Bitcoin refers to the methods that are used to make money transfer via the internet. Bitcoin uses a decentralized network to control it by the use of a transparent set of rules and hence gives an alternative to the central bank controlled flat cash. Many discussions have been held on whether to consider bitcoin as money or not. Initially, Bitcoin was made to act as an alternative and decentralized method of payment. It was operating at a very low cost and was almost instant. It also had an added advantage to the merchants since it was and has not been reversible and hence it removed the threats of chargebacks.
Bitcoin may be considered the best form of money that has ever been used. For something to be used as money, it should have several properties. Bitcoin has met these properties. The properties include:
Scarcity-there is a need for a finite supply so that there is the maintenance of value. Research shows that there will only ever be about 21,000,000 bitcoins and that there will be no person who will be able to create more bitcoins (robert , 2017). The latter is a rule in the bitcoin network and is maintained with a high degree of security.
Durability-bitcoin maintains this property since it neither tears nor breaks. One can, however, purchase physical items which possess bitcoin addresses stored upon them (robert , 2017).
Divisibility-bit coin meets this property in that each bitcoin normally abbreviated as BTC is divisible into eight decimal places. A satoshi is 0.00000001 bitcoin (John, 2018). The latter is meant to ensure that there is a global scale which is used by people to make transactions in fractions of bitcoins. Given that the value increases on a daily basis, then it will be counted in bits and milli bits.
Portability- Bitcoins can be stored in mobile phones, tablets or even bitcoin wallets. It does not have fractions. It is much lighter than carrying around cash. Before the introduction of bitcoin, it was not easy to move large amounts of money across the globe within a fraction of a second at little or even no cost ( Graham , 2017). The latter is likely to strengthen the relationships in the world economy and hence make it easier for businesses to operate.
Bitcoin is widely accepted because it has the first mover advantage of being the first of its kind. The cryptocurrency has faced many attacks but finally grew strong with all the hardships it faced (Billy , 2018). Gox announced the demise of bitcoin, but people still bought it and hence made it realize its future.
Bitcoin also possesses the social network effect (commonly known as network externality). The latter refers to the positive effects that are described in economics that an added user of a service has on the service on the value of the given service ( Graham , 2017). Bitcoin also boasts of possessing the viral effect since it has been noted to have the highest media coverage and the latter has been spreading like fire on social media (robert , 2017). Through this, many people who have access to the internet have learned about bitcoin and used it. The name is also catchy and appears to vibrant to most people.
Bitcoin is treated like many individuals as a store of value. It is an equivalent of the digital gold and it goes on growing in value but not money (this was one of the primary objectives of bitcoin). There is also an intense regulation that makes the cryptocurrency a safer bet when compared to the majority of individuals who did not have faith that bitcoin was not a Ponzi scheme.
Blockchain refers to a publicly visible and protected strong encryption. Blockchains can be used by people to store currency. Blockchains are not secure anymore. They are supposed to be secure, but high profile hacking have been taking place every time. The latter has been caused by the hard to find weaknesses in the codes used in block chains ( Graham , 2017). Examples of hacks that have taken place before include the Mt. Gox hack, the DAO hack, and the Bitfinex hack among others. Research shows that more and more hackings will take place in the future. Scientists have been doing some research on how to curb hacking called identify theft which allows limited duping of bitcoins.
Blockchains are not effective when applied in big scale. The reason behind this is power. Recent research showed that bitcoin could consume electricity more than what a single home could consume in the USA for one and half days (Kenny, 2017). The world hence can find it hard to run on bitcoins unless it consumes lesser energy or we get an unlimited source of energy, which is almost impossible.
Bitcoin experienced a bull run which saw it rise from $6400 to as high as $ 8500.as the bitcoin experience this rise, the other cryptocurrencies were suffering and did not have any bull run bitcoin that could cushion their fall. The crucial markets where bitcoins operate are also mulling on whether if to pass a law that would end tax benefits for the cryptocurrency exchanges. Cryptocurrency transaction brokerage is also not effective in the generation of added value.
Bitcoin has not been stable for some time as a result of its insecurity. The managers of cryptocurrency have been trying to curb money laundering and protecting the customers, but a lot needs to be done on the same (John, 2018). As a result of bitcoin using much energy, its prices have been swinging over a long time. The energy crisis that happens in the market makes the makes the prices for bitcoin swing too.
Conclusion
As noted in our discussion. There are several properties that must be met for something to be called money. Bitcoin possesses these properties and hence it has been used as money. There has however been constrains since it uses a lot of power to run. Bitcoin also faces security issues and hence the bitcoin officials need to do everything possible to ensure that customers are not exploited by hackers. There is also need to look for ways to make bitcoin operation to to consumer a lot of power.
References
Graham , T. (2017, May 24th). Surging Bitcoin Faces Two Barriers. Retrieved from Innovation: https://www.inverse.com/article/32111-bitcoin-blockchain-two-biggest-problems
Billy , B. (2018, July 31st). Forbes. Retrieved from Why Bitcoin Price Is Tanking: https://www.forbes.com/sites/billybambrough/2018/07/31/the-bitcoin-price-is-tanking-heres-why/#37ae50787c52
John, P. K. (2018, Oct 5th). Why do Bitcoins Have Value. Retrieved from Investopedia: https://www.investopedia.com/ask/answers/100314/why-do-bitcoins-have-value.asp
Kenny, L. (2017, March 17th). The History of Money & the Future of Bitcoin and the Cryptocurrency Economy. Retrieved from Blockchains: https://hackernoon.com/the-history-of-money-the-future-of-bitcoin-and-the-cryptocurrency-economy-5cc25e808275
Robert , b. (2017, may 21st). Is Bitcoin Real Money? Some Things You Need To Know. Retrieved from Blockgeeks: https://blockgeeks.com/is-bitcoin-real-money/
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