We are currently experiencing a massive shift in the way money is being used. Over the past few years, the world has witnessed the unexpected growth of the Bitcoin experiment, and every day the potential for it to become a global currency increases. More people are wondering how to purchase bitcoins
, and what they need to do to be part of this monetary revolution.
But why is that so? What makes Bitcoin a great currency? For most, the popular cryptocurrency is a store of value - the younger and cooler brother of gold. And yet, this was not the intention of its creator, Satoshi Nakamoto. According to the latest, Bitcoin is to become a global peer-to-peer decentralized currency. And this is exactly what makes it stronger in the market. In this article, we will help you understand the advantages that Bitcoin poses over FIAT currencies that it comes to its buying power.
Bitcoin is decentralized
The word decentralized comes up quite often when the subject of Bitcoin is discussed. Essentially, the term stands for no central authority, meaning that Bitcoin is not controlled by anyone; no banks, no financial institutions, and no governments.
This is important for several reasons. First off, even though the blockchain makes all transactions public, users have the ability to remain pseudo-anonymous by not revealing anything but their wallet address. This way, all financial information remains private. Next, the ability to send and receive Bitcoin in a peer to peer (person to person) fashion gives full control back to the people who use it - users are fully responsible for keeping their funds secure.
Bitcoin is resistant to inflation
To explain this point, we need to briefly introduce the concept of Bitcoin mining - the process of minting the new coins of the Bitcoin network with the help of powerful computers.
Mining bitcoins is somewhat like mining gold, apart from one thing - the newly minted coins are released based on a predetermined schedule. The max supply of BTC counts 21 million coins and nearly 18.5 million of these are already mined.
Once every four years, the amount of newly created bitcoins slashes in half, thanks to a process known as Bitcoin Halving
Here is how the process makes Bitcoin resistant to inflation:
1. Miners of the Bitcoin network use enhanced computers (also known as nodes) to solve complex mathematical equations that are linked to Bitcoin transactions.
2. A large number of such transactions are pooled together and form what is known as a transaction block.
3. As soon as the last transaction of a block is solved and confirmed, it is added to the resolved blocks and a new block opens. This process repeats every 10 minutes and is where the term blockchain originates from.
4. Once a given transaction block is fully resolved, a Bitcoin reward is given to the person (or computer) who confirms the final transaction. The current reward is set at 6,25 BTC.
5. As you can observe from the image, every 4 years these rewards decrease by 50%, thanks to the Bitcoin Halving. Since the latest halving happened just a few months ago, we will need to wait until 2024 to see the rewards will drop from 6.25 BTC to 3,125 BTC.
6. This continuously decreasing release of new coin supply makes bitcoin inherently resistant to inflation
and more valuable over time.
Bitcoin is cheaper, easier, and faster to use
When people buy something with cash or their bank account, there are many limitations. For example:
● People need to pay a small fee to the bank when making a payment. Merchants that receive the payment will most likely need to pay a small fee as well. This, in many cases, includes ATM withdrawals.
● Digital transactions take a long time to clear, even if the accounts are both located in the same country. When it comes to overseas transactions, merchants will sometimes need to wait for days until their money arrives.
● Online payments with a bank account or credit card can only be made by people who have access to a bank. At the moment of this writing, there are more than 1,7 billion people
with no access to a bank.
This is why many people choose Bitcoin instead. The popular cryptocurrency is built (by design) to solve the above problems. More specifically:
● Transaction fees one the Bitcoin network are extremely small, even for significant amounts of money. You can use this calculator
to estimate the fees you would pay for any transaction size.
● The transactions are also much faster than FIAT money. The faster you want your BTC transaction to be delivered, the more you will need to pay in fees. If you pay slightly more in fees, your transaction can be delivered in less than 10 minutes. If you choose to pay the minimal amount, the transaction may take up to an hour to be delivered anywhere in the world.
● Everyone with a mobile phone and an internet connection is able to create a Bitcoin wallet and start using the network. No ID is required unless you are using cryptocurrency exchanges. Even then, however, there are several platforms where ID verification is not required.
Bitcoin is globally adopted
Finally, Bitcoin is universally adopted. There are no currency differences for which users would need to pay exchange rates. This makes the cryptocurrency, once again, cheaper and easier to use.
When everyone, all over the world, uses the network in a specific way, it is much easier the buy things online without the hassles that are commonly observed with FIAT transactions.
Closing, lets briefly sum up the advantages of Bitcoin over government-backed money (FIAT):
● Bitcoin has no central point of authority (it is decentralized)
● Bitcoin is resistant to inflation (which makes it more valuable over time)
● It is cheaper, faster, and easier to use compared to FIAT money
● It is globally adopted and does not require users to have an ID or a bank account
Closing, it is important to remember that Bitcoin is more volatile than government-backed currencies, and its price might fluctuate more often. As such, consider the risks involved with the process before you decide to invest.