Bitcoin was created by Satoshi Nakamoto as an alternative, decentralized payment method. It was low-cost and almost instantaneous, as opposed to international bank transfers.
Why use bitcoin? Because it is fast, cheap to use, private, and cannot be taken away by central governments.
You’ve probably heard about bitcoin and cryptocurrencies, as well as the hype surrounding them as the “future of finance.” The primary goal of Bitcoin was to develop an electronic payment system that did not rely on a third party or centralized authority for confirmation, settlement, or issuance.
Aside from the elimination of third parties, bitcoin transactions were marketed as irreversible, immutable, and relatively cheaper than traditional payment methods. In contrast to fiat currencies, which are controlled by the government, Bitcoin is open to the public and operates independently of any government entity. Transactions are digitally verified using a blockchain, a type of ledger technology that is not tied to a single central server but rather to a global network of computers. This significantly reduces the risk of fraud or chargebacks in bitcoin transactions.
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Imagine waking up one morning to discover that your PayPal account has been closed because the company claims there has been fraudulent activity involving your account. Because your funds are not controlled by a centralized entity, this cannot occur in a decentralized setting. Similarly, because the blockchain is not hosted on a single server or in a single location, your government cannot shut it down.
These features are especially beneficial to online merchants, as they allow consumers to access a broader range of domestic and international markets without having to worry about high fees or geographical restrictions. Furthermore, bitcoin transactions are pseudonymous, which means they provide users with some level of anonymity when trading or exchanging funds.
Bitcoin is being used for cross-border remittances.
To some extent, Bitcoin addresses the issues with the current remittance model, particularly the issues of price and speed. Traditional remittance services typically charge exorbitant fees, and transfers can take days to reach their destinations. Bitcoin, on the other hand, is not only faster but also significantly less expensive. This is due to the Bitcoin network’s lack of reliance on an intermediary to confirm transactions. There is a global network of volunteers who run their computing equipment 24 hours a day, seven days a week to confirm bitcoin transactions.
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A BTC payment takes about 10 minutes to be confirmed. Depending on how congested the Bitcoin network is, this number can be lower or higher. The greater the number of people using the network at any given time, the longer it takes to process a transaction, and vice versa. Consider it like traffic on a highway. The more congested the road, the longer it takes for each car to arrive at its destination.
Bitcoin has proven to be a more efficient and cost-effective method of transferring money across borders. For example, the World Bank estimates that the global average cost of sending a $200 remittance in the third quarter of 2020 was 6.82%. For larger figures, this can become quite significant. In contrast, the Bitcoin network’s average transaction fee is currently around $2.37. As a result, countries such as El Salvador have moved to make cryptocurrency a legally recognized form of money.
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In general, Bitcoin is decentralized and allows people to exchange value without the use of intermediaries. And, as a result of the 2020 and 2021 institutional boom, many traditional businesses now accept bitcoin as payment.
A value store
Aside from its use as a medium of exchange, bitcoin has earned the moniker “digital gold” due to its scarcity and potential use as an economic or inflation hedge – a type of asset purchased to protect against an economic downturn or a decline in currency value (respectively.)
Bitcoin, like gold, has a finite supply with a maximum supply of 21 million tokens. 18.76 million Bitcoin tokens have been mined so far. As a result, many traders, institutional investors, and small-time savers have become aware of the potential gains from bitcoin’s price appreciation, as there are only 2.24 million bitcoins left in circulation.
It is estimated that there are slightly more than 20 million millionaires in the world, which means that there is just enough for each to own a single BTC, ignoring the rest of the world’s population.
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