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The world is a growing ecosystem hinged on advances in innovation and improvement in socioeconomic trends. As a result, conventional standards are being displaced by new technologies. One clear case is the advent of Bitcoin and blockchain technology. From its modest origins in 2008 to its peak in 2021, Bitcoin has caused quite a stir among investors, economists, speculators, and on-lookers.
Amid erratic price fluctuations, social media frenzies, and pervasion of early fears and concerns by speculators and on-lookers, Bitcoin remains the most promising development which has been proffering solutions to the problems fiat & centralized currencies couldn’t solve. Since it was introduced, Bitcoin has gained popularity, acceptance, and patronage among governments, businesses, investors, and individuals. Now more than a store of value, the digital currency has begun to replace government-backed fiat currencies because its features give its users an edge over inflation, restrictions & centralized policies, instant transactions & transparent settlements across borders.
Despite the lifelong debate on regulating the digital asset, Bitcoin has been programmed with a consensus mechanism called Proof of Work that happens to stand in as the determining factor & rules governing the innovation. Although the US, Canada, and the UK are among several countries which have acted around creating roadmaps & orders guiding the ownership & usage of this currency in their respective jurisdictions. The Central African Republic became the second country to adopt Bitcoin as a legal tender about a week ago. It joined El Salvador as the only country where Bitcoin is used to exchange as legal tender.
This puts further strain on African countries such as Nigeria, Cameroon, and Gabon that have measures that prohibit Bitcoin purchases with traditional banks’ debit & credit cards. Over the years, debates and controversies about the differences between Bitcoin and fiat currencies continue to arise. Concerns over how centralized entities can stall the adoption of Bitcoin in many countries are alarming, especially when users who are supposed to be restricted by the government ban in Nigeria are thriving and leveraging the innovation well through the Peer to Peer transaction feature of Bitcoin.
These debates are fueled by harsh recommendations of economists and financial institutions but won by Bitcoin’s ability to repel centralized policies by providing real-time solutions to users’ agony from the fiat currencies through layer two solutions like the Lightning Network, among others. However, it is wise to be cautious and understand the concept of money, what money should be, and what is considered money to understand Bitcoin perfectly and fish out the foul play of fiat currencies.
It’s imperative to seek opportunities to benefit and demystify the truth, which will be inevitable. More than a decade since Bitcoin was introduced, the internet and the media remain in a frenzy. A party of agitators calls for the adoption of Bitcoin as the legal tender in countries, while a second party, which is the more vocal of the two – the detractors – calls for its outright rejection. Although the opinions of both parties are understandable, it is evident that, with a better understanding of Bitcoin, we will realize it is a high time preference for countries readdressing the unending parlay. But before that, what distinguishes Bitcoin from conventional currencies, and how does it gain the advantage in this conflict?
Unlike fiat currencies issued by central governments, controlled by financial institutions, and widely proliferated to meet supply-demand and demand-supply in a state, Bitcoin is decentralized, limited in supply, and high in demand. Governments and financial institutions ensure currencies are secure and safe to use by deploying measures to control inflation and prevent counterfeiting. Conversely, Bitcoin’s means of issue do not rely on monetary authority. Instead, it is a digital currency, and financial institutions do not propagate its circulation. As a result, Bitcoin has functional characteristics. It derives its value from blockchain technology. And it deploys a decentralized network to facilitate transactions.
Over the years, money – the essential requirement for financial transactions – has evolved. From the use of livestock and agricultural produce as barter to cowrie shells to the proliferation of coins, and most recently – paper bills – the form of money and the technology backing it has evolved. And it will continue to remain so. Now in the digital era, the next iteration of money is not just a digital currency but a decentralized digital currency.
Bitcoin, unlike fiat, is not affected by inflation and monetary policies. Also, there are low or no transaction fees, and transactions are secured by blockchain technology and miners. Although Bitcoin detractors argue that it is volatile and subject to price fluctuations, in reality, in the real sense, one Bitcoin is equal to one Bitcoin. Still, the volatility in price comes with the instability of fiat currencies in each jurisdiction, such as the Dollar, Yen, British Pound, and Canadian Dollar, which don’t have a fixed supply. Hence the reason for their decrease in purchasing power & change in price relative comparison to Bitcoin.
Bitcoin and blockchain technology remain the most promising advancements in finance. As in the past, money and its underlying technology will continue to evolve, indicating that Bitcoin will eventually outstrip its centralized fiat counterparts in the years to come.
This is a guest post by SADIK OLAYEMI ABDULROSHID. Opinions expressed are entirely their own and do not necessarily reflect those of Satoshi’s Journal or Satoshi’sSatoshi’s Entertainment Company.