bitcoin

(pixabay.com photo)

It is rare to find something out in the world as sensational and exciting as cryptocurrencies - Bitcoins. It was developed and launched with a revolutionary aim, an innovation from the future.

The central idea was to eventually peel off from the so-called "centralized systems" that constituted of central banks and governments. It gained traction due to its anonymity and safety, and many believed that it would replace fiat currency soon. 

To understand why Bitcoin loophole became famous but failed in its attempt to replace traditional money, let us dive into a little bit of history. 

Delving into history

Known as the "gold standard," Isaac Newton, in 1717, fixed the value of pounds in terms of gold. To demonstrate in layman's terms, the Bank of England should now buy and sell gold at a particular rate, and this rate was fixed for the next couple of centuries. 

This was a massive advantage to this system, as there was an established exchange rate for currencies all over the globe. Practically, this meant that central banks could not print money at their whim. 

However, as time progressed, there were inflations and deflations, and soon the Bank of England adopted a 'print' currency. 

After the World War, monetary 'sovereignty' was restricted due to the Bretton Woods agreement. Consequently, inflation became the new normal during the post-war period. It was President Nixon of the USA who disengaged the link between gold and the USD. This resulted in gold being traded freely in the market, and flexible exchange rates were adopted. 

This new exchange rate system became a tool with which a country's financial health was gauged. 

A failed coup

Hence, to get away from the steady inflation and country-specific monetary policies, bitcoins became the rage - fixed in supply, and collectively mined. There were guards in place to protect bitcoins against overproduction. 

However, they could not displace fiat currencies, and one of the main reasons was because it was not a plausible means for payments. For example, paying a bill in a restaurant would require considerable computational power and time.

Hence people bought crypto to buy and hold, instead of using it for daily payments.  

Additionally, people generally preferred and trusted central banks as opposed to anonymous miners. Though the innovation and tech behind bitcoins are marvellous, to say the least, its future as a fiat alternative looks bleak. This is because it is marred by afflictions ranging from volatility, strict regulations, and even lack of anonymity (transactions have been traced to real owners). 

Finally, crypto is often associated with criminal and illegal activities, and many users do not understand crypto enough to use it for daily payments.

All of this resulted in bitcoin’s downfall as a viable currency. 

The Epilogue

Though Bitcoins is a fallen angel when it comes to using it as an alternate to fiat currency, the hype and innovation caused still acts as a catalyst for new blockchain research and implementation. 

This is good, though, for the crypto universe. Why?

Because, in trying vehemently to become a fiat alternative, bitcoins and the tech governing coins have grown to an unfathomable scale. Blockchain has been tested and used extensively in other fields and industries. 

Another huge advantage is that the bitcoin era opened the possibility of discussing many potential issues of centralized systems. These include democratizing and decentralizing currency and banking systems, privacy issues, and digital currencies

The saga will continue. Bitcoins and the underlying technology will continue to grow, and that is a fantastic thing. Many hope that by addressing the issues that have plagued cryptocurrencies, such coins can be used as a legitimized and viable medium for exchange. 

(guest post)

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