In response to the danger of economic collapse because of COVID, governments around the world have flooded global markets with money created by Central Banks, so as to spending & help save the economy.
But increasing the supply of cash erodes its value & leads-people to look for inflation resistant assets to hold. In this climate, Bitcoin has become a hedge against looming inflation & poor returns on other sorts of assets.
What is Bitcoin?
This limit is hard coded into the Bitcoin protocol & cannot be changed. It creates artificial scarcity, that ensures the digital money increases in value over time.
A functional & decentralized digital currency
And it does this through the participation of Bitcoin ‘miners‘. This is often anyone who chooses to run software to-validate Bitcoin transactions on the blockchain. Typically, these people are actively-engaged with cryptocurrency.
They are rewarded with bitcoins, more of which are created every 10 minutes. But the reward paid to miners halves every 4 years.
Bitcoin miners today-earn 6.25 bitcoins for each block mined, down from 50 bitcoins in the early years. This creates an incentive to be involved early as scarcity increases with time.
Because of this, the worth(price) expected to rise to satisfy demand. But because future scarcity is known in advance (predictable at 4 year intervals), the halving events tend to already be priced in.
But what function does Bitcoin provide for society that people invested?
Why does Bitcoin matter?
There are a couple of possible explanations on why Bitcoin is now deemed significant by numerous people.
• It’s a safe asset
In the face of global uncertainty, buying-bitcoins is a way for people to diversify their assets. Its market value can be compared thereto of another go-to-asset that shines in times of trouble: gold.
Amid the turmoil of a global pandemic, an unconventional US presidential handover & geopolitical power shifts the world over, it’s possible more people view gold and Bitcoin is a better alternative to dollars.
• It ties into privacy-oriented ideologies
Bitcoin’s intellectual & ideological origins are in the cypherpunk movement of the 1990s & early 2000s.
Records-of online forums show it had been advocated for as an anonymous digital currency that allowed people to interact online without being tracked by governments or corporations, offering an alternate for anyone who distrusts the federal central banking industry.
Perhaps the overt rise of digital surveillance in response to the COVID pandemic, has further stoked fears about online privacy & security, again piquing the public’s interest in Bitcoin’s potential.
Why is Bitcoin booming?
But although, these are variable factors, this does not discredit the importance of the digital economy, interest in the technology because it matures & the influence of institutional investors in cryptocurrency, including Bitcoin.
It was designed to increase in value over-time through the rules Nakamoto wrote into its software code, which Bitcoin’s most outspoken advocates, referred to as maximalists, vehemently defend.
Imagining new futures
And decentralized blockchain-based networks do not just enable digital money. Almost like ordinary smartphone apps, software developers around the world, are building decentralized applications (DApps) on top of Bitcoin & other blockchain protocols.
They introduced other cryptocurrencies like Ethereum that also are open platforms for the public.
Nakamoto’s audacious experiment in digital currency is functioning as intended. And what really deserves attention now’s what this suggests for our digital, physical & social futures.