Okay, so I have been in and around the crypto currency world for quite a while now, and this is actually something I have thought about, as the situation is different from coin to coin, but with Bitcoin being the grandfather of all cryptocurrencies, maybe it will be seen as a pioneer in the field, the benchmark to be compared to, or the coin to learn from and be totally different from.
So far there are 3 ways you could look to use Bitcoin or ways it could be adopted to use in the future and these are;
- As a currency in it's own right
- A store of wealth/value
- As a trade token
As a Currency
Bitcoin as a currency is not feasible, now OR in the near future. Bitcoin's value is pegged to FIAT currencies, which give it its intrinsic value. For the doomsday preppers amongst us who love decentralised currencies, sorry to burst your bubble, but if Fiat currencies pop, then Bitcoin will fall also. Bitcoin has the disadvantage of being digital, which would mean worldwide adoption would be long and arduous, and would be limited to wherever Bitcoin POS is available. remember, not everyone wants to, or will deal with crypto currencies.
As the Bitcoin blockchain continues to grow, transactions will be larger in size, meaning the cost to send a transaction will also increase. Over time, the cost to send a single Bitcoin transaction could, in theory cost $100's! This will mean that regular people would be priced out of using it as a currency and thus, the idea fails.
The Bitcoin network can only handle 7 transactions a second, which means mass use would clog the network and cause massive backlogs of transaction, and as they are not instant, some could take days, or even be lost entirely.
A Store of wealth/value
Many people liken Bitcoin and Litecoin to the digital versions of gold and silver, which I can totally get in tune with. Being a stacker myself, I like to hoard shiny objects and if they grow in value and keep my wealth safely locked away at a certain value, then it has to be a winner.
The problem we have with Bitcoin and Altcoins in general, is that they are very volatile, and their prices fluctuate way too much to be a trusted store of wealth. They are however a great way to punt some spare cash in to and see how far you can ride them as a risky investment. Many people have made their fortunes in crypto so far, and that won't stop, but people need to use their smarts and due diligence not to get stung. So for now, until the markets become less volatile, or Bitcoin's price stabilises at a future date, using it as a traditional investment would be a no-no.
As a trade token
This is where Bitcoin is and will shine in the future. While people are using Bitcoin to pay for items and send money, they are basically using it as a way to send their FIAT money to another person or entity. Usually people flip it back in to FIAT and have it sent to their banks so they can spend it as usual. Where I see Bitcoin being used, is to send large amounts of cash across the world at short notice. Thus establishing a Trade value of sorts. The british Empire used trade tokens that were similar in value to their currency at the time and were accepted across the empire for their stated value. Now, while Bitcoin's price will fluctuate and the fractions that one would send to transfer their funds will change, the principal will remain the same. I see Bitcoin being used by large businesses and traders and merchants, such as import/export brokers. It is quick, direct and honest.
Once Bitcoin is far more accessible to purchase and sell in exchange for FIAT, it will be more widely used by those with the need to shift large sums of cash, and the regular guy will be squeezed out by the eventual high transaction fees.
While we can use all 3 methods currently, I believe through it being decentralised, it will be adopted by those that are centralised and thus it will become another mechanism of control by those who have, and not for those who want to have.
Not THAT'S a comment!
Well said and well thought. I'd never considered Bitcoin as a trade token but after you laid it out here or made total sense.
Wow this could be a post in itself!
Lol @thecryptofiend, I wanted to cover the 3 uses I can see so far. It was going to be longer, but I managed to contain myself, hah!
You did great though. I was spoilt for choice with comments!
I appreciate the read either way :) Thanks buddy.
How is that? What's your basis for this statement and what qualifies for "pop"?
I disagree. It is quite the opposite. The reason bitcoin has been going up is the fiat currency losing its value.
Fear of fiat currency failing is the reason to invest in bitcoin. There is new supply of fiat currency added all the time, which devalues fiat currency. It is a hidden way of taxation.
Bitcoin doesn't take its value from USD. Its value comes from what it offers: secure trusted way of storing value.
Look at countrie with super high inflations, those who chose to store their assets in bitcoin were able to preserve the value of their assest and then some.
I disagree respectfully.
Financial collapse? If Bitcoins sole value is drawn from the USD, like it is now, then a financial crisis that caused true Fiat based currencies to fall like the USD, the GBP etc, then the value of BTC would drop. Pretty simple really.
I disagree respectfully.
It is quite the opposite. The reason bitcoin has been going up is the fiat currency losing its value.
Fear of fiat currency failing is the reason to invest in bitcoin. There is new supply of fiat currency added all the time, which devalues fiat currency. It is a hidden way of taxation.
Bitcoin doesn't take its value from USD. Its value comes from what it offers: secure trusted way of storing value.
Look at countrie with super high inflations, those who chose to store their assets in bitcoin were able to preserve the value of their assest and then some.
I do somewhat agree with you, but the price of BTC is inflated by people investing in BTC by using Fiat currencies. People invest in Bitcoin over this "fear", but what would give Bitcoin its price after a collapse? Fake made-up prices?
There is not one fiat currency. They actually all compete against each other. All of the fiat currencies' tied to the trust for the governments and their economies.
For example value of gold is pretty much same as it was 2000 years ago. Prices of gold change, but value remains almost same. There was no USD 2000 years ago.
In this regard bitcoin is playing role of gold, it is actually better than gold. If USD collapses another currency will take over. Bitcoin will keep its value. Prices are not going up because of fear, rather decline in supply and people realizing it is better way of preserving their assets.
I think bitcoin price is stuck at 2500 right nkw because of fear what will happen with forks. USD cannot destroy bitcoin. Only bitcoin community itself can destroy it.
Final note, as long as there is electricity and internet, crypto will continue getting stronger and be around for long time.
I have not said anywhere there is only 1 Fiat currency?. If the U.S economy collapses, do you honestly think the world economy as a whole would be fine, and that Bitcoin would remain at '$2500'?
Bitcoin is not Gold, and never will be. Gold can be traded physically on the streets. If the 'world ends', people will be trading Gold, Silver and Copper as I reckon the lack of availability of Starbucks WiFi may hinder the long and expensive Bitcoin transactions.
Bitcoin's price is generated by the total mean price against all currency trades. When It has it's own unique price, in which my house will say be worth 150 BTC and not £300k , then I will agree with you more. Until then it remains inflated and controlled by the world economies.