Bitcoin is popular, and it can be assumed that many investors might have weighed the option of investing some money in it. Many might have decided against it, but there are also some die-hard supporters, also known as ‘hodlers’. But all of this makes Bitcoin and later cryptocurrencies like Ether speculative assets. Was this the reason why the creators of Bitcoin introduced this blockchain-based ‘currency’ in 2009?
There is a reason why cryptocurrencies have ‘currency’ in their name. The first half, crypto, refers to cryptography or the technique for storing information and data. Creators like Satoshi Nakamoto of Bitcoin wanted crypto-backed virtual currencies to be used as money. Even big backers like Elon Musk have also signed on to this idea, and Tesla has experimented with using Bitcoin and Dogecoin as a form of payment. But can an investor who owns Bitcoin be sure of its acceptance as money anywhere in the world? Let’s explore.
Bitcoin as money or speculative asset or both
In a white paper, believed to have been authored by Nakamoto, Bitcoin is proposed as a “peer-to-peer version of electronic money.” He talks about ‘online payments’ and also how Bitcoin can eliminate the need for a financial institution that normally acts as an intermediary between a payer and a payee. In the document, it is also mentioned how the peers would support the Bitcoin transaction network and how the incentives would be accrued in return. The document is largely titled about the idea of using Bitcoin as money, and notably, words like investment or asset do not appear.
However, over time, many seem to have ignored Satoshi Nakamoto’s original idea and intent. Today, rather than being a widely adopted means of payment or money, Bitcoin has ended up more of a speculative asset that is traded for capital gains. It is sometimes compared to listed stocks, sometimes to gold, but at the same time, the intense price volatility of Bitcoin makes it a very risky asset for its backers.
That said, some countries have started to experiment with using Bitcoin as legal tender. El Salvador, a small economy in Central America, and the Central African Republic, one of the poorest nations in the world, are using Bitcoin as legal tender. In theory, this means that merchants in these two nations would easily accept Bitcoin from any payer. However, the situation on the ground may be different. This is because many traders are wary of Bitcoin’s unpredictability, which makes it less attractive as a store of value than the US dollar or Australian dollar.
Data provided by CoinMarketCap.com
Where can Bitcoin be used as money?
The use of Bitcoin as money depends more on a beneficiary than on a payer. The beneficiary is usually a merchant who sells goods or services. Notably, when airBaltic approved Bitcoin ticket booking in 2014, it became the first airline in the world to do so. Recently, there were news reports that Emirates, the largest airline in the UAE, may soon add Bitcoin as a form of payment for customers. Major airlines, whether in the United States or Australia, have yet to experiment with using Bitcoin as a form of payment.
Tesla, the electric car company run by billionaire Elon Musk, first announced the acceptance of Bitcoin as a form of payment, but soon abandoned the idea. Subsequently, Tesla stated that it would accept Dogecoin, a meme cryptocurrency, for the purchase of its merchandise. In Australia, retail brand OTR, which runs fuel and convenience stores, recently started accepting Bitcoin. Around the world, the scene is almost the same: Bitcoin is accepted as money by only a handful of companies. In some countries, such as China and Turkey, payment in Bitcoin or any other cryptocurrency is completely prohibited.
Any business that accepts Bitcoin today may decide to back down tomorrow, just as Tesla changed its stance last year. In other cases, a company can even expand the scope. For example, airBaltic now accepts a few other cryptocurrencies, including Ether and Dogecoin, for ticket booking. Separately, there are Bitcoin ATMs in countries like the US and Australia. But these act more as a means to buy cryptocurrency using fiat currencies like USD or AUD and keep Bitcoin as a speculative asset.
Money issued and controlled by any central bank, such as the Federal Reserve or the Reserve Bank of Australia, is the most widely accepted form of payment in today’s financial world. This money is also called fiat currency and is considered a reliable store of value. Bitcoin, on the other hand, can rise or fall in value sharply in a short period of time. That is why most countries and companies are not interested in using it for payments. Some companies here and there have independently experimented with Bitcoin. For now, Bitcoin has very limited use as money and a very long way to go to become what Satoshi Nakamoto envisioned: electronic money.
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