It is no secret that Bitcoin has captured the imagination of many people around the world. This could be due to Bitcoin’s recent appreciation against the US dollar. Additionally, several merchants have announced their intention to include Bitcoin as a payment method in their stores. However, Bitcoin remains largely unregulated and most people access it via cryptocurrency exchanges like Bitcointrader.
In essence, this cryptocurrency does not have a central regulator. As such, it remains vulnerable to speculative trading and volatility. Therefore, there are people who still believe that criminals can use it for illegal transactions.
Some countries have even warned their citizens against accepting or using Bitcoin. In other countries such as China, the use of bitcoin is illegal. At the same time, El Salvador went down in history as the first country to adopt Bitcoin as legal tender. But is this virtual currency a good currency?
what good money is
Some experts claim that good money retains its purchasing power for a short time. This means that people can use it to purchase the same amount of goods or pay for a similar service. The stability of the price level of a commodity depends on the supply and demand for money.
But bitcoin advocates need a tight supply. Therefore, the availability and circulation of Bitcoin should be free from political manipulation. However, the rigorous cost of supplying Bitcoin cannot meet the volatility of its demand. Therefore, its demand fluctuates considerably, as does its value.
The basics of bitcoin
Bitcoin works like traditional cash. People can buy or sell bitcoins on cryptocurrency exchanges. In addition, this virtual currency serves as a means of payment for services and products and is accepted by several companies.
People trade bitcoins by sending tokens to accounts they wish to credit. Once the transaction is complete, the Bitcoin network publicly broadcasts the details of the transaction. This network has miners or people who validate bitcoin transactions using networked computers.
A bitcoin transaction remains pending until most network participants verify its validity. In this way, bitcoin miners verify transactions in the same way that a central authority would execute traditional banking transactions before confirming them. After verification, a block with the details of the transaction goes to the blockchain and the network proceeds to decrypt another block of transactions.
Bitcoin users create a new address for each transaction for the sake of anonymity. However, anyone on the Bitcoin network can access its public blockchain and track account balances.
What Makes Bitcoins Good?
Satoshi Nakamoto envisioned Bitcoin as an alternative to traditional payment systems. The goal was a payment system that allowed cross-border transactions without intermediaries. Therefore, the anonymous creator of Bitcoin wanted a payment system free of interference from central banks, governments and other government agencies. Furthermore, Bitcoin would be free from alleged exploitation by governments and financial intermediaries such as banks. But has bitcoin achieved its goal so far?
- Bitcoin as a medium of exchange: Bitcoin must function as a medium of exchange to serve as a safe currency, and today various merchants accept bitcoins in exchange for services, goods and other goods. Therefore, it fulfills this purpose of money.
- Bitcoin as a unit of account: People derive the use of bitcoin as a unit of account from its purpose as a medium of exchange. Therefore, anyone who pays with Bitcoin must have the tokens they want to spend in their digital wallet accounts.
- Bitcoin as a store of value: Many people buy and store bitcoins in their cryptocurrency wallet, wait for their price or value to rise, and then resell them for a profit. Therefore, Bitcoin is both a store of value and an investment vehicle.
Bitcoin is a good modern currency. However, their adoption and acceptance are still in their infancy. Therefore, it takes longer to achieve Satoshi Nakamoto’s original goal.