Since its introduction in 2009, Satoshi Nakamoto’s bitcoin has brought immense change to the face of finance. Imagine an era where you no longer depend on banks or other central authorities to protect your funds?
A time where decentralization is the order of the day. You’re practically in charge of your life. It’s exciting.
Being the first cryptocurrency ever created, bitcoin started as a response to the world’s financial crisis of 2008. The housing market has just collapsed, and a subprime mortgage crisis exists. As a result, the traditional banking system became financially comatose, and the world went into a global recession.
“There has to be an alternative to the fragile traditional banking system. We don’t have to rely on a financial system that throws everyone into a state of confusion when issues arise”, Satoshi and his team of programmers thought.
Hence, the introduction of bitcoin. Since then, bitcoin has weathered the volatile cryptocurrency market storm to remain relevant.
Here is the million-dollar question–how likely is bitcoin to replace regular currencies? Let’s dig in.
Bitcoin–A Brief Overview
Bitcoin is a peer-to-peer (P2P) payment system. You don’t need a third party to facilitate transactions, and neither is there control by a national government regarding supply and creation. It is based on distributed ledger technology(DLT) called the blockchain. Call bitcoin digital money. That’s what it is, at least.
The bitcoin idea is centered on decentralization. An ideal for making individuals reclaim their financial powers. We’ve got an alternative to fiat currencies, such as the British pound and the U.S. dollar, right in our faces.
Interestingly, bitcoin is walking its way to becoming a global currency. If you’ve been looking forward to joining thousands of other traders, click here to buy bitcoin with moonpay.
Unlike traditional currencies, bitcoin is unaffected by inflation rates, economic growth indicators, and monetary policies. It utilizes blockchain, an interconnected body of data with units called blocks. These blocks contain information on each transaction performed in the chain.
The buyer or seller’s information, the date and time the transaction takes place, the total value, and a unique identification code is some information you’d find on the block.
At any point you upload a transaction on the blockchain, all the connected parties see it. However, no single entity controls it.
Transactions on the bitcoin blockchain must be accepted by the majority of the bitcoin miners. It is what validates the security and trust of the cryptocurrency.
For Bitcoin, data is secured and verified on the blockchain through encryption. It transforms plain texts into meaningless or random texts known as ciphertext. The unique codes for identifying users’ wallets and transactions must follow a correct encryption pattern.
Interestingly, BTC gained the name “anonymous” since you can send or receive it without your personal information in the open. However, it is more pseudonymous because every transaction that involves your address is recorded and linked to you.
Bitcoin—A Work in Progress
Like any other innovation, Bitcoin is a work in progress. One prevalent issue with the cryptocurrency market is its volatile nature.
That’s enough reason for some traders to refute the idea of bitcoin replacing regular currencies. The unstable market and its usual price decline remain the fear in traders’ hearts.
The irreversibility of Bitcoin transactions could be a thing for most people. Say there is an attack or a fraudulent exchange of data; some proponents say if truly Bitcoin is the future of money, it should include a back button.
They believe an undo/back button can prevent or correct suspicious activities on the chain.
In addition, BTC balance transfers are irreversible and cannot be reclaimed if stolen by hackers. If you forget your Bitcoin wallet’s password, the money in the wallet is unrecoverable and rendered worthless.
These are the considerations of traders when the discussion about bitcoin being a replacement for regular currencies arises.
How Likely is Bitcoin to Replace Regular Currencies
There are diverse predictions on the potential of bitcoin to become the world’s legal tender. Crypto experts and researchers predict Bitcoin will take over regular currencies by 2050. For instance, we already see El Salvador setting the pace in adopting bitcoin as a legal tender.
Countries with severe fiat devaluation can use cryptocurrency to preserve their savings, conduct business, and send remittances. Furthermore, at the invasion of Russia in 2022, many Ukrainians turned to cryptocurrency.
These are pointers that an economy where bitcoin is the legal tender is not just a dream but possible. Like any other new innovation, some investors believe bitcoin is plagued with several issues and would receive resistance from governments owing to some problems:
A government’s control over its primary currency ensures some forms of regulation. It’s already no news that cryptocurrencies would operate with less government interference. At its adoption, governments would no longer decide the number of currencies in circulation. In the case of bitcoin, it is dependent on independent mining activities.
Most central governments fund their spending on public services via debt financing. I.e., the sale of bonds. For instance, the United Kingdom sold around £500 billion in bonds in 2020. If this debt is recorded in BTC, because of its deflationary nature could make the debts more expensive.
By that, bitcoin would limit economic growth because companies would find it hard to repay loans which could lead to bankruptcy.
However, one potential solution to the issue above is to offset bitcoin deflation by adding a negative interest rate. Borrowers can pay back a little less BTC than they got.
The question is–will lenders be willing to accept less bitcoin than they lent, especially when they could keep their bitcoin and let it appreciate.
Some proponents have also come out to say bitcoin would likely weaken consumption which can cause economic stagnation.
Bitcoin—-Benefits of being a replacement for Regular Currencies
Much has been stated about bitcoin’s strategies to help eliminate intermediaries in everyday transactions. Unlike fiat currencies, cryptocurrencies cannot be manipulated easily. It is highly decentralized.
There is zero central control of the bitcoin network. Each participating node is involved in the protocol’s operation.
As a Bitcoin user, you have control over your personal information and financial data. You don’t find that with regular currencies or other traditional financial institutions.
One issue with the traditional financial infrastructure is identity theft. With bitcoin, there is a minimal identity theft risk compared to regular currencies.
You don’t want to grant fraudsters access to private information about you. Illegal access to your bank account details can make you lose money.
Although, with bitcoin, identity theft is only partially avoidable as miners could hack into the chain and cause havoc. However, you stand a lower risk compared to regular currencies.
There is the presence of cryptographic private keys that hide your identity behind a bitcoin wallet address that is publicly viewable.
Bitcoin—What the future holds
Bitcoin continues to evolve with more use cases, and it is sure that the more it grows, the more we understand it and the potential to replace regular currencies.
Currently, we see a scenario where exchanging your cryptocurrency for fiat from exchanges or other cryptocurrency traders is possible.
Cryptocurrency is receiving wide adoption around the world. If the trend continues because of its ease of use, governments worldwide will have no option but to accept it as legal tender.
However, some schools of thought project a hybrid of digital assets and fiat currency before a complete adoption. Governments around the world can start by using both. They can collect tax revenues and fund militaries and other programs.
One thing is sure. The transition of bitcoin to be the world’s legal tender won’t be a walk in the park. It won’t happen overnight.
For the world to adapt, newer infrastructures would be developed. It will be a challenging process for financial institutions, as they would have to revolve. However, as with many other technologies, the wider population would adapt to its eventual adoption.
Let’s wrap things up
Bitcoin is by far the most traded cryptocurrency in the world. Even at its lowest, many investors want to buy the dip. Over a hundred million of them.
The next couple of years will be crucial for Bitcoin’s development. It will be the years that would determine its eventual adoption. Currently, we see a government like Japan recognize it as a viable means of payment.
However, many researchers hope that scaling and security issues will be fully addressed. Only then will other central governments and individual investors have confidence in its adoption.
The technology is new, and there’s still a lot to explore. In fact, no investor can accurately state what the case would be in ten years. All we see around are technical speculations from the coin’s present state.
It is therefore important for investors to take only some financial advice. Every investor is employed to do their own research. Until bitcoin’s eventual adoption, we’d keep our fingers crossed.
Author’s Bio
Ale Oluwatobi Emmanuel is a freelance SEO content writer for SaaS and web 3 brands. With several published by-lines in notable tech websites, he’s passionate about tech, and the innovations that come with it. In his leisure, he listens to music and plays classical piano. Reach Ale via aleoluwatobiemmanuel@gmail.com
