Bitcoin was established by Satoshi Nakamoto as a decentralized, alternative payment method. It was low-cost and practically quick, unlike foreign bank transfers.
You’ve probably heard people refer to bitcoin and cryptocurrencies as the “future of finance” because of the buzz around them. Bitcoin was founded on the principle of creating an electronic payment system that does not rely on a third-party or central authority for confirmation, settlement, or issue.
Bitcoin transactions were marketed as being irreversible, unchangeable, and comparably cheaper than standard payment solutions, in addition to eliminating third parties. Bitcoin, unlike fiat currencies controlled by governments, is open to the public and works independently of any government organization. Transactions are digitally validated using a blockchain, which is a sort of ledger technology that isn’t tied to a single central server but rather to a global network of computers. As a result, bitcoin transactions are much less susceptible to fraud and chargebacks.
Imagine waking up one morning to find your PayPal account locked because the corporation thinks you were involved in some fraudulent activity. Because your funds are not managed by a centralized body, this cannot happen in a decentralized setting. Similarly, because the blockchain is not hosted on a single server or in a single place, your country’s government cannot shut it down.
These capabilities are especially advantageous to online merchants, as they allow consumers to access a greater range of domestic and foreign marketplaces without having to worry about exorbitant costs or regional limits. Furthermore, bitcoin transactions are pseudonymous, which means that users can trade or exchange funds anonymously.
Bitcoin as a method of cross-border remittance
Bitcoin addresses some concerns with the present remittance model, specifically the issues of price and speed. Traditional remittance firms are notorious for charging high fees, and transfers might take several days to reach their intended recipients. Bitcoin, on the other hand, is not just quicker but also significantly less expensive. This is because the Bitcoin network does not rely on a third party to verify transactions. There is a global network of volunteer contributors who run their computing equipment 24 hours a day, seven days a week to confirm bitcoin transactions.
A BTC payment takes roughly 10 minutes to be confirmed. Depending on how crowded the Bitcoin network is, this number can be lower or greater. The more individuals on the network at any given time, the longer it takes for a transaction to be processed, and vice versa. It’s comparable to traffic on a highway. The more congested the area, the longer it takes for each car to arrive at its destination.
Bitcoin has shown to be a more efficient and cost-effective method of cross-border money transfer. According to the World Bank, the global average cost of sending a $200 transfer was 6.82 percent in the third quarter of 2020. For higher figures, this can become crucial. In contrast, the Bitcoin network’s average transaction cost is currently around $2.37. As a result, governments such as El Salvador have taken steps to recognize cryptocurrency as a legal tender.
Theoretically, Bitcoin is decentralized, allowing users to trade value without the use of middlemen. Many traditional businesses now accept bitcoin as payment, thanks to the institutional growth of 2020 and 2021.
A valuable store of value
Apart from its usage as a medium of trade, bitcoin has gained the moniker “digital gold” due to its rarity and possible use as an economic or inflation hedge – an asset purchased to guard against an economic downturn or a decline in the value of a currency (respectively.)
Bitcoin has a maximum amount of 21 million tokens, similar to gold, which has a finite supply. There have been 18.76 million Bitcoin tokens mined so far. Because there are only 2.24 million bitcoins left in circulation, many traders, institutional investors, and small-time savers have become aware of the possible rewards from bitcoin’s price growth.
There are just over 20 million billionaires in the world, which means that each of them could own a single BTC, notwithstanding the remainder of the world’s population.