As of 2008, Satoshi Nakamoto originally designed Bitcoin as an electronic currency. Satoshi Nakamoto was dissatisfied with the economic crisis caused by the monetary system of Western countries, so he designed such a certain amount, free from the control of any organization or individual, everyone participates and obtains on an equal level, and all transactions are open, transparent and possible. Although Satoshi Nakamoto's original intention was to design an applicable electronic currency, some of the characteristics of Bitcoin's design made the market doubt the possibility of it as a currency. These factors include its limited total amount, so its economic model is actually a deflationary model. This is completely different from the conventional model of gradual increase in the total amount of money. In addition, what is more critical is how such an electronic cash can be truly accepted by the market and be used in economic life. All these uncertainties did not allow the market to accept Bitcoin as an electronic currency in its first few years.
But the subsequent development of Bitcoin was beyond everyone's expectations. Bitcoin's development to today's scale and nature, I believe it also exceeded Nakamoto's own expectations.
The initial flow of Bitcoin was only among tech geeks. These few tech geeks regard Bitcoin as a hobby to support its circulation. Since then, there have been more Bitcoin enthusiasts. But they can't directly obtain bitcoins through mining, so they use retail purchases to obtain these bitcoins. When such a group of enthusiasts is getting bigger and bigger, there is a demand for trading Bitcoin in the market. Some platforms have begun to provide centralized matching transactions for Bitcoin. Bitcoin has therefore achieved pricing based on existing legal currencies. With the emergence of these platforms all over the world and the 7*24 transactions on these platforms, the pricing of Bitcoin has therefore formed a basically consistent pricing on a global scale.
In 2020, Bitcoin has achieved rapid development. In March 2020, the Federal Reserve adopted a large number of US dollar quantitative easing policies in order to relieve the epidemic. A large number of additional issuances of U.S. dollars inevitably lead to the depreciation of the U.S. dollar, which in turn causes the depreciation of all U.S. dollar-denominated assets. This makes institutions holding large amounts of assets begin to look for hedging assets to hedge against the risk of additional USD issuance. Bitcoin has gradually begun to be accepted by institutions as a risk-hedging asset. As of April 2021, Bitcoin is now generally recognized as a store of value. In addition, Bitcoin is also evolving into a real currency. The Venezuelan government has begun to use encrypted digital currency for its foreign trade transactions to avoid the sanctions imposed by the U.S. dollar. A Citibank research report also believes that Bitcoin is likely to be used in international trade. In addition, Bitcoin has also begun to be used as a currency in some parts. For example, Tesla announced that it would accept Bitcoin to purchase its products. A professional baseball team in the United States also announced that it will accept Bitcoin to purchase season tickets for its VIP box. A recently sold apartment worth 175 million pounds in London also announced that it will accept bitcoin as payment. The world-renowned Time Magazine now also announced the acceptance of payments in encrypted digital currencies including Bitcoin. These sporadic applications indicate that Bitcoin is beginning to become a viable global digital currency. In view of the current price of Bitcoin and the range of users who hold Bitcoin, Bitcoin can only be used for large payments now, but the trend of its use as a currency has begun to appear. For a potential currency with only 12 years of history, this kind of development is very fast.
The current development of Bitcoin as a currency has also confirmed and fully utilized some of the basic elements of Bitcoin's design. Compared with all legal currencies, the total amount of Bitcoin is certain and will never be issued. This is the most fundamental difference between it and the legal currency. In the current market background of a large number of additional issuance of legal currency, this feature is more attractive and valued. The global circulation characteristics of the Bitcoin network support it as a currency to circulate on a global scale. Bitcoin itself is not controlled by any organization or individual, which makes it adopted by all users. No matter where the users are located, their cultural, economic, or religious background, as long as they can be on the Bitcoin network, they can make Bitcoin-based payments between each other. Finally, because all transactions on the Bitcoin network are transparent, it is difficult for criminals to use the Bitcoin network for illegal activities. This is very useful for fighting crime on a global scale.
The argument against Bitcoin as a currency believes that Bitcoin is still very volatile and therefore not suitable as a currency. But from the perspective of Bitcoin, it is not Bitcoin itself that is volatile, but various legal currencies that are exchanged with it. It is the various legal currencies that are volatile, not Bitcoin. Of course, the exchange between Bitcoin and legal currency is still in a process of formation and has not yet reached a relatively stable state, so these exchanges will make a big difference. This is a very normal situation for a currency that is growing and developing. In fact, as long as this volatility continues to exist, it means that Bitcoin still has huge room for appreciation.
The development of the underlying technology of Bitcoin is also promoting the use of Bitcoin as a currency. The Lightning Network on top of the Bitcoin network can support Bitcoin-based micropayments. Each transaction only costs 0.01 cents, and the completion time of the transaction is only 1 to 3 seconds. Such a cost and efficiency will enable Bitcoin to be promoted in a wider range. Strike is currently a very popular application in the market. Strike implements transfers between different legal currencies based on the Lightning Network. It has just launched in El Salvador and will be promoted in Europe and other places in the near future. The remittance efficiency of such an application is much higher than that of existing bank transfers and other methods of remittance transfer. Therefore, it will be widely accepted in the market. In other words, Bitcoin as a currency will be more widely promoted.
The three basic attributes of currency include value storage, unit of measurement, and medium of exchange. Looking at Bitcoin from these attributes, the attributes of value storage and transaction media have now been applied and promoted in the market, and the function of the unit of measurement will take time to develop. However, in view of the current trend of Bitcoin-based technology and application promotion, the attributes of measurement units will gradually be realized. Bitcoin is therefore very likely to become a digital currency that is circulated on a global scale, outside the existing legal currency system.
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