Just a couple of months ago, Bitcoin celebrated its 14th birthday, so there has been much talk in the crypto space about its evolution and how far it has come since its early days. Indeed, Bitcoin has experienced tremendous growth over the years, turning into a cultural and financial phenomenon that has attracted millions of people around the world. This overview of Bitcoin’s short but eventful history, with its staggering highs and lows, inevitably brought the discussion to its purpose and where the original crypto stands today in relation to that.
People’s interest in Bitcoin stays high, despite the ongoing crypto winter, which has caused prices to plummet and freeze across the board. Traders and investors still flock to crypto exchanges like Binance to buy Bitcoin in the hopes that the market will soon recover, and when that happens Bitcoin will once again soar to its previous highs or even reach new ones. But if or until that happens, crypto users should remain grounded in reality and analyze things with an objective eye.
Considering that a project’s success is measured by the level of efficiency in reaching its objectives throughout its lifecycle, it’s worth examining how Bitcoin did in this respect. The coin currently serves as a means of exchange and a store of value, having been used mostly as a tool for speculation. But are these applications in line with its initial purpose, and what is the long-term outlook for Bitcoin? These are the questions that we’re going to try to answer in the next sections of this article.
How it started
Going back to the beginning, Bitcoin was invented by an unknown person or group of people using the pseudonym Satoshi Nakamoto against the backdrop of the 2009 financial crisis. While the turbulent events happening on the financial scene at the time may not have been the reason for its inception, they did represent an example of why Bitcoin was created. Satoshi and his team started working on the project long before the financial crisis set in, but the timing was just right to link these two events together.
However, the idea behind Satoshi’s invention was to develop an alternative to fiat money that would solve the issue of a centrally controlled financial system. In Satoshi’s own words, the main problem with traditional currencies is that central banks need to be trusted not to undermine the currencies they issue, but history proves they have done so countless times.
This statement is a clear indication of what Satoshi intended with the creation of Bitcoin. He was looking to provide a solution to a long-standing problem, and he did that by introducing a new paradigm for money in the form of a decentralized peer-to-peer payment system that would allow for fast and easy transactions that rule out the intervention of a third-party like banks or other financial institutions.
While Satoshi’s intention to provide an alternative to an inherently flawed financial system was commendable, it was not without its challenges. The idea of using Bitcoin as a means of payment on a large scale is mostly hampered by its high volatility. Bitcoin’s price is subjected to wild fluctuations, being influenced by a wide range of factors, including supply and demand, political events, market sentiment, government regulations and so on.
How it’s going
14 years after its creation, Bitcoin remains the largest player in the cryptocurrency industry by popularity and market cap. There’s no denying that digital currency is no longer seen as an oddity that can be brushed aside and kept on the outskirts of the financial space. Bitcoin has made massive strides toward mainstream acceptance, carving its way into a system dominated by long-standing traditional assets. But did it manage to reach its objectives?
Looking at its current use cases, we can’t help but notice that Bitcoin still has a long way to go until it can be put on par with fiat money. On the one hand, there’s the issue of volatility that remains unsolved. It’s extremely risky for both businesses and consumers to conduct transactions using an asset whose price can spike or drop in a split second with no prior warning. That’s why despite the increasing number of companies accepting Bitcoin payments, the vast majority still shy away from this idea.
On the other hand, we have concerns regarding scalability to take into account. At the moment, Bitcoin’s network is not able to process an unlimited number of transactions, which can pose a huge problem if the coins are used on a broader scale around the world. There are also those who argue that the technology underpinning Bitcoin is also somewhat outdated compared to that of newer crypto projects that have brought significant improvements in terms of functionality, security and scalability.
On top of it, crypto regulation is looming, but there’s no unified regulatory framework to oversee the use of digital currencies for now. So, while governments and regulators are working to solve this issue, companies and organizations are left to weigh the pros and the cons and decide for themselves if accepting Bitcoin payments is a good idea or not.
As a result, Bitcoin has moved further away from its use case as a means of payment, gaining popularity as a store of value and a form of speculative investment instead. The volatility that represents an obstacle to using Bitcoin for everyday transactions serves as an incentive for traders and investors to purchase Bitcoin and hold it, waiting for its value to appreciate over time or to trade it when the time is right.
By all accounts, Bitcoin is not where its creators hoped it would be when the first block was mined. However, Bitcoin and the crypto industry as a whole are still in their infancy, and their unpredictable nature makes it difficult to foresee how they will evolve in the future. There’s a lot of untapped potential in the market, and there’s no telling if Bitcoin will one day reach its initial purpose or not.