Why use Bitcoin?
In the words of Peter Thiel, the legendary entrepreneur, and Venture Capitalist, “I do think Bitcoin is the first encrypted money that has the potential to do something like changing the world”. This is not the only time Bitcoin has been acclaimed positively; Both Steve Wozniak, the co-founder of Apple and Jack Dorsey, the co-founder of Twitter, has been optimistic about bitcoin and believe that it could be the ‘currency for the internet’. The list goes on and on… but why is it that such eminent personalities have been amazed by this digital asset? Why should we use bitcoin? The answer perhaps boils down to the advantages offered by Bitcoin over conventional paper currency.
Being a store of value, bitcoin can be used to transact amongst individuals. Just like fiat currency can be used to purchase goods and services, bitcoins can be used to purchase utilities (since bitcoin has not scaled enough for mainstream adoption, its purchasing capacity is still limited). However, the advantages of using bitcoin over fiat currency are as follows:
- Decentralized and digital
The ‘traditional’ banking system seems to be broke when it comes to transferring money and making online transactions; high transaction fees and a delay in the transfer of money serve as major roadblocks. Sometimes it can take days or perhaps, weeks to transfer money from one country to another.
Bitcoin is a decentralized digital unit of currency, which is not owned and controlled by any central authority. Bitcoin is a border-less means of transacting (nobody owns bitcoin) and transactions take place in a peer-to-peer environment, thereby, making them cheap, fast and seamless. Transactions can take place from any part of the world within a matter of minutes.
For example, online transaction fees are very high in countries like Uganda, so bitcoin serves as an easier and faster way of transacting, which helps in avoiding exorbitant transaction fees of the traditional banking system.
- Deflationary in nature
There is no limit to the extent to which the paper currency can be printed. Since the central bank owns and controls fiat currency, they can increase the supply of currency over time, thereby, resulting in inflation. As a result, the paper currency loses its value and becomes less valuable, i.e., more of it is required in order to purchase the same things.
This is not the case with Bitcoin, which is capped at 21 million coins. Once the bitcoin supply reaches the maximum ceiling, no more coins can be added to the ecosystem, thereby ensuring that the coins already in the circulation do not lose their value over time. Hence, bitcoin is a ‘deflationary currency‘.
All bitcoin transactions are recorded in an open-source distributed ledger, which means that anyone can download the database form the web and have a copy of all the transactions that have ever happened on the bitcoin network. This makes transacting with bitcoin transparent in comparison to banks, which reveal little to no information about their functioning.
Bitcoin transactions are anonymous such that no one can track your personal information such as your name and physical address. This provides greater privacy and trust to individuals, which indeed is a sign of a prosperous economy.
- Impossible to Duplicate
Being an encrypted digital currency, Bitcoin is impossible to duplicate when compared to its counterpart, i.e., fiat currency, which can be counterfeited.
With greater transparency, authenticity, convenience, and affordability, there’s no doubt why Bitcoin could completely revolutionize our traditional banking systems.