Is Bitcoin the perfect currency?

The first-ever medium to exchange known to mankind came in 6000 BC and we know it as the barter system. This was logical as every individual would produce goods that he/she specialized in and exchanged them for that good he/she required.

This worked well for a while but there were many flaws as there was no common unit of value, goods were perishable, the transportation was not efficient and finally, it wasn’t secure. Then we approached the concept of gold coins and it solved the basic problems of the barter system and there was now a common unit of value which was non-inflationary. But there were some negative points here too like it was heavy to carry around, it could be stolen easily, and it was expensive to mine.

People wanted to solve the issue of the security of gold coins so they started depositing gold coins to a third party which we now call banks and in exchange for gold, banks would issue an IOU note or receipts that validates the receipt of this gold.

Any person who had these IOU notes could then exchange these notes for goods and that was the first form of paper currency or fiat currency. But. it still did not solve the issue of security but created another issue as well because fiat currencies were inflationary and there was no way to keep a track of the supply of this money thus creating Black money.

Then came the concept of cheques and it finally solved the issue of security as it specified the sender identity, the receiver identity, the sender address, and the receiver address. It used a very basic form of cryptography for validation and the user could change the amount.

But still, there were flaws with this medium as the cryptography being used was very basic, in the form of a signature, and could be easily faked and the biggest flaw was the transaction verification time.

We then moved to the system of e-wallets with the birth of PayPal. E-wallets are almost perfect because there was no need for paper money, a higher level of security, they are fast, efficient, and convenient and the transaction verification is done in seconds.

It solved the biggest problem of the cheque system and also offers high accountability in the financial system which helped regulatory authorities to keep a track of the supply of money.

It seemed perfect as it is a relatively new technology, which is being used by everyone.

But, the main issue with e-wallet’s, which is not apparent even now is that they are still a part of the same financial system.

In 2008, the world saw the errors and the flaws within the existing system. It revealed that there is an inefficient corrupt financial system in place.

Due to which financial markets crashed in a domino effect, large investment banks went bankrupt and the government started bailing out several banks. It was the largest recession in the global market since 1929 because of this, people lost faith in the existing financial system and started mass withdrawal from the banks.

There was a need for an alternative system and at the end of 2008. A group of individuals or a single individual under the pseudo name of Satoshi Nakamoto released a white paper that was titled, "Bitcoin: A peer-to-peer Electronic cash system” This white paper was so revolutionary, it challenged the very concept of money and the concept of having an intermediatory to handle that money.

Bitcoins are completely digital and operate as an independent currency. They are open-source peer-to-peer money with data stored on multiple ‘nodes’ simultaneously.

Transactions are done anonymously using a complex cryptography method called Hash cryptography, thus ensuring a higher level of privacy. Bitcoins are not backed by a tangible substance, but an intangible one, that is people’s trust.

There is a total limit of 21 million BTC that will ever be mined and each Bitcoin can be further divided into ten million units ensuring its non-inflationary.

It has been accepted as a legal tender in some parts of the world. People in these areas make daily purchases using Bitcoin from milk to cars and speculators use the bitcoins deflationary nature to gain from it and most of the demand arrives from this activity, thus making it more volatile.

Beyond the specialists initially drawn to bitcoin as a solution to technical, economic, and political problems, interest among the general public has historically been stimulated by banking blockades and fiat currency crisis.

Probably the first such instance was the late 2010 WikiLeaks Banking Blockade, whereby Visa, MasterCard, Western Union, and PayPal seized processing donations to WikiLeaks.

Following a request from Satoshi, Julian Assange refrained from accepting Bitcoin until midway through 2011. Nevertheless, this event shined a light on bitcoin's unique value as censorship-resistant electronic money.

The most recent such blockade occurred when MasterCard and Visa Blacklisted Backpage.com, a craigslist style list that lists adult services among other things.

Adult services providers whose livelihood depends on such advertising have no way to pay for it besides Bitcoin.

The silk route is another example of when bitcoin was used to pay for illegal activities.

A Bitcoin wallet is a lot safer than a Bank account.

In Greece, strict capital control was imposed in 2015. Greeks were subjected to a daily withdrawal limit of 60 euros and bitcoin again demonstrated its value as money without central control.

After the Greek crisis, China began to devalue the Yuan. As reported, Chinese savors turned to bitcoin to protect their accumulated wealth.

However, due to the limited supply of Bitcoin, it has been extremely volatile and prone to sentimental trading.

The problem is that all 21 million bitcoins haven’t been mined yet and the value is driven by speculated demand than transaction demand. Bitcoin is the most secure, non-inflationary, and non-centralized currency which could be used as an international currency and lead humanity to Type-I Civilization but the effects of mining bitcoin on the environment are far severe, which brings us to a dilemma to call it a perfect currency.