Why Bitcoin is the best (digital) asset and currency there is
The Unrivaled Digital Asset Bitcoin is Revolutionizing the Financial Landscape
Introduction
In the ever-evolving world of digital assets, Bitcoin has emerged as a true trailblazer, captivating the imagination of investors, technologists, and financial experts alike. Born out of the groundbreaking Bitcoin Whitepaper, published in 2008 by the enigmatic Satoshi Nakamoto, Bitcoin has cemented its position as the premier digital currency and has revolutionized the way we perceive money, store value, and conduct transactions. This article will delve into the unparalleled benefits of Bitcoin as a means of payment, store of value, and unit of account, highlighting its scarcity as a driving force behind its desirability and the potential for long-term price appreciation.
The Genesis: Bitcoin Whitepaper
At the heart of Bitcoin lies the groundbreaking Bitcoin Whitepaper, published on October, 31 2008 by an individual or group operating under the pseudonym Satoshi Nakamoto. The Whitepaper introduced Bitcoin as a peer-to-peer electronic cash system that would enable secure, decentralized transactions without the need for intermediaries or central authorities. Its revolutionary design, based on blockchain technology, provided a transparent, immutable ledger to record all Bitcoin transactions, ensuring security and trust.
Means of Payment: Pioneering Financial Freedom
Bitcoin’s decentralized nature and cryptographic security make it an ideal means of payment. Its borderless, permissionless nature allows users to send and receive funds instantly, regardless of geographical boundaries or traditional banking hours. Unlike traditional payment systems, Bitcoin transactions are typically faster, more cost-effective, and accessible to anyone with an internet connection.
Moreover, Bitcoin’s fixed supply of 21 million coins eliminates the risk of inflation that plagues fiat currencies. This scarcity ensures that the value of Bitcoin is not eroded by the printing of excess currency, offering a hedge against inflationary pressures. As governments worldwide inject stimulus into their economies, Bitcoin’s finite supply becomes even more appealing, safeguarding wealth from the erosive effects of inflation.
Store of Value: A Digital Gold Standard
Bitcoin’s scarcity and decentralized architecture position it as a viable store of value. Its limited supply and the intricate process required to mine new coins introduce a level of scarcity that mirrors the properties of precious metals like gold. This feature instills confidence among investors and drives Bitcoin’s value proposition as “digital gold.”
Bitcoin’s market capitalization and growing institutional and retail adoption serve as a testament to its efficacy as a store of value. Institutions such as MicroStrategy, Tesla, and Square have allocated significant portions of their treasury reserves to Bitcoin, recognizing its potential for long-term value appreciation and wealth preservation. Additionally, the emergence of regulated custodial services and robust security measures has further bolstered Bitcoin’s credibility, making it an attractive store of value for both retail and institutional investors.
Unit of Account: Bridging the Digital and Real Economies
As Bitcoin gains widespread acceptance, it is gradually evolving into a unit of account. Merchants and service providers worldwide are beginning to accept Bitcoin as a form of payment, enabling individuals to transact seamlessly using their digital assets. Major companies such as Microsoft, AT&T, and Overstock have embraced Bitcoin, paving the way for wider retail adoption. This growing acceptance bridges the gap between the digital and real economies, providing a means for individuals to participate fully in the Bitcoin ecosystem.
While Bitcoin’s volatility remains a challenge for its adoption as a unit of account, innovative solutions such as stablecoins, which are pegged to traditional fiat currencies, mitigate this risk. These stablecoins provide price stability while harnessing the benefits of blockchain technology, ultimately facilitating a smoother transition to a Bitcoin-based economy.
Scarcity: The Driving Force Behind Bitcoin’s Desirability
The inherent scarcity of Bitcoin, with its limited supply and predetermined issuance schedule, serves as a key driver for its desirability and potential price appreciation. Bitcoin’s supply is capped at 21 million coins, with the mining process becoming increasingly more challenging and thus expensive over time. This scarcity encourages adoption and demand, creating a positive feedback loop that drives up the price.
As more individuals and institutions recognize Bitcoin’s potential and seek to participate in the ecosystem, the scarcity factor intensifies. The increasing demand for a limited supply leads to upward price pressure, potentially resulting in substantial value appreciation over the long term.
With “Modeling Bitcoin’s Value with Scarcity”, PlanB introduced the Stock-to-Flow (S2F) model, which quantifies Bitcoin’s scarcity by comparing its existing supply (stock) to the newly produced supply (flow) over time. The S2F model suggests that as Bitcoin’s supply becomes increasingly scarce, its value is expected to rise significantly. The correlation between Bitcoin’s scarcity, as measured by the S2F ratio, and its historical price performance is highlighted. This relationship strengthens the case for Bitcoin as a store of value and suggests that scarcity will continue to drive price appreciation, especially as Bitcoin gains further adoption.
Adoption and Usability: A Growing Ecosystem
Bitcoin’s adoption has seen significant growth over the years. Not only has it gained popularity among retail investors, but institutional adoption has also soared. Major financial institutions, including investment banks and asset management firms, have integrated Bitcoin into their portfolios, viewing it as a viable asset class. This institutional endorsement has helped dispel earlier concerns regarding Bitcoin’s legitimacy and bolstered confidence in its long-term prospects.
Recognizing its potential as a store of value and a hedge against inflation, prominent institutions like Grayscale Investments, Fidelity Investments, and Coinbase Custody have established dedicated cryptocurrency services, enabling institutional investors to access and invest in Bitcoin securely.
Furthermore, the development of user-friendly wallets, payment gateways, and exchanges has made Bitcoin more accessible to the general public. The proliferation of Bitcoin ATMs and the acceptance of Bitcoin by prominent online retailers have also contributed to its increasing usability, fueling adoption and expanding its ecosystem.
Bitcoin and Governments: A Late Love Story?
Governments, too, have begun to explore the potential of Bitcoin and blockchain technology. While some countries have adopted a cautious approach, others have shown more openness towards cryptocurrencies. El Salvador made headlines by becoming the first nation to adopt Bitcoin as legal tender in September 2021, marking a significant milestone in the government-level acceptance and adoption of Bitcoin. This move is likely to influence other nations to consider similar strategies, further propelling Bitcoin’s adoption at the national level.
Liechtenstein is currently considering Bitcoin as a legal tender. The small European nation has been exploring the potential of cryptocurrencies and blockchain technology, and this recent development signifies a significant step forward in their adoption. The Prime Minister of Liechtenstein has expressed his desire for citizens to have the option to pay their taxes in Bitcoin (BTC). The Prime Minister recognizes the increasing importance of cryptocurrencies in the financial landscape and believes that providing this option would be a step towards embracing innovation and offering greater convenience to the citizens. By allowing Bitcoin tax payments, Liechtenstein aims to position itself as a forward-thinking nation that actively supports the use of digital assets in everyday transactions. This move could further boost Bitcoin adoption in Liechtenstein and potentially inspire other countries to explore similar initiatives, showcasing the growing integration of cryptocurrencies into mainstream finance.
Various other jurisdictions are actively creating favorable regulatory frameworks to attract cryptocurrency businesses and promote innovation. States such as Wyoming in the United States and Switzerland have positioned themselves as cryptocurrency-friendly destinations, fostering an environment conducive to Bitcoin adoption and the development of blockchain technology.
How many Bitcoiners are there?
It is challenging to provide exact figures on the number of Bitcoin users worldwide, as Bitcoin transactions are pseudonymous and decentralized, making it difficult to track individual users. In particular, studies are often published on cryptocurrencies and not just bitcoin. However, there are estimates based on available data and research.
Worldwide: It is estimated that there are hundres of millions of Bitcoin users globally. The exact number is difficult to determine due to factors such as multiple wallets owned by a single user and the use of cryptocurrency exchanges.
Europe: Europe has a significant number of Bitcoin users. According to a study by Statista in 2020, there were around 11% of Europeans who owned or used cryptocurrencies, including Bitcoin. Countries such as the United Kingdom, Germany, France, and the Netherlands have seen notable Bitcoin adoption rates. Switzerland has the highest cryptocurrency investor quto, with about 17 percent of the respondents in a Statista study. It is followed by Austria with 12 percent.
Germany: Germany is one of the leading countries in Europe in terms of Bitcoin adoption. According to the Statista Global Consumer Survey in 2022, around 10% of Germans have invested in Bitcoin.
United States: A survey in 2023 revealed that 16% of Americans own Bitcoin. This translates to around 45 million adults in the United States.
Africa: Bitcoin adoption in Africa has been growing steadily, with a user base as high as 22%, primarily driven by the need for financial inclusion and the potential for cross-border remittances. Countries like Nigeria, South Africa, and Kenya have seen significant interest in cryptocurrencies, including Bitcoin, with a growing number of users and Bitcoin-related startups.
China: China has historically been a significant player in the Bitcoin market, both in terms of mining and trading. However, the Chinese government has imposed strict regulations on cryptocurrencies, leading to a decline in local trading activities. While the exact number of Bitcoin users in China is uncertain, there is still a significant interest and involvement in the bitcoin space, particularly among tech-savvy individuals and investors.
It’s important to note that the numbers provided are estimates and may have changed, as Bitcoin adoption is a dynamic and evolving phenomenon, with varying levels of interest and usage across different regions and countries.
Conclusion
Bitcoin has emerged as a groundbreaking digital asset, revolutionizing the financial landscape with its unique properties and decentralized architecture. As a means of payment, store of value, and unit of account, Bitcoin offers unparalleled benefits such as secure, borderless transactions, protection against inflation, and the potential for long-term value appreciation.
Bitcoin’s scarcity, driven by its limited supply and growing adoption, makes it highly desirable in an era of economic uncertainty and inflationary pressures. As more individuals and institutions recognize the advantages of Bitcoin, its ecosystem continues to expand, propelling it towards wider acceptance and adoption.
While challenges remain, Bitcoin’s resiliency and potential to reshape the financial landscape are undeniable. As the world embraces the digital revolution, Bitcoin stands at the forefront, poised to redefine the way we perceive and utilize money in the years to come.
Remarks
Please note: This is a brief overview of Bitcoin that evolves over time. In particular, the numbers provided may be incorrect or may have changed recently.
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Philipp J.A. Hartmannsgruber holds a master’s degree in Finance & Accounting. He is a Board Member of the Blockchain Bundesverband (Bundesblock). In 2019 he founded PJAH Consulting, a digital assets-consultancy.
