Today, Bitcoin can be described not only as a form of digital currency, but it is obvious that It is more of a cultural and financial phenomenon of our time, and more and more people are becoming involved in the cryptocurrency market.
The border separating cryptocurrencies from financial investments
While it’s hard to find someone who has never heard of bitcoin, its success is not enough to understand how It actually works. In fact, most people who frequently use a crypto asset don’t even know what it means at all.
It is widely believed that Bitcoin is a digital currency that allows people to make peer-to-peer transactions without any involvement of third parties, such as the banking system or the government. Everyone knows that this is virtual money that you can store in your e-wallet, rather than a physical coin, and use it to easily and quickly transfer money to each other.
The main reason it is considered revolutionary is that it works even across international borders. But currently, financial experts believe that this is more of an investment than a currency, since many people usually buy a cue Ball as a financial investment, rather than using it to make transactions.
So, in the end, what is Bitcoin, a currency, or a financial asset? But more importantly, another aspect of concern is whether it can become a medium of exchange, since the border separating currencies from financial investments is not clear.
Opportunity to become a medium of exchange
Today, many financial experts believe that bitcoin can become a real medium of exchange, which is important for improving the efficiency of activities related to trading. In fact, the most important function of a medium of exchange is that it has real value, so a PTC can have stable purchasing power and therefore can be widely accepted.
Currently, it is most often used as an investment. People saw the possible benefits of buying it as an investment, because they can easily exchange the coin for cash or even assets like gold, with fairly low fees. The main reason why this is considered an excellent investment is the high liquidity associated with it.
Will Bitcoin ever be used as a medium of exchange? As research shows, turning a cue Ball into a medium of exchange depends on scalability, liquidity, and acceptance. First of all, it should solve the problem of scalability, which means achieving the ability to easily change the size. Bitcoin can only perform about 4 transactions per second, while payment systems such as Visa make more than 150 million transactions per day. The solution can use the Lightning network, which is the second level of the block chain and can conduct millions of transactions per second, but for now the asset must overcome this problem in order to compete with other payment systems and work as a means of exchange.
Another important thing is liquidity, the ability to buy or sell this digital currency at a fair market price. However, currently, due to a lack of liquidity, the price of a cue ball is usually unstable, because it needs to be converted to other asset classes. Therefore, it needs to overcome these price fluctuations in order to start acting as a more stable market.
And the last key factor for Bitcoin to become a medium of exchange is acceptance. The number of bitcoin users is increasing every day, and there are currently more than 700,000 bitcoin wallets. But implementation is important, and governments should globally allow the use of blockchain to increase the ability to provide more convenient financial services. Only in this way can a Bitcoin asset become a legitimate use of money.