Say what you like about Bitcoin, and let's face it, there's plenty to say about Bitcoin, good and not so good, but this genie is now well and truly out of the cryptocurrency bottle.
But before we go into the nitty-gritty of Bitcoin, let's illuminate what Bitcoin actually is.
Bitcoin is a digital currency, a cryptocurrency if you will, that was unleashed onto the world around the time of the banking crisis by somecalled called Satoshi Nakamoto. The timing of Bitcoin's release was not a coincidence; Bitcoin is after all destined to be a rival payment system, which at best was intended to replace fiat money, or at the very least, run parallel to fiat money.
The main gripe of the inventor(s) of Bitcoin was the way banks, both private banks and central banks, and some of the more unscrupulous governments outright, were no longer acting with the benefit of the public at large in mind. On the contrary.
In hindsight it's pretty obvious why Bitcoin was conceived, given how murky, mendacious and outright fraudulent some financial giants acted in the run-up to the financial crash in 2008. Credit-worthiness was routinely assessed unethically, banking charges were inflated at will and dubious investment vehicles were passed on as quality assets. All of this resulted in risk levels and leverage being stretched to the limit.
Until the house of cards came tumbling down.
You could say that all of this misconduct by the financial industry was possible, because the current payment system in the world today is centralized. That is to say, fiat money is issued by a central authority, a government central bank, in conjunction with private banks. This means that there is someone in charge of this money, a person. And as we all know, nobody is infallible. Even with the best of intentions, bias can creep into the system.
Now, Bitcoin, on the other hand, is decentralized, rendering it immune to interference and/or manipulation by governments and/or private parties. This is one of Bitcoin's main fortes, apart from the fact that it's nigh impossible to counterfeit.
In addition, Bitcoin's dynamic database, Blockchain, the distributed public ledger that documents each and every one of its transactions, is so sophisticated that it is incorruptible. Not only is it incorruptible, it's fully transparent and uncensorable too. What goes into the blockchain stays in the Blockchain.
This Blockchain is the heart and soul of Bitcoin. It comes about from the pas de deux between Bitcoin's so-called miners and all of the network's user's transactions. These transactions are checked by its miners and, once approved, are locked into the Blockchain for keeps, forming the immutable ledger the Blockchain represents. In so doing, some new Bitcoins are generated to be rewarded to the miners, for the work done.
But Bitcoin's Blockchain offers so much more. To wit, Bitcoin's code dictates that the maximum number of Bitcoins available maxes out at 21 million, in the year 2140. As of 1217, there are about 15 million Bitcoins in circulation; this number will slowly and measuredly uptick to 21 million during the next centrury. In other words, unlike fiat and its overzealous money-printing mandarins, Bitcoin isn't inflationary. Far from it. In fact, Bitcoin could be said to be deflationary.
And this deflationary character, in addition to everything else, makes Bitcoin a very effective store of value too. It's not for nothing that Bitcoin is called digital gold.
Ultimately, proponents of Bitcoin believe that Bitcoin, the grand-daddy of all cryptocurrencies, will be used as a parallel money, supplementing regular fiat money in a trustless more efficient, frictionless way of not only transacting but remitting too. Those who, in the years to come, manage to get their hands on Bitcoin, given its scarce and finite nature, will be able to use it without being subject to bank fees, conversion fees or any other charges levied when sending funds.
Still, having said all that, Bitcoin is not quite there yet. For one thing, it's still rather volatile, albeit with a definitive upward tendency. It also still tends to elicit a fair amount of FUD amongst the uninitiated especially, on account of the way it hasn't yet been forged by government regulations, in most countries anyway.
Whilst Bitcoin is gaining more and more traction as a legitimate investment vehicle, earning OTC approval from various derivatives and ETF boards in a number of countries, more official regulation is required before it's fire-proofed enough to allow for general use as a currency, a store of value and an investment asset.
Arguably, not working in Bitcoin's favor is the way its workings are not easy to fathom or, indeed, to explain. It doesn't seem all that intuitive and could be labeled as somewhat geeky. However, these issues will undoubtedly be overcome. in fact, if Japan or Switzerland are anything to go by, it's only a matter of time before other forward-looking countries follow in their footsteps, resulting in Bitcoin's wholesale acceptance.
Lastly, and critically, Bitcoin can be expected to play a comprehensive role in fulfilling Singapore's ambitions to become a fully-fledged Smart Nation in the years to come. With players of this calibre in your corner, it would be unwise to decline participation.
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I am not an investment advisor and above article is for purely informational purposes and is not to be taken as investment advice. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.