The relationship between Bitcoin and traditional currencies can be described as a complex and hostile relationship.
As Bitcoin seeks in a clear challenge to replace the traditional way of dealing with cash, so Bitcoin versus traditional money is a fierce competition for it.
In this article, we will explain the main differences between Bitcoin and traditional currencies.
Before we get to the differences between the two, we first come across:
Attributes of money:
Over the course of human history, money has taken and evolved in many forms.
There was swap, physical things like rocks or shells, precious metals, banknotes, paper bills and digital money, and finally decentralized digital currencies like Bitcoin.
Over time, people have noted the most desirable traits that money should have.
Whereas, for the currency to be useful and comfortable, it must have the following:
Divisible: can be converted into smaller lots for specific uses such as paying a certain amount or small payments.
Non-expendable: It cannot be consumed for purposes other than exchange of value.
Portable: It can be carried easily.
Durable: Does not fade or wear out over time or under certain conditions.
Safe: It cannot be rigged.
Easily convertible.
Rare: cannot be repeated without end.
Exchangeable: every part has the same value as its counterpart.
Recognized: is recognized and accepted as a method of transaction.
Whereas by comparing Bitcoin, Fiat currencies and Bitcoin in the context of the previous characteristics, we get the following:
The difference between Bitcoin and traditional currencies
The main difference that distinguishes Bitcoin from traditional currencies is the fact that no one controls Bitcoin because it is decentralized.
As Bitcoin is an independent peer-to-peer money system that can operate regardless of the wishes of any person or government agency.
Bitcoin relies on the shared computing power of the network's participants, each equal as no one is more or less important than the other.
In addition, it helps reduce the cost of using the system by perfectly eliminating fees and transaction times.
Thus, no one can have an influence on your money and transactions that you send or receive.
In contrast, fiat currencies depend on central entities such as central banks, commercial banks, governments, payment processors such as Visa or MasterCard, and other intermediaries.
Any of these institutions has the power to decide whether or not to consent to your transaction, whether or not you can send money to specific people or organizations, or if the funds they use are legal or not.
These operations also include in-depth monitoring and data sharing in everything you do with your money.
Another important difference is that unlike traditional currencies , Bitcoin is not a sovereign.
Meaning there is nothing to support Bitcoin, which means that its value is not linked to any political or economic situation, and it can exist independently outside the traditional system.
Bitcoin introduces a new dimension of programmability.
This means that in the future, Bitcoin transactions can be attached to smart contracts or other programs that are only executed after certain conditions are met.
This feature will allow building additional solutions with Bitcoin, such as reputation management systems, insurance contracts, or the like.
Such contracts do not require any intervention from a third party for their implementation, in a fundamental sense, it introduces a new dimension to the concept of traditional cash.
Bitcoin and the dollar:
When asked how different Bitcoin is from the dollar, most people will tell you that the reason is that Bitcoin is not backed by anything.
This is not entirely true
As Bitcoin does not have anything physical to support it, so does the dollar.
Historically and until 1971, most coins were backed by a commodity, usually a gold or silver commodity.
This is not the case now.
Also, there is an argument that all Bitcoin is covered by the amount of electricity used during mining.
Bitcoin has no central authority it claims to support:
Bitcoin is undergoing a deflation due to an artificial scarcity, while central banks can print more money at any time.
Every transaction is logged forever to an immutable public blockchain.
Requires payment of transaction fees for miners, which works like paying taxes to the government,
Except that it can evade taxes when it is impossible to complete the transfer without paying a fee to the blockchain.
Transactions are done online and include public addresses, while cash transactions are anonymous and leave no trace.
Many people describe Bitcoin as the next step in money development, but it still lacks the broad adoption as it does with money.
How much is Bitcoin worth?
According to CoinMarketCap , all Bitcoins in the world are valued at $ 92 billion as of March 16, 2020.
For comparison, Forbes estimated the net worth of Amazon founder (AMZN) Jeff Bezos at $ 115.5 billion.
Which means that Jeff Bezos has more than the total value of Bitcoin.
Bitcoin and the money supply:
To understand how much global money is compared to Bitcoin, we must determine the total amount of money.
It is not an easy matter to answer.
These accounts may take into account dozens of wealth classes, including banknotes, precious metals, money market accounts, and debt.
The Money Project attempted to provide the estimated value for money in October 2017 and reached an estimated conclusion of $ 36.8 trillion in global funds.
As of March 2020, this number is definitely out of date.
However, it was also discretionary as it was difficult as it was as we were told to estimate the exact true value for the money in total.
By comparing the previous figure reached and comparing it to Bitcoin, we find that Bitcoin is estimated at 0.4% of the appraised value.
The Project Money Estimate gives a good general idea of the size of the money supply in relation to Bitcoin.
However, it is much less accurate than the other estimates used in this article.
Bitcoin vs gold:
Some people still consider gold to be real money.
It is definitely the gold standard against which other coins should be compared.
We start with the numbers of the World Gold Council, who estimated that about 190,000 tons of gold were extracted throughout history as of the end of 2017, as about 2500 tons are extracted annually on average, so we can estimate for our part that about 195,000 tons of gold were extracted at the end of the year 2019.
32,150.7 troy ounce of gold per ton, and the gold price per ounce was $ 1,615.50.4 USD, so we can estimate the total value of all gold as follows:
195,000 tons of gold x 32,150.7 troy ounces per ton x $ 1,615.50 an ounce = $ 10.1 trillion.
In total, all Bitcoin is valued at around 1.6% of all gold.
Bitcoin and other cryptocurrencies:
Bitcoin is the largest and most popular cryptocurrency in the global economy.
However, it is not the only cryptocurrency.
If we combine Bitcoin with Litecoin, Monero, Ethereum, and all the other important cryptocurrencies, the total value comes to around $ 144 billion.
This is still just under 0.7% of all the aforementioned estimated global funds value.