How Did Bitcoin Become a Real Currency?
Bitcoin has witnessed a massive increase in value since its introduction as a digital asset in 2009 by its creator Satoshi Nakamoto. The extent of its growth made the United States government designate the asset as a currency. Bitcoin is used as real money because of what people use it for. There are many means through which real money is spent, unlike in the old days, which involved using shells and stones. However, some people are unaware of how bitcoin becomes real money through the bitcoin trade. This guide will answer specific questions and discuss how bitcoin becomes a real currency.
What is Bitcoin?
In order to develop an alternative means of exchanging currency through an electronic payment system, Satoshi Nakamoto created bitcoin in 2009. The payment system is decentralized, and the possibility of a fake transaction is eliminated since all BTC transactions are available to the public. Before exchanging any currency, you would need to visit a bank; however, through the creation of bitcoin, exchanging, buying, and selling digital currency is possible. You cannot discuss the journey of bitcoin becoming real money without discussing the bitcoin trade.
Amount of Bitcoin in Circulation
The total supply of bitcoin is 21 million. Thus, the rules of bitcoin will keep growing until the maximum number is reached since its basis is mathematical. Shutting down of bitcoin is expected once it comes to the endpoint. Breaking down bitcoins into bits theoretically helps meet the increasing demand by expanding the money supply. Through bitcoin trade, you can obtain the asset or by mining.
Valuation of Bitcoin
You cannot attach any value to bitcoin unless a payment is made for or with it through bitcoin trade. Bitcoin has no worth unless traders decide to start trading the asset. When it was first created, it was worth pennies; however, since 2008, the value has increased to thousands of dollars. Over one billion dollars of the total bitcoin is currently in circulation, representing a little fraction of currency globally. According to the international monetary fund (IMF), individuals and governments are responsible for about 150 trillion dollars of the global economy which are available in bank credits and accounts.
How Does It Become Real Money?
Unless you convert bitcoin to cash through exchanges like Binance and Bittrex, it cannot become real money. Based on estimation, 80% of bitcoin are available in cash, whereas only 20% are recirculating and kept in inventory. There is a marketplace where bitcoin trade occurs. Before participating in the bitcoin trade, you need to open an account. The price of bitcoin is not static in the marketplace as it fluctuates based on several factors.
According to Economists, the loss of interest of speculators in the bitcoin trade will plummet the price. However, some countries and big organizations have started adopting and recognizing bitcoin as a payment method. The more the recognition and adoption, the more the value will increase.
Bitcoin Adoption and Implementation
There is a limit to the traditional use of digital assets even though it has existed for a while. The adoption of digital currencies has increased to the extent that some game sites reward their users through minting digital currencies. On the appropriate exchange, you can exchange these digital currencies for money. Those backing bitcoin aim for it to be more than just a virtual currency but a globally recognized and used payment method.
There is no organization controlling Blockchain, the system on which Bitcoin trade operates. Many big companies, such as Microsoft, Tesla, and PayPal, accept bitcoin as a payment method. The Blockchain network is secure; with it, there is no room for manipulation and cheating.
Differences between Bitcoin and Traditional Money
|It is dencentralized||It is centralized|
|It is not sovereign||It is sovereign|
|It is a virtual currency||It is not a virtual currency|
|More transparent and safer||Less transparent and safe|
As time goes on, there will be the adoption of Bitcoin as a currency in many countries. The exponential growth of bitcoin makes it a recognized digital currency and payment method in many countries. Some big companies like Paypal, Tesla, and Microsoft accept bitcoin as a currency. Recently, El Salvador made bitcoin her legal tender, therefore, making bitcoin a recognized currency in the country.