financial assets, derivatives, a speculative financial bubble, and a lot more.
Bitcoin Decentralization: A boon or bane?
Interestingly, this technology has lured massive investors due to its rate of liquidity and volatile nature. Now, how can a volatile natured investment help the investors?
Well, the whole of the investment industry abides by a simple, go to rule: “Higher the risk, higher the returns.”
However, unfortunately, many jurisdictions and governments in power have not regulated Bitcoin and other cryptocurrencies due to a number of limitations.
- First, the energy and the resource depletion that is caused in mining Bitcoin is massive and destructive, leading to breach the environment laws.
- Second, although Bitcoin meets the criteria of a medium of exchange, it fails as a store of value and a unit of account due to its virtual nature.
- Third, the value of Bitcoin will always be speculated as per its demand from the investors and traders. This will eventually make people crazy by its high interest and lead to utter inflation in the name of investment. For instance, 2 years back, Bitcoin was most talked about when it had hit $20,000 at the end of 2017. But by the end of 2018, BTC price slid to rock bottom and at the time of writing this, Bitcoin was trading above $8,000.
Despite having a transactional value, which is majorly compared to the US Dollar, it is not preferred and accepted as much as the US Dollar. Although, we know this as “crypto” and “currency,” Bitcoin is not really preferred against fiat currencies like US Dollar, Euro, British Pound, Japanese Yen, Canadian Dollar, Australian Dollar etc. If it manages to abide by the definition of currency, this will boost its adoption and help dilute the gambling factor.
Unlike traditional currency that can be stored and counted, we can’t store Bitcoin in our physical wallet, therefore, highlighting the importance of the technology deployed.
In terms of transactional unit, the US Dollar rules as the ultimate power of comparison. So, what if Bitcoin and cryptocurrencies begin to be accepted as centralized currency? This will welcome a high percentage of inflation. Moreover, the economic gap will only widen wherein the rich will get richer, and the poor will get poorer.
All in all, accepting Bitcoin and cryptocurrencies as the ultimate medium of exchange and comparison, along with the traditional currency, seems illegitimate in nature. Interestingly, Bitcoin seems to be diffusing like a technology-based product rather than like a currency, making it inversely correlated to the traditional currencies.