At the end of 2008, Satoshi Nakamoto designed Bitcoin as an electronic currency. Satoshi Nakamoto was dissatisfied with the economic crisis caused by the currency system of Western countries, so he designed such a fixed amount, which is not controlled by any organization or individual, and everyone participates in the acquisition at an equal level, and all transactions are open, transparent and unrestricted. It is such an electronic currency and its circulation network that are directly traded between accounts without tampering. Although Satoshi Nakamoto's original intention was to design an applicable electronic currency, some characteristics of Bitcoin's design made the market doubt that it could really be used as a currency. These factors include that its total amount is limited, so its economic model is actually a deflationary model. This is completely different from the conventional pattern of gradual increase in monetary aggregates. In addition, what is more critical is how such an electronic cash can be truly accepted by the market and applied in economic life. All this uncertainty did not allow the market to accept Bitcoin as an electronic currency in its first few years.
But the later development of Bitcoin was beyond everyone's expectations. Bitcoin has developed to such a scale and such a nature today, I believe it has also exceeded Satoshi Nakamoto's own expectations.
The initial movement of Bitcoin was only among tech geeks. These few technical geeks use Bitcoin as a hobby to support its circulation. Since then, there have been more bitcoin enthusiasts. However, they cannot obtain bitcoins directly through mining, so they use retail purchases to obtain these bitcoins. When such a group of enthusiasts grows larger, there is a demand for trading bitcoins in the market. Some platforms have started to offer centralized matching transactions for Bitcoin. Bitcoin thus achieves pricing based on existing fiat currencies. With the emergence of these platforms around the world and the 7*24 transactions of these platforms, the pricing of Bitcoin has thus formed a basically consistent pricing globally.
In 2020, Bitcoin has achieved rapid development. In March 2020, the Federal Reserve adopted a large amount of dollar quantitative easing policy in order to relieve the epidemic. The issuance of a large number of U.S. dollars will inevitably lead to the depreciation of the U.S. dollar, which in turn will lead to the depreciation of all U.S. dollar-denominated assets. This makes institutions holding a large amount of assets begin to look for hedging assets to hedge against the risk of additional issuance of US dollars. Bitcoin is gradually beginning to be accepted by institutions as a hedging asset. Developed to today's April 2021, Bitcoin is now generally recognized as a value store tool. In addition, Bitcoin is also evolving into a real currency. The Venezuelan government has begun to use cryptocurrencies for its foreign trade transactions in order to avoid US dollar sanctions. A research report by Citibank also believes that Bitcoin is likely to be used in international trade. In addition, Bitcoin has also begun to be used as a currency in some parts. For example, Tesla announced that it will accept Bitcoin to purchase its products. A professional baseball team in the United States has also announced that it will accept bitcoins to buy season tickets for its VIP box during the season. A recently sold £175 million apartment in London has also announced that it will accept bitcoin payments. The world-renowned Time magazine has now announced that it accepts payments in cryptocurrencies including Bitcoin. These sporadic adoptions show that Bitcoin is starting to become a viable digital currency on a global scale. Given the current price of Bitcoin and the range of users who hold Bitcoin, Bitcoin can only be used for large payments at present, but the trend of its use as a currency has begun to appear. That's a lot of development for a potential currency that's only 12 years old.
The current development of Bitcoin as a currency also confirms and fully exploits some basic elements in Bitcoin's design. Compared with all fiat currencies, the total amount of Bitcoin is certain and will never be issued additionally. This is one of the most fundamental differences between it and legal tender. Under the current market background of massive issuance of legal currency, this feature is even more attractive and valued. The global circulation of the Bitcoin network supports its global circulation as a currency. The fact that Bitcoin itself is not controlled by any organization or individual also makes it adopted by all users. No matter where the users are located, what their cultural, economic, and religious backgrounds are, as long as they can be on the Bitcoin network, they can make Bitcoin-based payments between each other. Finally, since all transactions on the Bitcoin network are transparent, it is difficult for criminals to use the Bitcoin network for illegal activities. This is very beneficial for fighting crime on a global scale.
Arguments against Bitcoin as a currency argue that Bitcoin is still very volatile and therefore unsuitable as a currency. But from the perspective of Bitcoin, it is not Bitcoin itself that is volatile, but the various legal currencies that are traded with it. It is the various fiat currencies that are volatile, not Bitcoin. Of course, the exchange between Bitcoin and legal currency is still in the process of formation and has not yet reached a relatively stable state, so these exchanges will have great differences. This is a very normal situation for a currency that is growing and developing. In fact, as long as this volatility continues, it shows that Bitcoin still has huge room for appreciation.
The underlying developments in Bitcoin technology are also advancing the use of Bitcoin as a currency. The Lightning Network on top of the Bitcoin network can support Bitcoin-based micropayments. Each transaction only needs 0.01 cents, and the transaction completion time only takes 1~3 seconds. Such a cost and efficiency will enable Bitcoin to be promoted on a wider scale. Strike is currently a very popular application in the market. Strike implements transfers between different fiat currencies based on the Lightning Network. It has just been launched in El Salvador and will be promoted in Europe and other places in the near future. The remittance efficiency of such an application is much higher than the transfer between existing banks and other methods of remittance transfer. So it will definitely be widely accepted in the market. That is, Bitcoin as a currency will be more widely promoted.
The three basic properties of money include store of value, unit of measure, and medium of exchange. Looking at Bitcoin based on these attributes, the attributes of value storage and trading medium have now been applied and promoted in the market, and the function of the unit of measurement still needs time to develop. However, in view of the current trend of Bitcoin-based technology and application promotion, the attributes of the unit of measurement will also be gradually realized. Therefore, Bitcoin is likely to become a digital currency that circulates around the world and is outside the existing legal currency system.
