Reasons Behind Success Of Bitcoin In A Form Of Decentralized Cryptocurrency

By , UniversityHerald Reporter

Reasons Behind Success Of Bitcoin In A Form Of Decentralized Cryptocurrency

Photo : Kanchanara via Unsplash

Bitcoin was released on 9 January 2009; it has grown worldwide due to its cheaper transaction costs. However, it has failed to gain much traction as a currency because of its volatility and lack of adoption as a standard purchase method. As a result, it is still used primarily for investment purposes and speculation. In 2017 alone, a volume of 2 billion bitcoins was exchanged with a market value that exceeded over $200 billion US dollars.

Bitcoin succeeds partly because it sidesteps some pillars of the government-issued currency: endless quantitative easing, central bank manipulation and inflation. However, adoption will remain limited to those who understand Bitcoin's technology and can afford to purchase Bitcoin. Find out what drives success with this article. Bitcoin as a decentralized cryptocurrency

Bitcoin is the first decentralized cryptocurrency that allows peer-to-peer transfers with no transaction fees and complete anonymity. It solves the problem of double-spending through a solution called a blockchain. Furthermore, transactions can be processed without any fees or limits on them and processing delays, making this new form of currency attractive for glossy advertisements on Radio and TV programs.

1. Volatility of bitcoin's value:

In the short-term, bitcoin can be highly volatile, making it challenging for governments and large companies to choose bitcoin as a payment method for goods or services. However, it can also be purchased and held to generate a profit from the price increase in the future, and you can check this through To understand how volatile bitcoin's value can be, consider its price history over the last 20 years or so. Since its inception in 2009, Bitcoin prices have fluctuated dramatically due to numerous reasons, both technological (such as block size debate) and non-technological (such as Bitcoin ETFs).

2. Lack of adoption

Despite its success as a decentralized digital currency and payment system, bitcoin has failed to gain much traction as a currency. Since transactions on the blockchain are public, bitcoin addresses are visible and can track transactions. This can make bitcoin users vulnerable to identity theft. Furthermore, bitcoin's anonymous nature makes it extremely attractive for questionable transactions such as money laundering or buying/selling illegal goods online. These factors make many businesses hesitant in accepting bitcoin payments by adding 3% - 6% transaction fees (even after accounting for potential savings from avoiding chargebacks).

3. Decentralization of bitcoin

Another important reason for the success of bitcoin is its decentralization. Decentralization means that Bitcoin is not owned or controlled by anyone. When someone pays using bitcoins, they send them to a Bitcoin address controlled by the recipient and no one else, meaning that no identity theft can occur. Bitcoins are transferred from one address to another using public and private keys, making it impossible for anyone to spend the same coins twice. Every transaction on the blockchain is, therefore, permanent and irreversible. 

4. No central authority:

Since bitcoin's success is mainly due to its decentralized nature, it has been criticized by central banks and governments worldwide. However, after seeing the potential benefits of decentralized cryptocurrency, many countries have started to accept it as a form of payment. While the impact on monetary policy may be negligible, the benefits of increased financial inclusion may become more significant as cryptocurrencies become successfully integrated into society. While this trend is promising, it should be noted that government control cannot be extinguished because Bitcoin is still centralized from a legal point of view; otherwise, law enforcement agencies would lose their ability to investigate illegal activities performed using bitcoin.

5. Anonymity:

Bitcoin allows users to receive and send payments without giving any personal information and at almost no cost. This provides a level of privacy that many people are looking for to conduct business safely and hassle-free. Unfortunately, most countries have strict laws requiring payment providers to store information about their customers, making it very difficult to use bitcoin anonymously, if not impossible. However, new developments such as Bitcoin mixers or tumblers allow users to send bitcoins anonymously by creating multiple transactions using an address under different names. In contrast to prepaid debit cards, these transactions do not show up on a bank account because they are spent in different amounts from the same source.

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