Global relationships between different enterprises often span national borders, time zones, and banking hours. In this complex maze of global supply chains, bitcoin is uniquely suited due to its programmable protocols allowing users to coordinate timing and delivery across various parties without intermediaries. The below-listed portion explores why bitcoin is such an intuitive choice for a global currency in the modern economy and why bitcoin is valuable. Like bitcoin, PayPal is globally accepted and people are connecting these two by asking if PayPal allows users to cash out bitcoin and it is being discussed online.
Why is bitcoin valuable?
The traditional means of transacting business still exist, but bitcoin offers a better solution for certain types of transactions. Bitcoin is valuable because its early adopters have leveraged the unique properties of the bitcoin protocol to build applications that were not possible before its existence. These applications rely on programmability, a foundational principle of the protocol and its primary innovation over previous attempts at digital monies. Let’s discuss these reasons in detail.
1. Utility:
Bitcoin can have a use case to transact, store value, or both. For this reason, it is considered a currency, money for the internet age. The unspoken paradox of bitcoin is that its users find it valuable because of its utility but simultaneously resist attempts to name it a currency. Bitcoin to streamline complex supply chains by enabling parties who don’t trust each other to coordinate using a common language and decentralized authority.
The underlying distributed protocol infrastructure of bitcoin enables trustless, global supply chains. It is a powerful feature that is not available to companies in the financial services sector. They are often forced to rely on loans, securities, and banking systems that are often slow, costly, and inefficient for certain transactions.
2. Scarcity:
Bitcoin operates on a fixed schedule, much like the process of mining gold out of the ground. There will only ever be 21 million bitcoins in existence. Today around 18 million bitcoins have been mined and distributed, with new bitcoins being released to miners every 10 minutes. It means that no one can take the wealth created by Bitcoin and suddenly dilute or devalue it by creating more of it.
Bitcoin’s blockchain is global, distributed, and public, which means everyone has access to its history (the ledger) and can join the network as a full node to participate in transactions or run applications that rely on its protocol infrastructure (e.g., smart contracts).
3. Marginal Cost of Production:
Bitcoin’s protocol sets limits, called “hard” limits, on the amount of data that can enter into its blockchain by setting a maximum sized limit (1 MB) and a time limit (10 minutes) on the amount of time it takes to mine a block. It means that bitcoin’s supply is not elastic. The process of mining bitcoin is intentionally designed to be slow and expensive to support the secure and stable operation of the network. As a result, Bitcoin’s supply chain operations are not efficient compared to traditional fiat currencies that are pliable, elastic, and managed by central banks as a part of their monetary policy.
4. Divisibility:
Bitcoin is divisible into much smaller units than traditional commodities like gold. It means that the market can handle a more significant number of participants conducting smaller transactions. Bitcoin scales globally and in real-time because its distributed ledger, called the blockchain, is replicated on thousands and thousands of computers worldwide.
5. Uniformity:
The bitcoin protocol was designed to be neutral regarding how it can be used by people and where it is being used, so long as participants in the network agree on how it is being used and are using compatible software versions. In addition, Bitcoin’s scalability properties mean that it can work for consumers and businesses – regardless of size or sophistication – at a low cost.
6. Acceptability:
By its scarcity, divisibility, and utility as a currency, bitcoin is more than just a speculative asset. It means merchants are more willing to accept bitcoin as payment – because it costs less and is easier to handle – than traditional payment methods like credit cards.
Traditional finance companies operate in many areas that connect the financial world with the natural world, including Lending, insurance, stock trading and investing, payments (e.g., remittance), savings products and services, credit cards, mortgages, and the majority of these industries are ready to accept bitcoin. These businesses also operate in areas that touch on many other industries and are integrating bitcoin as a means of payment.
7. Portability:
Bitcoin is far more portable than money that requires a bank account and is often only available in cash form. In addition, using bitcoin means that people with smartphones and internet access can continue to constantly communicate with their friends, neighbors, and family as they travel and work around the world.
8. Privacy:
With the early arrival of cryptocurrencies, many consumers are starting to pay for more sensitive transactions like online purchasing, shopping at stores that ship internationally, or sending digital payments to those who need assistance in foreign countries. Unfortunately, the digital ledger of transactions is stored on a public network, potentially exposing users to identity theft or financial fraud.
Contrary to popular belief, bitcoin’s blockchain is not just a distributed ledger for recording transactions. Bitcoin’s blockchain is also a robust framework for building secure applications that will protect your money and identity from being stolen by hackers. The security of bitcoin comes from its ability to be digitally signed with private keys, proving ownership over funds and enabling escrow-style transactions between parties who don’t trust each other.
