Whether Bitcoin can be an alternative to gold or fiat currencies is a topic that has been extensively debated upon. Alternative currencies, as the name suggests, are basically mediums of exchange besides fiat currencies. Bitcoins provide an effective and secure means of transporting money online. It is a digitalized currency that is completely decentralized with transparent rules. So, it can offer a usable alternative to traditional currency that is issued and controlled by the government. Go through bitcoin revolution test 2021 for getting detailed information about cryptocurrency and its trading methodologies.
Can Bitcoin be an alternative to fiat currency or gold?
Currencies are usable as they can be depended on to maintain their values without depreciating over time. Fiat currencies are issued by governments and people have to accept these. They are durable and less prone to depreciation with time. Any successful currency must offer features like transferability, utility, scarcity, counterfeitability, and divisibility.
- At the time of Bitcoin’s launch, it was stated that this cryptocurrency will have a finite supply. There will be a maximum of 21 million Bitcoins and no more. Bitcoin’s block value will be diminished by half every 4 years. If this protocol does not change then the last Bitcoin will be mined in 2140. To change this, an incredible amount of computing energy will be needed for mining and this is practically not feasible. In case of fiat currencies, governments will have control over their supplies, and they can make adjustments relative to prevalent economic factors. But this will never happen with Bitcoins. Since Bitcoins are still readily available and in the limelight, the mining community is still strong. Like in the case of gold, scarcity may push Bitcoin prices higher eventually, making Bitcoin a suitable alternative to gold.
- If you consider other currencies, Bitcoins are much smaller in terms of supply because there is a cap. But, divisibility of this crypto con ensures that millions of Satoshis or units of Bitcoin stay in circulation throughout the world. Incidentally, a single Bitcoin offers much more divisibility compared to a single USD. Even if Bitcoins were to become scarce and gain in value, a single BTC can be a part of daily transactions. Hear to the co-founder of finixio about the demand for cryptocurrency trade among the investors.
- Another factor which makes it a good alternative to traditional currencies is the blockchain technology. The blockchain is a public ledger that is trustless and completely decentralized. So, no parties involved in Bitcoin transactions can engage in unscrupulous activities. There is a clear system of checks that is intrinsic to the blockchain and it ensures that all transactions remain anonymous and secure.
- Because of crypto exchanges, crypto tools, and wallets, it is easy to transfer Bitcoins across borders in a matter of minutes. This is true regardless of the volume of transaction. Traditional currency transfers are time-consuming and they entail steep fees on certain occasions. Any currency must have transferability, and to this extent, the Bitcoin is transferable.
- Fiat currencies are not durable because physical paper notes can be damaged and made unusable. However, digital payment systems like the Bitcoin cannot be physically damaged. This makes it a viable alternative. Bitcoins are not physical coins and cannot be misplaced or lost, but if you lose the private key to access your wallet, you may never get your money back.
- Finally, Bitcoins are hard to counterfeit. To do this, the entire system comprising of thousands of computers in the blockchain would have to be a part of it. This is not practically achievable because unlike fiat currencies that can be duplicated, double spending is not an option in digital currencies.