Since Satoshi’s vision became a reality, the Bitcoin reputation has faced a constant uphill battle. Banks and other financial institutions considered it a joke. Some governments banned it. Rumors and flat out lies were spread to discourage the public from buying and trusting this new digital currency. Today, Bitcoin has a market cap of over $180 Billion and rising. More and more people are trusting Bitcoin as the perfect store of wealth as many young people are losing trust in the traditional banking system. But just like everything, Bitcoin is not perfect. Let’s take a look at just some of the good and bad that Bitcoin has to offer.
Bitcoin allows you to send money anywhere in the world without having an account. This means it is open and permissionless. You do not have to ask permission from a bank or lender to send the funds from your account to another. You are the one in complete control of how they are stored and how they are spent. Because there is no middle man, transactions and payments cannot be blocked or frozen – like they can in the current conventional payment system. Any merchant familiar with using PayPal is well aware of the challenges regarding “chargebacks”. Unscrupulous customers will often obtain goods or services, then claim some issue to get their money back. PayPal, as well as credit cards, side with the customer and freeze the assets in a merchant’s account pending investigation. The process takes several weeks. This cannot occur using Bitcoin.
Bitcoin is not issued or controlled by any central bank, financial institution, or corporation. Instead, it is directly created by a decentralized network that is set on a schedule to produce only a finite amount. In Bitcoin’s case, the maximum amount of coins to be produced is 21 million. Since there will never be another one created after all 21 million are mined, it can never face inflation. With the fourth halving just hours away at the time of this posting, the crypto community is eager to see if this event serves to further cement the bitcoin reputation in a positive light. Historically, the halving usually has a positive impact on Bitcoin’s price, but there are some who believe value surges have already been priced in.
There has always been a concern about the amount of electricity used for the mining of Bitcoin. It is estimated that around 80 Terawatts of electricity is used each year. That is roughly the same amount as the country of Belgium that has a population of 11 million people. Even after the last Bitcoin is mined, miners will still be active confirming transactions on the blockchain. It is yet unknown exactly how much electricity will be needed to continue this process. That said, new technology is often energy inefficient and this changes over time.
Countries like Iran, North Korea, and Venezuela have been rumored to be using Bitcoin to avoid sanctions and embargos.
Because of the anonymity, Bitcoin – just like fiat cash – has been used for illegal activities like money laundering. It has also been rumored that some terrorist organizations have tried to use Bitcoin to help fund their efforts. Again, just like fiat cash.
We have seen through history that every type of currency has been used for good and bad. These were just a couple of examples of each. In our opinion, Bitcoin faces a lot of the hurdles that other currencies have in the past – but it solves many more problems than it creates. It will be interesting to see if the bitcoin reputation is boosted or diminished following the May 2020 halving. The potential for ransomeware attacks could increase as hackers exploit vulnerabilities or deploy phishing means to wreak havoc. Additionally, the coronavirus pandemic is sure to have an impact on overall market sentiment and trust as people begin to understand the implications of quantitative easing efforts, and governments grapple with contactless payment to promote social distancing.
All things considered, the bitcoin reputation appears to have improved of late with more beginning to understand its self-deflationary and decentralized design. The halving event has brought bitcoin back into the spotlight and the timing could be perfect for pushing more adoption. Institutional players could join the ranks should the price begin to surge steadily and investors look to hedge risks among growing global economic uncertainty. Surely a continued upward ascent will help position Bitcoin as a long-term investment asset and improve the bitcoin reputation. By the same token, should value start to decline, already nervous investor confidence levels could be shaken. Only time will tell.