The birth of cryptocurrency in January 2009 ushered a new dawn in the sphere of finance and the global economy. For the first time ever, who would have thought that a decentralized monetary system would surface. Thank to Satoshi Nakamoto, the unknown. We can’t tell if he is actually human, perhaps an AI or alien.
The identity of Satoshi Nakamoto, the inventor of bitcoin, the cryptocurrency is still a mystery. Inspire the claim by various persons to be the character, there hadn’t been a substantial proof to verify this character. The uniqueness of this ledger or currency is that it isn’t physical as it is the first digital currency.
It is created, distributed, traded and stored with the use of the decentralized ledger system known as a block chain. The bitcoin system is a collection of computers that all run bitcoin’s code and stores its blockchains. Thus, bitcoin use a peer-to-peer technology to operate with no central authority or bank managing or regulating it. It is an open-source and everyone can take part since nobody owns or control it. Nevertheless, bitcoin has value just like fait currency.
According to Bryan Routledge, an associate professor of finance at the Tepper School of Business at Carnegie Mellon University, bitcoin has value “because people think it does, and if that sounds kind of unstable and goofy, it’s because it is. Kiana Danial, the author of “Cryptocurrency Investing for Dummies” explains “gold is just dirt that people decided that, OK, this dirt that is kind of shiny, it has value to people, humans assigned that value to gold, to your $ 100 bill. The $100 bill doesn’t itself has value. We assign that value to it.
Thus, Bitcoin is worth owning but what really is the value of a bitcoin, the first cryptocurrency.
The major determinant of the value of bitcoin is demand. A heavy demand of bitcoin will lift the value of the crypto which reveals it measure of usability and supply, intrinsically. Amongst others are the cost of mining crypto owing to the energy and resource exhausted. The reward issued to bitcoin miner for verifying transaction to the blockchain, the number of competing cryptocurrencies and the regulation governing it sales.
Satoshi Nakamoto has initiated the perfect tool for an utopia society. A society where government might be rendered somewhat useless, at least in the sphere of wealth and economics. Aside the fact that cryptos can be used for illicit business such as purchase of hard drugs, sponsoring terrorism, black market arms, fraud, money laundering and so on. Businesses which have been thriving even before the advent of cryptocurrencies. It presents a danger to the central banks and government monetary policy as it plummets their influence over the economy.
In this regard, since the government cannot regulate bitcoin. It can salvage the opportunity to influence the value through media sensationalism or simply ban or restrict the use of cryptocurrency. Nations such as Turkey, Ghana, Egypt, Nigeria and recently, China has perpetuated this act. Every country wants to be in charge of it supply and demand of currencies. Another currency outside of their domain operating can be implicating and get things out of control, reenacting the Mansa Musa effect.
The environmental cost of mining bitcoin should be worrying considering climate change but how many carbon emissions crypto mining generates remain disputed. Also, 86% of the world central banks are exploring the possibility of a CBDC (Central bank digital currencies). These CBDCs will see to the end of bitcoin and the new dawn of digital currencies. They should be slightly indifferent from fait currency.