The bitcoin logo (Photo credit: Wikipedia)
Bitcoin is all the rage recently as value per Bitcoin has climbed really high. As I’m writing this blog post, it’s about $866 per Bitcoin. Furthermore, more reputable businesses are beginning to join the fun by accepting Bitcoin as payment for business transactions. With Bitcoin is moving toward mainstream or so as people think it is doing so, we have to wonder how long will Bitcoin would shine right?
As we all know, money has to be backed by something. Sure, money can be in various currencies, but all currencies have to be backed by something. In the antiquity time, countries accepted all sorts of bartering items as currencies. Nonetheless, most of those bartering items could not withstand the test of time. Gold is one of those few bartering items that have withstood the test of time thus far. Gold could be used as money in the antiquity time, and even today some parts of the world are still accepting gold as real money.
How can gold be so resilient against time? For obvious reasons such as scarcity and so forth, gold cannot be seen as just another bartering item. Scarcity is important, but gold has one more trait that is very very important. People have often overlooked that gold has always been special throughout the globe and through time. By special I meant since the antiquity people have found gold to be valuable and sexy. Since the whole world is being captivated by gold since the antiquity, therefore gold cannot be easily discarded in time.
Bitcoin might have the appealing of gold if it can convince people that it too can be valuable and sexy, worldwide. As I have mentioned earlier, money (currencies) have to be backed by something, and so we have to wonder what is backing Bitcoin, right? I think what is backing Bitcoin is how people put Bitcoin into practice throughout the world.
Nonetheless, without a specific government endorsement, can Bitcoin last? I think Bitcoin is special in that it’s not being bounded or controlled by a specific government, and yet the people throughout the world are willing to have faith in Bitcoin. With that being said, if Bitcoin doesn’t have the appealing of scarcity, it would probably be just another funny money (i.e., monopoly money).
Bitcoin can be scarce since it does require tremendous amount of effort in mining it. For an example, one has to be spending real money to buy expensive hardware before one can mine Bitcoin effectively. One might have to mine 24/7 for months and years before one can have few Bitcoins. Now, if one is really rich and wealthy, one can build many Bitcoin mining rigs that can churn out Bitcoin really fast. It is all about being rich in the first place, right? There is a saying and it might go like this, the rich get richer and the poor get poorer.
In summary, I think Bitcoin can be real money, but for how long I won’t know. I know though that if people around the world use Bitcoin as money, then Bitcoin won’t easily be discarded. If the whole world is using Bitcoin, then not a single country can stop Bitcoin from being used as money. If the whole world is using Bitcoin, then politics will become less important when it comes down to currency manipulation. Bitcoin can be traced just like how cash can be traced, but both Bitcoin and cash can be way more stealthy than most forms of currencies. With stealth as one of its awesome traits, Bitcoin can definitely be facilitated as cash-like money. With all of that being said, Bitcoin isn’t cash since it’s not physical. Since Bitcoin has to be used in a digital form, it might just be inconvenient enough that some people will not want to use Bitcoin as their money. Invention such as smartphone apps to facilitate the Bitcoin transactions might help Bitcoin to be seen as physical cash, because there are so many people who carry their smartphones around.