Published on: https://untamedscience.com/
Most investors and Bitcoin users hope for the cryptocurrency to be added as an official means of payment in the real world soon, as its benefits make it a perfect competitor for fiat money. Experts compared Bitcoin with gold from the value perspective as it has shown signs of stability through the years despite volatility.
However, Bitcoin will have to undergo the regulatory challenge of being safe and reliable enough for financial institutions to adopt it. While progress is made at the moment, as the SEC recognized Bitcoin as a commodity and approved BTC ETFs, we’re wary of the long road ahead for the cryptocurrency.
The blockchain should also aim to solve some of the problems that make it slow and inefficient. Considering that mining is still based on proof of work, a congested network will affect the Bitcoin price today.
So, does the cryptocurrency have the potential to become legal tender?
The economic implications of Bitcoin adoption
If Bitcoin became just a daily means of payment, it’s no wonder that it would greatly impact our world. The cryptocurrency could pave the way toward the decentralization of financial power, and there would be less demand for centralized institutions.
At the same time, Bitcoin has the potential to become the world’s tool for financial inclusion. Considering the number of unbanked people in the world and the number of people with no means of access to financial services, Bitcoin could democratize financial services and ensure everyone across the globe a chance to invest.
Unfortunately, Bitcoin’s volatility might put people in dangerous situations regarding their wallets and financial crises because no one on the blockchain can control the potential economic stability. Moreover, adjusting inflation and interest rates would be significantly tricky without regular tools.
The technological challenges
Based on our current technologies, it might take some time for Bitcoin to gain acceptance. For Bitcoin to serve its purpose, companies would need to develop an expanded blockchain infrastructure, which must be maintained continuously to provide scalability and security.
Another problem is posed by the massive energy consumption for Bitcoin mining. The process is essential for the network, and without it, safety would be compromised. While forms and individuals approach many sustainable options at the moment, a robust plan would be needed to cover all requirements for massive mining.
Bitcoin also tends to be slow as it processes up to a maximum of ten transactions per second. In comparison, Solana has an average rate of 1.5000 TPS, while Visa, a centralized system, can handle 24.000 transactions.
The social responsibility
Bitcoin was created for humans, so it should be approached accordingly and thoroughly understood. However, it might be possible for it to become a massive divider between different social groups, separating those without access to technology or education in digital literacy from the rest.
Another issue that’s already prominent in the real world is that Bitcoin could help some people gain more wealth, therefore turning the balance from those who actually need it. We’ve already seen how bigger communities influence trends and prices in Ethereum’s staking pools.
Finally, people have to learn to adapt to changes and the new digital era by changing their habits and learning how to manage their finances. Investing in crypto requires solid knowledge of the matter and continuous interest, so people will experience different consumer behavior.
The international impact
Although Bitcoin can be used globally without many problems, becoming an official currency means being subject to several laws and regulations, depending on each country. For example, taxation is already established in a few places but not clearly, which can contribute to further illegal activities.
At the same time, Bitcoin could potentially create troubles in regard to international trade due to differences in technologies and regulatory instances. However, if used correctly, Bitcoin will eliminate currency conversion therefore help companies save money and time.
Finally, we might see governments oppose the cryptocurrency, potentially triggering geopolitical tensions, as nations might not agree to let their monetary sovereignty go in exchange to a digital currency.
The dangers lurking around
Indeed, adopting Bitcoin has numerous advantages for the financial sector, but it can also pose innumerable challenges if not implemented correctly. For instance, transitioning from traditional systems to the new and modern Bitcoin system will be complicated and will most likely disrupt operations and networks. There are few chances the change will be smooth, especially since Web3 is only slowly entering our Web2 world.
Even if the transition is not that bumpy, it’ll still pose various challenges to developers and users as the risks of cyber attacks and technical failures will boom. Moreover, infrastructure vulnerabilities are possible at every moment.
Finally, we’re not yet sure of how the regulatory sector will develop, meaning there’s no reassurance that Bitcoin will become legal. Although Bitcoin has seen some encouraging approvals from financial bodies, that doesn’t mean things will continue in the same manner. If another event similar to the FTX collapse happens, it might be possible for governments to take severe measures to prevent Bitcoin or any other cryptocurrency from being used.
Bitcoin is the new gold
Bitcoin is considered the new gold, as it’s an asset that hasn’t been controlled by the governments and provided massive value for so much time. In a way, Bitcoin is the digital gold because it has deflationary effects and is a great means of payment. However, Bitcoin is much more volatile than gold has ever been, and we’re not sure if this will change in the future.
What do you think about Bitcoin adoption?
Bitcoin adoption would pave the way towards technologization, so people won’t have to worry about fiat money and governmental control. Still, the financial implications of this massive change in the real world are pretty intense for the moment, as Bitcoin is volatile and complex to acquire. Even if it’s compared to gold as a valuable asset, Bitcoin has to wait long until institutions accept it, people understand it, and markets value it.