Monetary changes have always existed in human history: gold replaces barter as a currency for transactions, banknotes replace gold as a means of storing value, and Bitcoin and other cryptocurrencies could be on the verge of replacing paper money. Each type of currency solves the problems of the previous generation of currencies. Right now, Bitcoin offers a solution to the problem of unlimited money printing and counterfeiting. But what is its future, is it destined for failure or success?

Bitcoin, the world’s first decentralised digital currency, was created in 2009 by an anonymous individual or group of individuals under the pseudonym Satoshi Nakamoto. The currency operates on a peer-to-peer network, enabling fast and cheap transactions without the need for intermediaries such as banks.

Since its inception, Bitcoin has been the subject of much debate and speculation, and indeed one of the most common debates surrounding Bitcoin is whether or not it is destined to be the future of money. Some see it as the future of money, while others see it as a speculative bubble destined to burst.

Arguments in favour:

One of the main arguments that favour Bitcoin as the future of money is its decentralised nature. Unlike traditional currencies, which are controlled by governments and financial institutions, Bitcoin is not subject to the whims of politicians and bankers. This makes it a potentially more stable and secure form of currency, as there is no single point of failure that can be exploited.

Another argument favouring Bitcoin is its potential to disrupt the current financial system. The traditional financial system is often criticised for being slow, outdated and overly complex. On the other hand, Bitcoin is fast, efficient and easy to use. This could potentially lead to a more inclusive financial system in which individuals and small businesses have greater access to financial services.

In addition, Bitcoin is a scarce digital asset, meaning that only 21 million bitcoins will ever exist. This scarcity, combined with its digital nature, is a hedge against inflation and currency devaluation, which is increasingly becoming a concern in many parts of the world.

More and more companies are accepting cryptocurrency payments, even those that rely entirely on this payment method. Companies such as PayPal and Square have entered the Bitcoin and cryptocurrency sphere, and more and more companies are joining one after the other. Also, users, volumes, transactions and applications are continuously growing in cryptocurrency. Many would argue that cryptocurrencies will not disappear, and their upward movement is not over.

In terms of regulation, Bitcoin and the cryptocurrency market are being regulated and maturing, and there are now increasingly clear state rules for cryptocurrencies around the world. It can be said that cryptocurrencies are being accepted more and more frequently, and precise sets of rules are slowly emerging.

Arguments against:

However, there are also valid doubts about the long-term viability of Bitcoin as a currency. One of the main problems is its volatility. Bitcoin’s value can fluctuate wildly quickly, making it difficult to use as a medium of exchange. This volatility also makes it a risky investment, as the value of holdings can drop significantly quickly.

Another concern is the energy consumption required to mine new Bitcoins. The mining process involves solving complex mathematical problems, which require significant computing power. This energy is usually generated by burning fossil fuels, contributing to climate change.

On the other hand, it cannot be assumed that all users understand the technical basis of cryptocurrency blockchain technology. This implies that these users do not have the same advantages as technology experts. And therefore, they have no choice but to believe what they say about the security and integrity of the system. This reliance on specialists who can benefit from the system can pose a risk of abuse in using cryptocurrencies.

In addition, the regulatory landscape for Bitcoin is still uncertain in many countries. Many governments have yet to establish clear rules and regulations for the use and trade of digital currencies, which could slow their growth and adoption. There is also the scepticism of the more traditional population to consider.

Bitcoin as a unique and hopeful asset

At the moment, we know that it aspires to be a currency and form of payment, which, moreover, it already is in some scenarios. However, what is relevant is its programmed scarcity, its irrevocability in transactions and its incommunicability. This differentiates it from other financial assets that are not real assets. The rest of the cryptocurrencies promise obligations of the issuer concerning the value of that currency at a given time. They depend on the issuer acting in one way or another to improve the platform where those crypto assets are held. All cryptos are, therefore, financial assets, but bitcoin is a real asset as it is no one’s financial liability.

Whether bitcoin can become a monetary asset and a reserve asset depends on whether it is understood as an economic concept and not as an investment. 

Bitcoin could be the last hope for a reserve of freedom once fiat money is completely extinguished. Now that fiat currencies are plummeting towards parity with the dollar and people are beginning to distrust them, Central Banks will take the opportunity to introduce CBDCs (Central Bank Digital Currency) during the chaos and offer them as the solution to all ills.

In short, Bitcoin (you can expand your knowledge of Bitcoin with books such as
`The Bitcoin Standard’, among many others) is an innovative and disruptive technology that has the potential to change the way we think about and use money. However, it remains a relatively new and unproven technology, and there are well-founded doubts about its long-term viability as a currency.