Everyone is talking about the Bitcoin and with good reasons too. The Bitcoin had debuted in the crypto scene a decade ago as a decentralized digital peer-to-peer currency. It depends on cryptography to preserve its integrity. This is why Bitcoin advocates argue that it has all the properties needed to make it an alternative to traditional fiat currencies. It could be soon accepted by consumers and merchants worldwide.
Why can you consider Bitcoin as an innovative alternative digital currency?
- When the Bitcoin has been introduced in 2009, Satoshi, its developer, had claimed that there would be a cap of 21 million Bitcoins. Currently, there are almost 18 million Bitcoins in circulation, and given its halving every 4 years, the supply should surpass 19 million by 2022, assuming that this protocol remains intact. To change this would need the agreement amongst a majority of computers or miners that take part in Bitcoin mining. This is why it is unlikely that the protocol will change. So, unlike fiat currencies that can be issued by the government from time to time, Bitcoin has a finite supply. Because of this, there is a greater demand for Bitcoins and the last Bitcoin will be mined around 2140. So, like gold and other precious metals, Bitcoin can prove to be an alternative to fiat currencies.
- While 21 million Bitcoins may seem to be a rather tiny figure when compared to other fiat currencies, every Bitcoin can be divided up to 8 decimal points. The smallest Bitcoin unit or Satoshi is equal to 0.00000001 BTC and one Bitcoin has much greater divisibility compared to the USD.
- The biggest USP for the Bitcoin that justifies the claim that it is an innovative alternate digital currency is the blockchain technology. The blockchain is a distributed ledger that is trustless and decentralized. There are no intermediaries and there exists a checks-and-balances system whereby new Bitcoins are mined and added to the blockchain.
- Because of crypto wallets, tools, and exchanges Bitcoins can be transferred seamlessly across boundaries. Transaction costs are also lower compared to traditional money transfers that typically involve high transfer fees and may take days. A lot of electricity and power may be needed to mine the crypto asset and process digital transactions, but individuals cannot physically hold the Bitcoin.
- Unlike traditional forms of money like dollar bills, crypto coins cannot be physically damaged, burnt, or made unusable. Crypto coins can however be misplaced if you lose the private key that gives you exclusive access to your wallet. This is what makes Bitcoin rather valuable, since you cannot destroy it.
- Finally, Bitcoins are hard to counterfeit. To do this, it would require a huge amount of computing power and participation of all computers or nodes in the blockchain. This is no small feat, because whenever a block is tampered, it’s unique hash changes and with it, every other block also changes. Double spending may be possible where a currency note can be used twice, but the same Bitcoin cannot be used for two different transactions. To counterfeit, one more than 50% of the total networking power is required; only then can miners falsify records. But such an attack is theoretically impossible because it would need an overwhelmingly large amount of power, money, and effort.