If you think about it, gold and bitcoin seem to share a lot of common characteristics. In fact, most crypto companies use gold to explain cryptocurrency in a simple easy way. Luno explained on “Bitcoin as digital gold” that alike gold, bitcoin is finite, exists in small or big units such as 1 satoshi or 1 Bitcoin and most importantly, the security it offers – managing funds, protection from threat, etc. But, bitcoin is so much more than that. Bitcoin takes gold’s benefits a step further, by being digital.
The Revolutionary Idea
What is “Bitcoin”? Bitcoin was the very first decentralized digital currency. The brains behind the operation is Satoshi Nakamoto who published his ideas online in 2009. The idea is to use a digital currency to perform financial transactions that is accepted worldwide with no involvement of authority. But, what makes it secure? All transactions are recorded in a digital ledger which is visible to everyone in the blockchain network. This was a billionaire idea. Unfortunately, back then, people refuse to see the bigger picture and to look at the Bitcoin value instead.
The value of Bitcoin is due to two reasons. Firstly, supply and demand. Bitcoin is finite as there are only 21 million bitcoin that can be mined in total. Currently, about 18 million bitcoin have been mined. This means that Bitcoin is low in supply, indirectly causing a high demand for Bitcoin. Another reason that many seem to believe is due to Bitcoin Halving.
The New Coin on The Block
This dates back to 2009 when Satoshi introduced bitcoin to the world. But, the world seems to hear about the news years later. In the meantime, a small group of people had the first Bitcoin experience and officially put Bitcoin on the map.
- Mr Hanyecz from Florida bought two pizzas from Papa Johns with 10,000 bitcoin, making this the first real-world bitcoin transaction.
- Mr Andresen from New England developed a website called the “Bitcoin Faucet” where he gave away 10,000 bitcoin.
- Mr Forster from Massachusetts on the other hand started to accept bitcoin as payment for his farm selling alpaca socks.
The Age of Digital Coin
Bitcoin started to hit the streets around 2012 probably due to Bitcoin Halving. As you know, Bitcoin Halving occurs every 4 years or every 210,000 blocks are mined. The reasons are unclear but it led people to believe that the value of Bitcoin would increase post-halving, as it did two halvings ago. This seems to be great news now. But, what would happen when there is no longer Bitcoin left to mine? With only 2 million bitcoin left to be mine, 2140 would be the end of the road.
Various predictions have already been made about bitcoin’s value after the last mine. However, there is no way to know for sure especially with what has happened – hard forks, new protocols, new methods of recording and processing transactions, etc. There is a possibility that if cryptocurrency is accepted as the primary medium of exchange, demand would be out of the roof causing the transaction fees to increase, profiting miners. On the other hand, if the role of cryptocurrency remains the same in the economy, miners will require higher fees which means people would need to pay higher transaction fees, discouraging the use of bitcoin and calling the time of death for bitcoin.
In sum, regardless of growing demand, supply cannot be increased. Bitcoin miners will continue to collect transaction fees over time as bitcoin increases in value. “This value appreciation across time turns fee-centric mining into a financially infeasible task to a sensible, long-term investment.”