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Bitcoin is no longer a thing of the future or the “next big thing.” It has arrived and is actively working to alter the global financial model as we have known it for the past century. It is the only possible natural development in the form of money.
However, underlying principles govern what can and should be considered money in an economy. People can’t use mangoes as a form of payment, can they? (Though we should), it lacks some essential elements required to determine the value of an asset.
Valuable metals like gold and silver meet these requirements. Modern currencies have been designed to fit the model and thus maintain their value. What about cryptocurrencies such as Bitcoin? Do they have these characteristics that make them valuable enough to be used as the primary form of money? Start your trading journey with the bitcoin circuit
Bitcoin is Better than Gold
The scarcity of precious metals has primarily contributed to gold and silver’s relative value over the centuries. They used it to solve a purpose in ancient times. These characteristics are no longer present in these metals. Away from their long history as an essential component of the financial system, they are no longer useful to anyone today. That’s because they are not easily transferable, do not last as long as other currencies are not as divisible, are not as secure, and are not as decentralized.
Bitcoin excels in these criteria. Cryptocurrency employs one of the most advanced forms of technology – blockchain to address these critical issues; Bitcoin has a limited supply, with only 21 million Bitcoins produced worldwide. As a result, it retains its relative value in the same way that gold does. It is also secure, decentralized, and transactional efficient. To summarize, Bitcoin serves a purpose and does not exist in the financial system solely due to ancient practices.
Consider this: Would you rely on gold or Bitcoin for transactions if all fiat currency disappeared today? Bitcoin would be simpler to use.
Bitcoin Outshines Fiat Currencies
Based on these and other factors, we can compare Bitcoin and cryptocurrency to fiat currency.
Bitcoin is a limited currency, whereas all other fiat currencies are issued regularly by the government. And this means Bitcoin is increasingly scarce and thus valuable. Of course, a steady supply of fiat currencies is necessary to avoid quantitative scarcity, but an excess supply causes a drop in their value, resulting in inflation. Part of this regular supply is also their use to compensate for damaged currency notes, which render them unusable. Bitcoin has no such issue because it does not exist in physical form. Cryptocurrencies like Bitcoin are not only infinitely more “durable” than fiat currencies, but they are also secure. For example, Bitcoin operates on a decentralized ledger system that is checked for accuracy multiple times on each ledger, which means that a transaction will only be approved if all nodes on the network approve it according to their records. And this means that the chances of Bitcoin being counterfeit are nil.
Bitcoin Needs Legitimacy
Cryptocurrencies such as Bitcoin are currently gaining enormous value in anticipation of becoming the world’s future form of currency. They have all of the advantages of existing currency forms, but they lack approval and regulation by world governments.
And this is not a simple task. Bitcoin was created in some ways to transfer power from the prevalent banking institutions to the people. The decentralized maintenance and transactions achieve the same result, but this nature makes Bitcoin challenging to regulate.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
Cryptocurrency trading involves high risk, and is not suitable for all investors. Before deciding to trade cryptocurrencies, tokens or any other digital asset you should carefully consider your investment objectives, level of experience, and risk appetite. TaxGuru does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions. By the use of the above information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
