Bitcoin still retains the top position in the world of cryptocurrencies. The user base has grown dramatically to over 109 million users worldwide. This dramatic growth of Bitcoin has created concerns that it could overtake fiat currencies. But before anyone holds any position on this matter, it’s essential to consider the facts.
What is Bitcoin?
Bitcoin is undoubtedly the most successful cryptocurrency to date. An entity called Satoshi Nakamoto developed and launched Bitcoin in 2009. So, Bitcoin has only existed for about 13 years. Keep that in mind as this article will refer back to it.
To avoid all technical details, Bitcoin is simply a digital currency. It is money but in virtual form. You cannot touch or see Bitcoin. But you can use it to pay for your shopping or services in places that accept Bitcoin payments. You can also buy and sell Bitcoin since it is also an asset.
Can Bitcoin Overtake Fiat Currencies?
This article starts by taking the position of Bitcoin critics who believe that Bitcoin will overtake fiat currencies. For most of those who hold this position, the dramatic growth of Bitcoin as a digital currency globally is the main indication. Yes, for an innovation that is only 13 years old, Bitcoin’s dramatic increase should cause jitters.
Another factor that supports this position is the advantages of Bitcoin over fiat currencies. They are many, but this article will highlight the most important. Unlike fiat currencies that the government highly regulates through central banks and other commercial banks, Bitcoin is unregulated. Bitcoin uses decentralized blockchain technology, meaning no government or single entity manages or controls it.
As an unregulated alternative to fiat currencies, Bitcoin provides a free and open platform for many users who may be uncomfortable with the government control of fiat currencies. Moreover, anyone can use Bitcoin, even those that cannot access conventional financial services. Finally, blockchain technology is impossible to interfere with or hack.
With all these advantages of Bitcoin, it is understandable that some people are concerned that it could overtake fiat currencies. With millions of users now preferring Bitcoin over fiat currencies, the fears are not baseless.
Now to my second position that Bitcoin cannot overtake fiat currencies. Here, I will consider several factors.
Central Bank Digital Currencies (CBDCs)
Governments like China have already introduced the digital versions of their national currency, the digital Yuan. Debate is still going on in the U.S. about introducing the digital dollar. These are alternatives to cryptocurrencies because they are primarily national currencies under the control of the government.
The CBDCs will provide the same benefits that Bitcoin provides. For example, with platforms like Immediate Edge official site, people can still trade in the bitcoins despite the ban on cryptocurrencies.
Bitcoin’s Limited Supply
Bitcoin’s supply limit restricts it to 21 million coins. And this means that no more new coins will be available when miners reach the 21 million coins target. If this is the maximum supply of Bitcoin, then it is substantially lower than the demand. The demand for Bitcoin is much higher and will continue growing.
Although there are many other cryptocurrencies, their supply is also limited. And this is not the case with fiat currencies. The amount of fiat currencies in circulation is already much higher than that of all cryptocurrencies. Since the limited supply of Bitcoin cannot meet the growing demand, fiat currencies will meet the unmet demand, which will be higher.
Parting Shot
Bitcoin and other cryptocurrencies have grown dramatically in the recent past. While they serve the same purpose as national currencies as digital money, they are unlikely to overtake national currencies.
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