Bitcoin has been extending its lead on the cryptocurrency market. For me, as an analyst, there is a lot of exciting new data coming out. For instance, a recent report by Chainanalysis.com, titled “Quantitative Analysis of SegWit Adoption in the Bitcoin Ecosystem”, showed the following adoption numbers:
The age of cryptocurrency is upon us and blockchain technology is changing the world. Bitcoin has been acknowledged as the first cryptocurrency, but it has spawned a whole slew of other crypto-coins that are changing the way we think about money and making the world a better place.
Bitcoin has been in the headlines recently. We’ve seen the price skyrocket and crash. We’ve seen the technology, the community and the community’s reaction to the technology. We’ve seen it’s potential to change the world and we’ve seen its potential to be a store of value. But what is it? What is it really? Is it a currency, a payment system, a speculative asset or a store of value?
Since its inception, bitcoin has exhibited several characteristics that have been labeled as game changers. Three of these are decentralisation, globalisation and disinflation. The ability to combine all of these features into one package is one of the reasons for the popularity of this digital asset. How do these three characteristics manifest themselves in 2021? Have they become the solution to today’s problems?
Bitcoin is decentralized
In recent weeks we have seen China undermine the bitcoin mining industry and push activity beyond its borders. This resulted in the largest recorded drop in the hash rate on the Bitcoin network since its inception.
The beauty of a decentralized network is that there is no single point of failure. Thus, despite the events in China, there was no significant disruption or impact on the network. The Bitcoin network has worked 99.98% of the time since its inception. The same cannot be said for traditional banking and payment systems, which regularly fail due to planned or unplanned maintenance.
Darin Feinstein, founder of Core Scientific, said in a recent Bitcoin Mining Council report: Despite the fact that China has crippled over 60% of the Bitcoin network, the network has experienced no outages, no bailouts, no reported bankruptcies, and has simply adapted by moving its infrastructure to more open regions… The network remains as strong as ever, simply overcoming challenges and moving forward.
The decentralized nature of the Bitcoin network has shown that while it is not completely immune to global events, it is very robust.
Bitcoin is disinflationary
Inflation is a real problem for many countries in 2021. Over the past 18 months, governments have effectively unleashed their money printing machines. Those who made this decision said they did not expect inflation to rise further, but now it appears that this is no less true.
In recent months, countries like Canada and the United States have seen inflation rates not seen in decades, and now they are expected to be even higher. While inflation can have a positive effect, it can quickly destroy wealth, which is why many people seek hedges.
In times like these, investors traditionally look to assets that are considered stable while hedging their bets. Often contains precious metals such as gold. The reason is simple: gold cannot be created on a whim. The supply is limited, and it takes an enormous amount of energy/labor to increase that supply. That’s why the value of gold can’t be inflated/deflated as easily as the FIAT.
The same rationality that explains the appeal of gold in an inflationary environment also applies to bitcoin. The digital asset has a fixed reserve of 21 million, which is distributed according to a known rhythm, regardless of global activity. The difference is that bitcoin holdings are easily verifiable and globally transferable, while gold is not.
Overall, bitcoin has gained a lot of value over the past 18 months against the FIAT. While this growth cannot be attributed to one factor, the disinflationary nature of bitcoin is known to be a major factor in the decisions of companies like MicroStrategy.
Bitcoin is global
Although some of the world’s major currencies are found throughout the world, the vast majority of FIATs are only accepted in the country of issue. As a result, transferring money abroad can be a slow and expensive process involving several intermediaries. Bitcoin solves this surrender problem because it operates on a global scale. You can send money to someone on the other side of the world just as quickly as to someone sitting next to you – and without a commission charge.
There is perhaps no better example of how Bitcoin can change the money transport industry than El Salvador. The country, which recently introduced bitcoin as legal tender, receives literally billions of dollars a year from abroad. This is money sent home by people working abroad to support their families. For families often considered poor or vulnerable, every dollar counts. Bitcoin makes it easier for these families to access their money and avoid paying exorbitant fees.
Digital asset ownership is not only highest in El Salvador, but also in small Asian countries that rely heavily on remittances (e.g. Vietnam, Indonesia, etc.), according to several reports.
While bitcoin is not perfect and has not yet managed to develop into a real currency, it is hard to deny that its inherent features have not already had a positive impact on the world. It has enabled people to preserve their heritage through a strong global network. Over time, the number of examples above will increase as the networks are implemented.In the past several years, we’ve seen an explosion of Bitcoin-related content popping up in online communities. There’s talk of a “Bitcoin Bubble” and a “Bitcoin Scam”, which are bizarre reactions to a huge development, as we live in a world where there are both central banks and central services that lack decentralization.. Read more about defi coins news and let us know what you think.
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