8 Things That Make Bitcoin Money
Whether Bitcoin is real money or not, is a question that often causes a stir. Many arguments have since emerged that discredit Bitcoin as a bona fide form of modern currency. Its highly volatile nature makes it quite unpredictable, which has earned it many sceptics. Many authorities and regulators also find it challenging to consider Bitcoin as money since it lacks some of the essential characteristics of "money".
This begs the question: What is money? Apparently, money is; a medium of exchange, a unit of account, and a store of wealth. While Bitcoin doesn’t fulfil some of these essential functions, we all know cryptocurrencies offer an efficient means of transferring value over the internet.
In this article, we shall explore eight things that make Bitcoin money.
One of the many reasons fiat currency holds value is because of its rarity. Too much supply of money and economic problems can arise (think Zimbabwe). Too little amount of funds and economic issues can occur. To avoid potential financial problems, the scarcity of money becomes a necessity.
The main reason fiat currency is scarce is that only a small group of people can create it. Not anyone can create legally approved paper money.
Compared to a fiat currency, Bitcoin is also scarce. The digital currency supply is highly controlled and predictable. There is only 21 million Bitcoin mineable in total. Currently, only 18 million have been mined. This means only 3 million Bitcoins remain to be introduced in circulation globally.
Any proper form of money should not degrade over time. Fiat currency made of paper is easily degradable, falling short of this characteristic. Paper money can easily get torn or damaged while in use. However, paper money can also easily be replaced, so the actual value of the money is not destroyed.
Compared to a fiat currency, Bitcoin is way more durable. As a digital currency, Bitcoin cannot get damaged or wear out. As long as people want to use this currency, it will always be around — wallets - which store Bitcoins - can also be duplicated to prevent file corruption.
However, unlike fiat currency, Bitcoin is not reprintable. Extra care should always be taken when handling this digital currency. Once you lose it, it’s gone.
Any form of money meant to be used frequently has to be portable. Fiat currency qualifies as it's paper form can easily be carried around in pockets, bags, and wallets. For more significant transactions, banks and other financial institutions come in handy. Additional infrastructure like debit and credit cards also boosts the portability of fiat currency.
Compared to a fiat currency, Bitcoin is even more portable. As a digital currency, Bitcoin doesn’t weigh a thing. It can be carried around in a flash drive or hard drive and in large quantities. Anything between $0.01 to $1 B+ can be stored in a hard drive. Transfers of the digital coin can be made almost instantly to anyone across the globe.
Money has to be divisible for smooth operations and transactions. When you go to buy something with a large sum of cash, you expect some change, if there is any, after a purchase. Fiat currency is available in a wide variety of denominations, making money transactions easy.
Compared to a fiat currency, Bitcoin is also divisible. Currently, Bitcoin is divisible up to 8 decimal places. Now, the smallest unit of Bitcoin on the blockchain is known as Satoshi, which is 0.00000001BTC. Each Bitcoin is equal to 100 million Satoshis.
Fiat currency can easily be stored in large quantities in any storage infrastructure. Paper money is not only lightweight but also occupies very minimal space. You can easily carry it around in your wallet or suitcase in case it's a lot. The smooth movement of fiat currency makes it a great store of value.
Compared to a fiat currency, Bitcoin is even easier to store! As a digital currency, Bitcoin can be stored in a digital wallet or cryptocurrency exchange. For enhanced safety, there are backup storage facilities, like cloud storage, available for Bitcoin storage.
6. Authenticity Verification
The risk of handling counterfeit currency is always high. For this reason, money always has to be verified to ensure you are using a legally accepted tender. Fiat currency is easy enough to confirm as it is physical, and specific characteristics can expose fake currency from legit. There are also quick chemical tests that can be done to distinguish counterfeit money from legit money.
As a digital currency, Bitcoin cannot be visually verified. However, there is software that can be used to identify it in the Blockchain.
For any form of currency to qualify as money, all units of the money must be considered equivalent and replaceable. For example, all $1 coins should be equal to another. If one $1 coin is not of equal value to another $1 coin, then there is cause for worry.
Compared to a fiat currency, Bitcoin is also fungible. Currently, all Bitcoin is considered equal. Throughout the blockchain, 1 BTC is equivalent to another 1 BTC. At the time of writing this, the value of 1 BTC was USD8,639.96 across the globe.
8. Difficult to Counterfeit
Counterfeit money is not that hard to come by. It is for this reason that any form of currency should be difficult to falsify. Fiat currency is hard to counterfeit but not impossible. Currently, there are millions of dollars of counterfeit money in circulation. Many unsuspecting individuals keep finding themselves on the wrong side of the law for handling such fake cash.
Compared to fiat currency, Bitcoin is pretty difficult to counterfeit. Unlike paper money, where you need paper and a few chemicals to fake it, Bitcoin is secured with layers of cryptography that it would take any witty hacker many years to crack.
Plus, considering Bitcoin utilises blockchain, a cryptographically secured distributed ledger for any transaction, security is top-notch.
Bitcoin has come a long way from its infancy stages. Its volatile nature is still a concern to several people, but its widespread global use tells another story. Bitcoin is gradually conquering the finance space. The coin is already in circulation globally, and so many legitimate transactions have already been made, from buying real estate to buying vehicles.
Over to you, do you believe cryptocurrency is real money?
About the author:
Jay Jackson is a blockchain enthusiast and a freelance writer at topcryptowriter.com. He works closely with brands (people, businesses and startups) in the crypto sphere. He currently writes Blog posts, Guides, Press releases, ICO reviews, eBooks & Whitepapers. You can find him on LinkedIn.
The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.
Last updated: 30/01/2020