Since its inception since 2008, the world has looked at Bitcoin with cautious fascination. In 2013 Bitcoin started to generate interest as investors and buyers explored the possibility of Bitcoin emerging as the predominant international currency. The bursting of the Bitcoin bubble several years later did much to dampen its outlook but is Bitcoin the future of money?
Yes, Bitcoin is the futureShow moreShow less
The decentralized and incorruptible nature of Bitcoin offers it an advantage over conventional fiat currencies that will eventually see it emerge as the predominant international currency.
Fiat currencies backed by central banks have a very limit range of divisibility. A dollar, for example, can only be divided into 100 pieces, each worth $0.01.
Successful currencies are divisible into smaller units. In order for a single currency system to function as a medium of exchange across all types of goods and values within an economy, it must have the flexibility associated with this divisibility.
21 million Bitcoins is vastly smaller than the circulation of most fiat currencies in the world. Fortunately, Bitcoin is divisible by up to 8 decimal points. The smallest unit, which is equal to 0.00000001 Bitcoin is called a ‘Satoshi’.This allows for quadrillions of individual units of Satoshis to be distributed throughout a global economy.
This is why bitcoin has a much larger degree of divisibility than the US dollar, as well as many other fiat currencies.
For example, whilst the US dollar can be divided into cents, or 1/100 of 1 USD, one Satoshi is 1/100,000,000 of 1 BTC. It is this extreme divisibility which makes bitcoin’s scarcity possible; if bitcoin continues to gain in price over time, users with tiny fractions of a single bitcoin can still take part in everyday transactions. For example, without any divisibility, a prince of $1,000,000 for 1 BTC would prevent the currency being used for most transactions.
There is a limit to the number of Bitcoin that will exist: 21 million. Once Bitcoin hits that amount, miners will no longer receive block rewards, and no new Bitcoins will enter the market. Economists are protesting over what will happen in a currency system that has a fixed supply. In fact, the amount of available Bitcoin will decrease over the years. For example, when someone forgets their private key, all the BTC that person owned are now lost and the system will never recover them. Bitcoin is a deflationary currency system, and some economists feel like this would be a disaster in the long-run, leading to a spiral of hoarding and not spending BTC. Therefore, Bitcoin is not a better alternative to fiat currencies for the long-term future.
[P1] Currencies that are more divisible are more useful.
[P2] Bitcoin is more divisible than fiat currencies.
[P3] Therefore, Bitcoin is more useful than fiat currencies.
Rejecting the premises
[Rejecting P1] There is a limit to the number of Bitcoin that will exist, and when that happens, no new Bitcoin will enter the market.
[Rejecting P3] Therefore, Bitcoin is not a better alternative to fiat currencies, as it will not last in the long-run.