According to the creator of bitcoin, Satoshi Nakamoto, the aim behind launching bitcoin was to introduce a peer to peer payment system which was times better than all the existing payment services. For that to happen, bitcoin was required to evolve into a medium of exchange.
In a time span of over 10 years, bitcoin has attracted the attention of masses due to its several signature attributes. First of all, the biggest cryptocurrency by market cap has proved the world that it is a decentralized digital currency that can’t be manipulated or controlled by any authority. The peer to peer payment system introduced by bitcoin eliminates the need for any supervisory authority.
Besides, the world’s first truly decentralized cryptocurrency dependent on the fundamentals of demand and supply has shown resistance to inflation. Unlike the current medium of exchanges such as fiat, bitcoin doesn’t lose its value due to inflation. With a finite supply of 21 million and the rate of supply programmed, bitcoin has disrupted the current financial system composed of banks and fiat currencies.
Although the traits displayed by bitcoin outclass fiat currencies by miles, at the moment, bitcoin is a medium of exchange. Instead, bitcoin is more of a store of value and is often regarded as digital gold. Like gold, bitcoin having a finite supply needs to be mined. Bitcoin miners spread all over the world deploy high computing power and bear electricity bills in order to mint new coins. For mining bitcoin, miners are awarded bitcoin to compensate for their expenditure.
Since the inception of bitcoin, its growth has been so phenomenal that no other asset is able to challenge the prospect and potential of bitcoin. With a remarkable 720,000,000% price surge since its inception, bitcoin is well-suited to act as a store of value for now.
Apart from the growth, bitcoin’s volatility and scalability problems have also hindered its progress as a medium of exchange. As bitcoin’s price is hovering up and down the graphs, people can’t rely entirely on bitcoin as a medium of exchange and would rather prefer fiat. Apart from that, bitcoin’s ability to handle only 7 transactions per second means that it can’t be used by billions of people.
Visa is capable of handling thousands of transactions in a second so in order to replace fiat and become the next generation’s medium of exchange, a solution to the bitcoin scalability problem is a must. Let’s see if bitcoin is able to transform from a store of value to a medium of exchange.