Our world is turning our communication into applications, you no longer need to go outside for shopping, you can get your food, clothes, appliances and so much more from the comfort of your seat. Marketing used to be done through TV and newspapers, now the internet took control. You do not even need to see a doctor anymore in some cases, you can just have the appointment online. Even our appearances are digitized and manipulated into virtual profiles where you can create an entire new personality through. The world is changing every inch of our lives into digital presence. It is no surprise that our money is turning digital as well through cryptocurrencies, or bitcoins.
In the early beginning of our world, there was no money used; there was a barter system where people exchanged of merchandise for merchandise, without value equivalence. One could exchange tomatoes for cucumbers. The problem here was that there was no measure for the value of the goods exchanged for one another. One cannot claim that cucumbers are more important than tomatoes. This lead to the usage of commodity money, which was quite similar to the barter system but some items had more value than others. A cow had more worth than any vegetable or fruit, since cows can produce milk, leather and meat. Then again, there was the problem of disease, a cow can die anytime and all its worth could be rendered obsolete. Then this system evolved to metals as soon as they were discovered. Metals could be reshaped and turned into objects. Metal evolved into coins in the 7th century B.C, these coins were made in gold, silver and copper. Again, these coins, especially in large quantities, were difficult to be carried around and this is when we came to what we know today as “money”, or banknotes. The set of coins and bank notes used by a country form its monetary system. Lately, with the evolution of technology, digital currencies ought to be produced.
Bitcoin is a digital currency first developed by Satoshi Nakamoto and released in 2009. It is a decentralized currency which indicates that it is not controlled by any central bank, unlike banknotes. Bitcoins were not the first attempt to create a digital currency, there were many attempts for creating digital currencies but met failure because of the double-spending issue. The double spending issue points to the duplication of the digital currency, where the same coin can be used more than once by falsely duplicating the currency, much like counterfeit money with banknotes.
Bitcoin solved the double-spending issue by creating a security protocol that performs functions which validate the transactions with cryptographic methods in a blockchain, thus securing the currency.
Bitcoins are measured against fiat currencies like US Dollars and Euro. A bitcoin was worth USD $0 in 2009; in fact, it never topped USD $0.39 in 2010. Today, it is worth over USD $11,500. But why this price? If we aim to measure any value or “price”, we must first monitor the supply and demand. For bitcoins, it is clear that the “supply” part is manipulated by early buyers for the bitcoins. Bitcoins were designed to only produce 21 million coin to ensure a certain amount and a rarity in its value, much like gold. Over half of the amount set has already been issued. The great interest of people (demand part) can be evaluated through “Google”. If you monitor the interest over the search term “bitcoin” years back and now, you can tell how much the demand is rocket high.
However, there are several arguments against the use of bitcoins. The most important one is how bankers mistrust bitcoins, and call it a “fraud”. Deutsche Bank chief strategist, Ulrich Stephan, is a big opponent to bitcoins. He claims that it’s very highly volatile and lacks any value except in investment.
Another problem is legality. While they haven’t been declared illegal, cryptocurrencies have not yet been declared legal either. However, countries could go to outlaw bitcoins just like that, so any careful person would vote against it. Bitcoins are not regulated by banks or government. If you buy something with a credit card and the money gets stolen or hacked in, you can call the bank and get your money back, however with bitcoins, even though encrypted, there is no guarantee for it especially with the great development of technology everyday.
Bitcoins serve an easy ground for criminals as well. There is no way to tell which bitcoin belongs to which person, and there is no way to trace these bitcoins, which allows for cybercriminals to practice freely.
On the other hand, arguments for the use of bitcoins are quite intriguing. Perhaps the biggest argument is how those who did not listen to the bankers made a whole lot of money. They literally cost you millions of dollars in missed opportunity. Some even claim that the only reason for this resistance and blind hatred for bitcoin is that it represents huge threat to well-established businesses and entities. It could bring the end of what we know as banks today.
Another economic reason for using bitcoins is the fiat currency crisis that often occurs. Banknotes have been tested for a long time and proved to be basis for inflation and economic crisis. Perhaps a change is important now.
Whether you are with or against bitcoins, one cannot predict what could happen in the future. But one thing is certain, technology is evolving day by day and it will not stop. Will bitcoins render banks obsolete? Will technology outperform one of the greatest world establishments?