What Happens if Bitcoin Succeeds?
Since the introduction of Bitcoin in 2008, the world has been rethinking traditional economics. Through Satoshi Nakatomo's white paper, an alternative to fiat currencies emerged. Given the immutability of cryptocurrency, it's an interesting substitute to fiat currencies (which are prone to inflation). Bitcoin found itself hitting an all-time high of around $68,000 in 2021. After that, a correction took place. However, the more time passes, the more people are intrigued by the crypto space. As it gets hotter as time goes by, a question beckons: what happens if Bitcoin succeeds?
In this article, we will explore what Bitcoin's success looks like. Furthermore, we will see if there is a world where crypto and fiat can co-exist together. Success for Bitcoin doesn't necessarily mean that it would completely replace fiat currencies. It could become an alternative to the value of gold. Let's first explore the value of Bitcoin and its global significance.
Bitcoin’s Success Story: What Does that Look Like?
When Bitcoin first emerged, doubt circulated. People accused the peer-to-peer electronic exchange of being used for illicit purposes. However, as time went by, interest in cryptocurrency grew. Its ability to perform a transaction without a third party appealed to users. Bitcoin’s value proposition is simple yet genius.
It is digital gold that governments cannot print. Bitcoin launched in 2009. The first famous transaction occurred on May 22, 2010. A Florida man agreed to have two Papa John's pizzas delivered for 10,000 BTC. It equates to almost $400 million nowadays. Garrette Furo, a partner at Wilshire Phoenix, a New York-based investment management firm, explains this period of Bitcoin history.
"In the early days, the first transactions with Bitcoin were negotiated on internet forums with people bartering for goods and services in exchange for Bitcoin."
The cryptocurrency has since then become extremely popular. It holds the highest market cap out of all cryptocurrencies. Experts such as Tim Draper have predicted that the value of a single Bitcoin could reach $250,000 by 2022.
If Bitcoin succeeds, it would mean an alternative to fiat currencies and central banks. For example, if the US dollar were to collapse tomorrow, people would still have their savings in Bitcoin that they can use to hedge losses. The value proposition of Bitcoin is that it is a digital asset that cannot be inflationary. Central banks can print more fiat currencies, but they cannot create more Bitcoin.
In a world where fiat and crypto can co-exist, the value of Bitcoin would likely be much higher -- due to its scarcity. What happens if fiat currencies fail? This is a question that the topic of inflation has brought up significantly.
While it's unclear what will happen if fiat currencies fail, cryptocurrencies could take their place. If this were to happen, the value of Bitcoin would likely skyrocket. This would be due to the demand for an alternative to fiat currency. The difference between crypto and fiat is that crypto is decentralized while fiat is centralized. This means that no one person or institution can control or manipulate the value of bitcoin like central banks can with FIAT.
In a world where Bitcoin succeeds, we would likely see a major shift in the way our economy works. The value of fiat currency would diminish and cryptocurrencies would take their place. While this is a possibility, it's important to note that there is no way to know what will happen. However, one thing is certain: the world would change forever.
Value of Bitcoin Today (What Makes Bitcoin Valuable?)
Currently, the value of one Bitcoin is around $40,000. This value has been incredibly volatile over the years but has shown a general trend upwards. Bitcoin is a long way from its peak. However, it's also a long way from its low in 2018 of just over $3,000. So, what makes Bitcoin so valuable?
Bitcoin is not a pyramid scheme because it acts as a store of value. Pyramid schemes have no underlying value to the investment. With Bitcoin, there is an underlying technology (the blockchain) ensuring security and immutability. This makes it incredibly valuable as people can trust that their investment will not disappear overnight. Additionally, Bitcoin has value because it is decentralized. This makes it a safe investment for those who want to avoid government manipulation. Lastly, Bitcoin has a limited supply. Hence, its value could potentially continue to increase as demand increases.
Nowadays, traders, investors, and countries are starting warm up to Bitcoin. Last year, El Salvador became the first country to accept Bitcoin as a legal tender. Now, the currency is a legal transaction method within the country. One of the potential challenges if Bitcoin succeeds is the possibility of governments feeling threatened by the decentralized currency. For example, China has cracked down on ICOs and exchanges.
Another potential challenge is that merchants may not want to accept it given its volatility. Lastly, as Bitcoin grows, we could see a centralization of power amongst miners. This goes against one of Satoshi Nakamoto's visions for Bitcoin. While there are potential challenges, there is also the potential for Bitcoin to co-exist with fiat currencies. In a world where Bitcoin succeeds, we could see a future where people have the option to hold both fiat and cryptocurrencies as an investment. We could also see more merchants accept cryptocurrency as a form of payment given its increasing value and usage.
Fiat vs. Crypto
The world of finance is fiat-based. Fiat is a legal tender whose value is backed by the government that issued it. The most popular fiat currencies are the US dollar, the euro, and the Japanese yen. On the other hand, cryptocurrencies are not backed by any central authority. Their value comes from the fact that they are scarce. There will only ever be 21 million bitcoins mined in total. This makes it a deflationary asset, unlike fiat currencies. The latter can cause major financial collapses due to inflation. However, they are a much more stable asset at present. If you had to buy a pair of gloves at $20, it is easier to give them a value with fiat than Bitcoin. This is due to the latter’s volatility. Nevertheless, if Bitcoin is mass adopted, the volatility would eventually dissipate. Here are some potential outcomes if Bitcoin replaces fiat:
- The price of Bitcoin would skyrocket since there would be more demand for it.
- The value of fiat would plummet.
- There would be more economic stability since Bitcoin is not subject to inflation.
- The role of central banks would diminish.
- The global financial system would become more decentralized.
- More compliance starts to creep into the crypto world
- Bitcoin could be used to track taxes and avoid money laundering.
Cryptocurrencies are still in their infancy. It is hard to say what will happen if they replace fiat currencies. However, they have the potential to revolutionize the world of finance. Fiat has been around for centuries, but there is no guarantee that it will survive. This is especially true in a world dominated by cryptocurrencies. Only time will tell.
Bitcoin prophecy: what does the future hold?
In a world where Bitcoin succeeds, we would likely see a major shift in the way our economy works. Fiat currency value could decrease dramatically. In turn, cryptocurrencies would take their place. While this is a possibility, it's important to note that there is currently no way to know what will happen if Bitcoin succeeds. Is the Bitcoin prophecy a world where everyone holds both fiat and crypto? Possibly. All we can do is analyze past trends and try to make an accurate prediction for the future.
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