By now probably everyone has heard of Bitcoin. There seems to be no escape from hearing about Bitcoin or seeing it on tv. But what actually is Bitcoin? Is it like a Krugerrand, a type of gold, or a kind of money, or a kind of investment? This article will try to shine some light on this revolutionary thing called Bitcoin.|
The first point to note is that Bitcoin isn't named very well. The reason is that Bitcoin isn't a coin at all. In fact, Bitcoin isn't tangible; you can't even hold it in your hands, because it consists of digital code only and only resides on computers. Those shiny gold coins that you always see in the media, these are just artists' renderings of a Bitcoin.
Bitcoin is virtual money, also known as a cryptocurrency. This is the first aspect of Bitcoin that is radically different from so-called fiat money, i.e. dollars, sterling, euro, ruble, etc.
But there are a few other sides to Bitcoin that make it spectacularly different from fiat. Probably the most critical one is that Bitcoin is fully decentralized. This means that nobody runs Bitcoin, nobody owns Bitcoin and nobody issues Bitcoin. Bitcoin is a peer-to-peer currency that is used without a middleman.
If you want to pay someone in Bitcoin, you won't need a bank, a government, a Western Union, a PayPal, or anyone. The transaction occurs from the payer direct to payee.
This direct means of payment renders Bitcoin much faster and cheaper than traditional payments, particularly money transfers from one country to another. Typically, banks or money wiring services take up to a week or more to transfer a sum of money, and may charge up 5% of the sum to be transferred. In some cases even more. In addition, where applicable, they charge a currency conversion fee.
In the case of Bitcoin, a transfer, even if to a recipient half a world away, takes a few seconds and costs a nominal fee, in most cases less than 1 dollar.
But Bitcoin is unlike fiat money in other ways. Since it's been coded to never exceed 21 million is number, Bitcoin is fully resistant to inflation. In fact, rather than inflationary, like fiat is, has been, and always will be, Bitcoin isn't subject to the inflation bane whatsoever. As such, Bitcoin doesn't only play the role of a great currency, but it's also a rock-solid store of value.
It's for this reason that Bitcoin is often called digital gold. Apart from its scarcity, it also tends to fulfil an ever-growing demand for a non-correlated investment amongst investors worldwide.
But there's more. Because Bitcoin's backbone is built from the Blockchain, Bitcoin is practically unhackable. Since Bitcoin's network comprises thousands and thousands of computers, each containing its very latest Blockchain-backed ledger, in order for Bitcoin to be compromised, every single computer on the network would need to be compromised. This is considered an impossibility. And in the nearly 10 years that Bitcoin is out there, nobody has come even close to undermining its tamper-proof protocol.
So where does that leave fiat money? Well, it's safe to say that regular currency like the USD or the Japanese Yen will continue to exist for some time of course. For the time being, Bitcoin is still too volatile and too un(der)regulated to supplant fiat money. It also still needs to resolve its scaling teething problems.
However, that being said, it's equally safe to say that once Bitcoin has reached a decent level of maturity, it may well encroach on fiat, probably existing side-by-side to fiat, at the minimum.
Ultimately, when you consider the entire course taken of the way people have transacted, from ancient history until now, including barter, to gold, to paper money, to credit cards, to tap and pay, it's quite evident that the next step is Bitcoin.
It seems the world has come to this realization. To be sure, a few countries have chosen to not participate in the revolution that is Bitcoin, but by and large, these tend to be countries that are not the most democratic traditionally. These risk being left behind, particularly in view of the wholesale innovation and opportunities that Bitcoin and the Blockchain will be generating in the decades to come.
As for Singapore, Bitcoin is expected to play a critical part in rolling out Smart Nation in the next few years. With a FinTech powerhouse of this reputation in your corner, it would be wise to participate.
Do you wish to know more about Bitcoin in Singapore? Click here for details.