Digitized currency: what is it really and will it ever be for the everyday Joe? Since 2014, the media has been buzzing about Bitcoin, one of the most well-known and mainstream cryptocurrencies on the market. Bitcoin utilizes three main components: the user, the miner and the blockchain. In an extremely simplified explanation, the user completes a transaction with another user, and a miner adds it to the blockchain, a public ledger of all the transactions of Bitcoin. However, while this financial fad is exciting, I don’t believe Bitcoin will ever become the next everyday currency because of its complicated framework and function, incentive for illegal activities and high volatility.
The first reason I don’t believe that Bitcoin will ever become a normalized currency is because of the complexity of the program. In my personal experience, it has taken me many hours of research and a variety of articles to understand how the program works and even then, there are still things I don’t know the answer to. While our current economy of the dollar is difficult to understand, it isn’t difficult to use. To use bitcoin, you have to understand how the entire cryptocurrency works, which requires quite a learning curve. A transaction isn’t as simple as transferring money from one person to the other. For Bitcoin, a transaction includes a miner and the blockchain, not just the government overseeing it all. I think due to this difficulty, most people get bored and lost when it comes to Bitcoin.
Another facet of my argument lands on the government. Most don’t like it, and some, like China, have gone as far as completely banning the currency. The decentralization of the program tends to encourage users to circumvent the government, making them very nervous. The US, specifically, has too much to lose. Since the dollar is already the international reserve currency, a new currency like Bitcoin could be very dangerous gaining popularity. In addition, with the only identification on Bitcoin being an address, a unique series of letters and numbers, many criminals are attracted to the program for use in illegal activities. Without the support and encouragement of many institutionalized governments, I think Bitcoin will struggle to catch on.
Finally, I think Bitcoin will struggle to gain everyday popularity because of its high volatility. While cryptocurrency has now been in use for almost a decade and a half, its volatility has never settled. Bitcoin is even known for increasing 15% in one day and then decreasing the next; many experts call this “yo-yo” like movement a common occurrence. For the majority of people, I think the risk is higher than the reward, which causes most to ignore this new, flashy currency.
However, I think that cryptocurrencies will continue to grow in popularity. I could see it becoming something people use frequently when they want to avoid costly government fees or exchanging dollars to foreign currencies. I have learned through my research it’s really the blockchain technology that cryptocurrencies use that will have the biggest future. The decentralized and public ledger of the blockchain allows for more seamless and efficient communication and transactions, especially in the business world.
To summarize, I think Bitcoin will continue to be an important aspect of the finance industry but never become something a person outside the industry would have much involvement with. I think the primary audience for this currency is the uber rich and finance- junkie investor types. However, Bitcoin could still be a smart investment. I just don’t see it catching on with the general public or becoming the next dollar.
