What Will Determine the Future of Bitcoin

Bitcoin is a decentralized digital cryptocurrency that is not run by any government or central bank. Bitcoins can be traded for other currencies and from other users through the internet. It is believed to be the first decentralized cryptocurrency and has become the most widely used virtual currency. Bitcoin is often used to buy goods and services while being stored as an asset. However, the illiquidity of bitcoin makes it difficult for them to be used in the real economy, which may be its main shortcoming. On the other hand, it offers user anonymity and financial privacy that can not be found elsewhere on the internet. However, they are not sustainable when they lose their liquidity since they are priced according to demand from buyers and sellers on different exchanges.

The creation of bitcoins, according to a computer code, is known as mining, where miners use their computing power to verify and record all the bitcoin transactions. In order to confirm a bitcoin transaction, nodes or miners must solve complex mathematical problems while racing to complete a block which is essentially the same as solving a cryptographic puzzle. The first one with the right answer will get its block reward plus transaction fees. This process is called proof-of-work (PoW) since it relies on brute force, and it is also used by other cryptocurrencies like Ethereum.

Governmental Interaction:

Governments around the world have taken an increasingly hostile stance towards bitcoin and other virtual currencies, resulting in bitcoin being banned outright in some countries. China, Russia, and Bolivia issued an order against digital currencies in August. In South Korea, there is a special task force to investigate cryptocurrencies. The cryptocurrency exchanges in China have been subjected to a series of restrictions since the beginning of 2017. The National Bank of Poland stopped recognizing bitcoin as a form of virtual currency back in 2014, but it has allowed other bitcoin-like cryptocurrencies to continue operating under the country’s existing laws.

Public Pressure:

Due to the lack of a central authority to oversee bitcoin, there have been no regulations to help prevent the illegal use of bitcoin in criminal activities such as human trafficking, drug dealing, and money laundering. As a result, the public tends to associate bitcoin with these sorts of illicit activities. So, when the public associates bitcoin with crime, it is unlikely to be considered a currency for everyday purchases. Further, the public may perceive bitcoin to be a volatile currency because of its extreme swings in value.

Playing Nice:

The general public may not consider bitcoin to be a currency because it is not supported by the current monetary policy of their country. In the last few years, governments have been trying to get away from printing their own money and allowing for an alternative currency in order to build up a reserve of cash to help with economic cycles. Central banks like the Federal Reserve have been printing money in order to stimulate their economic markets. These actions, along with quantitative easing by the European Central Bank and the Bank of Japan, have helped build up a large amount of excess money supply in the world economy. This extra cash has led to an increase in prices while also causing a lot of uncertainty because it is not backed by any sort of tangible assets.

No Hiccups:

As of now, bitcoin does not have any hiccups that make it unattractive to the general public. However, when bitcoins are used in the real economy and investors begin to become more interested in investing, then volatility may be a concern. It is also important to note that the privacy features of bitcoin make it attractive to use for illicit activities like drug deals. This has led to many government agencies around the world issuing warnings about using bitcoin for money laundering purposes.

Future of Bitcoin:

The future of bitcoin may depend on whether or not it will be adopted by the general public. A lot of people are still learning about bitcoin, which means that even though they may be attracted to its anonymity of it, they would not put their trust in it as a currency. The stability and security features have been tested out a lot since their creation in 2009, and they still have yet to experience any hiccups. However, as many people rely on their local currency, they will be more willing to stick with it than adopt bitcoin. The general public may not be interested in using it unless they can use it to buy everyday items like groceries and clothes.

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Conclusion:

Bitcoin is often looked at as one of the most promising and revolutionary decentralized cryptocurrencies on the market. However, it has a lot of flaws that may reduce its longevity in the real economy. The biggest flaw of bitcoin is that it is still a speculative cryptocurrency, which means its future depends on how much people are willing to put their trust in it. The public has largely been sceptical about using bitcoin because they believe it can be used for illegal activities.