- The only way to shut Bitcoin is to shut down the internet
- A number of cryptocurrencies (Ethereum and Worldcoin) are trying to take over the role of Bitcoin in the financial ecosystem
- Fiat currency is a currency that is backed by nothing except government policy. In Latin, fiat means the currency that is circulating by force.
In July 1999, Milton Friedman, a Nobel Prize-winning economist at that time, predicted the future of Bitcoin.
“One of the major forces for reducing the role of the government, one thing that is missing that will soon be developed, is a reliable e-cash system whereby you can transfer funds on the internet from person A to person B, without having to know each other,” Milton Friedman said in an interview.
His prediction, however, took a whole ten years later to be realized, and Bitcoin came into the world after the 2008 financial crisis. Since then, Bitcoin has gained a rightful place in the financial market’s headlines. With its wild price fluctuations and the weathering of all negativity around digital money, Bitcoin has become more than just another average investment.
Bitcoin lies arguably among the most valuable technologies of our time. Understanding what money is gives footage better to understand the role of Bitcoin in the financial ecosystem.
Money as a medium of exchange
The currency started developing over 6000 years ago. Societies around the world started to select gold and silver as their mediums of exchange. About 680 BC, some of these metals were melted into coins of equal weight to become money. People would then convert their gold into coins and notes until 1971 when governments created fiat currency.
Fiat currency is a currency that is backed by nothing except government policy. In Latin, fiat means the currency that is circulating by force. The problem with fiat currency is that governments have a right to declare something of no value to be money and subjects must accept it.
This unchallenged government control over money has led to the creation of Bitcoin and other digital currencies.
How is Bitcoin different from money
Bitcoin is an internet protocol that enables the transmission of value over communications channels. People can send any amount of money to anyone in the world at any time. Unlike money, bitcoin cannot be ceased, confiscated, or frozen. Essentially, it serves as a digital currency and a payment system.
Bitcoin is unique over money in that it cannot be created from thin air. Its supply is capped at 21 million, and no one has the power to create additional bitcoins. It takes power from Central Banks to a more decentralized system that has millions of participants.
Unlike money where bureaucrats meet behind closed doors to determine the value of a currency, mathematics and cryptography determine the value of the digital currency.
The only way to shut down Bitcoin is to shut down the internet. However, that is nearly impossible as the Internet is a collection of many independent networks under the control of different people, institutions, and governments.
On the downside, however, the inner workings of Bitcoin can be quite complex and daunting, but that has not in any way hindered its adoption.
Role of Bitcoin in developing worlds
The use of Bitcoin is particularly vital in developing countries where a majority of the population is unbanked. Additionally, currencies in most countries to be specific, continue to lose value over time. Traders in such countries own Bitcoin, not because it is an investment, but because they need it in their day-to-day transactions.
In the last decade, Bitcoin has attracted a lot of enemies most of them being governments and other cryptocurrencies. The United States, specifically, has had mixed reactions over the digital currency, most of which have been negative. The FED has referred to Bitcoin as having no intrinsic value, linking internet money to corruption, theft, and tax evasion.
The SEC has launched a crackdown on several crypto projects such as Binance, Coinbase, and Ripple making the working environment quite hostile. There has been a push and pull as the projects have offered equal resistance, leaving the crypto community in the confusion of uncertainties.
Additionally, a slew of cryptocurrencies (Ethereum and Worldcoin) are trying to take over the role of Bitcoin in the financial ecosystem. Nonetheless, bitcoin still maintains the top spot as the most used and widespread cryptocurrency across the globe. The anticipation is high as to whether governments will either fall for or against digital money. Will the cryptocurrency weather all the negativity around it? We await to see.