Is Bitcoin money?

Is Bitcoin money? 1
is bitcoin money

In part 5 of the bitcoin Basics series, we looked at the legalities of. viewed bitcoin. In this article we will examine whether bitcoin can be viewed as money.

As we have already examined, Bitcoin is a peer-to-peer cryptocurrency that, thanks to its fundamental properties, is the next step in the evolution of money.

Bitcoin is designed to function as a scarce digital asset. Similar to how gold and silver were used centuries ago, Bitcoin is designed to satisfy the most important properties of money.

There are mainly five properties that Bitcoin must have in order to function as money. These are:

durability (it does not degrade over time),

transportability (it can be easily transported from one place to another)

Fungibility (where each unit corresponds to every other),

Divisibility (where it can be broken down into smaller units),

acceptability (where it can be exchanged for goods and services),

and Scarcity (as it has limited supply and is difficult to fake).

In the modern world, neither Bitcoin, US dollar nor British pound have any inherent value. This value is really achieved by the willingness of a. definitely trader to accept one of the two currencies as a means of payment in a transaction.

Therefore, we can assume that currencies are the so-called. need to have usefulness. This corresponds to three major use cases that we can determine as follows:

Table of Contents

Store of value

Every currency must be able to hold its value over a long period of time. Gold is considered valuable due to its scarcity. In the past, paper money was weighted against supplies of precious metals such as gold or silver. Although this is no longer the case, we still refer to the price of gold in the market as a measure called the “gold standard”.

Unit of account

A “unit of account” is a universal unit by which we value goods in a market. For example, the US dollar uses both whole units (dollars) and decimal values ​​(cents).

Exchange mechanism

After all, any currency must be accepted in order to transfer value from one party to another. For example, most business organizations today could transact in their local currency or in US dollars.

What Makes Bitcoin Real Money?

Bitcoin fulfills all of the major properties and utilities required to operate as a currency, although the relative novelty of digital currencies compared to fiat currencies or precious metals presents some interesting challenges.

Bitcoins durability remains the subject of evidence; The cryptocurrency has managed to survive for ten years since its debut in Satoshi Nakamoto’s whitepaper and the breakdown of the Genesis block, and at the time of writing has managed to survive countless speculations that have argued that it was short-lived or a ” Bubble ‘would be.’

However, gold still sets the standard of durability throughout human history and remains the most recognized form of universal currency. Similarly, the US dollar has solidified over the past hundred years to become arguably the most famous fiat currency.

Basically it is bitcoin transportable in the sense that it can be sent from one place to another over the internet much easier than gold, fiat currency, or even paper money.

Bitcoin is restricted only by access to the Internet, which – while many nations and territories around the world may be excluded from it at this time – represents the first time humanity has been able to build a payment network that is not intrinsically rooted in individual control Nation or issues national currencies against each other.

Gold and paper money are restrictive in the sense that it can be immensely difficult to move materials around the world, while digital fiat currencies are often locked into complex agreements between banks and governments that require long transaction times or high transaction fees when moving from one Form include the currency to another.

Bitcoin is designed in a similar way to fungible, like everyone bitcoin can be exchanged for each other like US dollars. There is nothing special about either bitcoin or a specific dollar bill.

However, this property is being jeopardized by the advent of sophisticated analysis software that monitors the history of each individual bitcoin on the blockchain. In theory, this allows people to refuse to accept a coin that may have been used in illegal activities in the past.

There are a number of projects that aim to address these concerns by increasing the privacy of bitcoin Transactions. In private transactions, it is not possible to trace the history of a particular coin – which in turn eliminates concerns about fungibility.

Bitcoin can be divided into infinite values ​​- with the lowest value (0.00000001 ฿) called Satoshi – and offers more Divisibility than gold or fiat currencies like the dollar. Typically, it is difficult to break gold into smaller units because it is labor intensive. Likewise, the US dollar can only be divided into values ​​of 100 cents.

After all, Bitcoin is inherent in it sparse thanks to the fact that there will only ever be 21 million Bitcoins in circulation – the price of gold is elastic in the sense that deeper gold mines become more profitable with increasing rarity and increasing gold price while it is valued There are $ 10.5 trillion in circulation today.

Thanks to these properties, Bitcoin benefits from the fact that it is known as a form of “digital gold” (or Store of value) due to its scarcity as Unit of account where Bitcoin, in BTC value, can be used to value goods, and finally, it can simply be used as A. Exchange mechanism to make transactions over the Internet easy.

Who Accepts Bitcoin?

Probably the biggest challenge that Bitcoin still has to overcome is to create acceptance. While many merchants or service providers around the world accept payments in their local currency or international currencies such as the dollar, Bitcoin remains an emerging currency and is not yet widely accepted as a form of payment.

However, that hasn’t stopped many enterprising service providers or merchants from accepting Bitcoin as a means of payment.

A popular story had it that a hungry customer paid 1000 BTC for two pizzas in early 2011, and in the years since then, numerous services, merchants, and even payment gateways have accepted Bitcoin as an offer. Notable users range from Microsoft, Virgin Galactic, PayPal, and even Zynga.

As Bitcoin grows in value, the digital currency is likely to become more widely adopted as a means of payment in the months and years to come.

In part seven of our bitcoin basics series, we’ll unpack how much a bitcoin is worth and how it increases in value.

The Post Is Bitcoin Money? first appeared on Coin Insider.

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