The year 2009 marked a significant revolution in the history of money when Satoshi Nakamoto created the bitcoin, a digital currency. None of us thought this digital currency would act as a supreme competitor of fiat currency and even the US dollar. Despite cryptocurrency being a notoriously volatile asset, it received acclaim from investors worldwide due to its power to eliminate mediators or third parties in the financial transaction scenario.
Perhaps, a primary reason Nakamoto invented bitcoin is that conventional currency requires a central authority to validate a time-consuming transaction; this issue is adequately addressed in crypto as it’s a decentralized system.
Blockchain, the disruptive technology that led to the creation of bitcoin, works on a digital ledger that keeps a record of each transaction and verifies them, thereby limiting the chances of double spending.
Digital money is aimed at resolving issues which a fiat or a US dollar faces; this blog will shed adequate light on the relevance of bitcoin in a country’s economy.
Bitcoin Emerging As The Best Mode Of Exchange
Lately, cryptocurrencies have gained substantial market value as a mode of exchange, and a store of value continues to grow. Besides several ups and downs, bitcoin’s popularity registered a significant surge among businesses, traders, consumers, investors and technologists. Reasons that make bitcoin a currency better than fiat or even the US dollar have been mentioned below:
- Potential to earn investors a high return
Digital currency’s uses are gradually becoming relevant across various industries like finance, education, media, and many others. Bitcoin prices are volatile, which can be taken positively and negatively. Suppose you stake a good amount in bitcoin, and with a sudden surge in the market, the prices skyrocket; in this volatility scenario, you gain.
As per investors, bitcoin will gradually appear as a global currency and pose threats to the US dollar and fiat currencies. Bitcoin has a stock of 21 million coins, unlike US dollars, and perhaps this scarcity adds to its rising value in future.
- Conversion into liquid money made easier
When investing money in fixed deposits in your banks, immediate liquidation isn’t possible because you must wait for the policy term to an end; that’s not the issue with bitcoin. Whether transferring money into someone’s wallet or getting quick access to hard cash, crypto makes it possible. Digital currencies act as a barrier breaker because, with the help of digital currency, businesses can conduct trade across borders which is still a dream for those using fiat.
The best part is transferring money to another country won’t cost you hefty fees. You can exchange bitcoin for other currencies, which makes it a viable investment option.
- Users can easily track transactions
Transparency is a significant characteristic acting as a determinant in enhancing crypto’s popularity. Bitcoin is minted on the blockchain, which is connected to thousands of computers called nodes, and each node keeps a record of each transaction visible to users. When you can view transactions, it attaches transparency.
While in a centralized system, there’s no way to track whether or not your money reached the recipient. Often scammers can acquire confidential information about your credit cards or account details, which is impossible in blockchain unless you share your private key information with a stranger.
Fiat Vs Bitcoin- An Unending Debate
Fiat currencies are undoubtedly a widely accepted means of exchange because they’re validated by a central authority, making them a safe asset for some people. Well, the world is changing, and so is how people interact with money. The Covid time is a perfect example of how the world turned digital and perhaps taught us the power of digitization.
There has been a trend towards switching to a system that guarantees transparency and is free from authoritativeness. In a conventional monetary system, for each transfer, people must rely on loads of paperwork and wait for approval from their respective banks. This is where the role of bitcoin comes to the fore, transactions become decentralized, and one can transfer funds anytime, irrespective of region.
In the centralized scenario, the government and banks try to generate or reduce demand by setting up policies that grimly impact the value of the conventional currency. In contrast, bitcoin or any other crypto doesn’t come under the scanner of market conditions hence its value increases despite inflation or any other policy updates.
Well, some economists are of a firm belief that cryptocurrency has the potential to replace fiat in the future. However, specific problems require significant attention as crypto’s volatility poses a threat, and investors run at risk of security hacks. Such issues must be addressed to make crypto or digital currency part of the world’s economy.
Though bitcoin impresses us with myriads of advantages, we should never forget its volatility factor and lack of authoritarianism that might prove harmful to your investments. Therefore, before you invest in bitcoin, conduct thorough market research and stake an amount you can afford to lose.