Bitcoin burst onto the scene in 2009 as a decentralized digital currency, powered by blockchain technology. Since then, Bitcoin has become the world’s most well-known and widely-traded cryptocurrency. While many different cryptocurrencies are available today, Bitcoin remains the most valuable and popular by far.
On the topic of cryptocurrency, many people are choosing to learn more about it by registering for a cryptocurrency course. By doing so, they can learn to think critically about cryptocurrency and make more informed decisions about investing in it or utilizing it in their business.
Bitcoin is often referred to as “digital gold” due to its similarities to precious metals. Like gold, Bitcoin is scarce, durable, and divisible. It is also portable, meaning it can be easily transported and stored. And like gold, Bitcoin is recognizably valuable to people all over the world.
However, there are some key ways in which Bitcoin differs from gold. For one, gold has been used as a form of currency for centuries, while Bitcoin is still in its infancy. Gold is also not as easy to trade or transport as Bitcoin. Finally, the total supply of gold is finite, while the total supply of Bitcoin is capped at 21 million.
Despite these differences, Bitcoin shares many of the same qualities as gold, making it a valuable asset for some investors.
Why Bitcoin is a Digital Gold Standard
Here are some key reasons why:
1. Bitcoin is scarce
Bitcoin is often compared to gold because both assets are limited in supply. There will only ever be 21 million Bitcoins created, and over 19 million of those have already been mined (as of 2022). This fixed supply makes Bitcoin similar to precious metals like gold, which have a finite supply that cannot be increased.
The scarcity of Bitcoin gives it value and makes it an attractive investment for those looking to store wealth.
2. Bitcoin is durable
Another critical quality that Bitcoin shares with gold is durability. Gold is a physical asset that can be stored and traded and does not corrode over time. Similarly, Bitcoin is a digital asset that can be stored on a computer or in a digital wallet and is not susceptible to degradation.
However, Bitcoin storage comes with its own challenges, including environmental concerns and the risk of losing access to Bitcoin if a digital device is damaged or lost.
3. Bitcoin is divisible
Gold can be divided into smaller units (e.g., grams or ounces), and Bitcoin can be divided into smaller units (satoshis). This divisibility makes both assets easy to trade and use for transactions. It also makes them more accessible to a broader range of investors, as they can invest any amount they want.
4. Bitcoin is recognizable
Gold is a valuable asset that is recognizable all over the world. Similarly, Bitcoin is becoming increasingly well-known and accepted as a form of payment. In fact, major companies like Microsoft, AT&T, and Overstock now accept Bitcoin as payment.
As Bitcoin becomes more widely known and used, its value is likely to increase.
5. Bitcoin is portable
Another quality of both gold and Bitcoin is portability. Gold can be easily transported and stored, and Bitcoin can be stored on a computer or in a digital wallet. This portability makes both assets easy to trade and use for transactions.
While there are some key differences between gold and Bitcoin, they share many qualities that make them both valuable assets. As Bitcoin becomes more widely known and used, it is likely to continue to increase in value. For those looking to invest in a cryptocurrency, Bitcoin is an option they tend to consider due to its scarcity, durability, divisibility, recognizability, and portability.
Bitcoin, like gold, is not without its risks, however.
Bitcoin: Potential Risks
These are some of the notable risks associated with investing in Bitcoin, including:
- Volatility: The price of Bitcoin is known for its volatility. This means that the price can fluctuate rapidly, making it a risky investment.
- Hacking: Bitcoin exchanges have been hacked in the past, which has led to the loss of customer funds.
- Regulation: Cryptocurrencies are not currently regulated by governments, which could change in the future. If regulation increases, it could impact the price of Bitcoin and other cryptocurrencies.
How are Financial Institutions Adapting to the Emergence of Bitcoin?
It’s also worth discussing how financial institutions and central banks are adapting to the emergence of Bitcoin. For some, the potential is clear, and they’re investing in cryptocurrency infrastructure and expertise.
Other financial institutions are taking a more cautious approach, however. In 2017, for example, JPMorgan Chase, for instance, banned its customers from buying Bitcoin with credit cards. And while some banks are exploring the possibility of using cryptocurrency technology (like blockchain), they’re not yet ready to fully embrace it.
Bitcoin Applications in Business
Many businesses are choosing to get ahead of the curve by investing in cryptocurrency and blockchain technology. Some are even accepting Bitcoin as payment.
Some applications of cryptocurrency in business include:
- Payment processing: It can be used to process payments quickly and securely.
- Microtransactions: Cryptocurrency can also be used for small transactions, like paying for content or services online.
- Supply chain management: Cryptocurrency can track goods and materials through the supply chain.
- Asset management: Cryptocurrency can be used to track and manage assets, like property or vehicles.
- Data storage: Lastly, cryptocurrency can be used to store data securely and immutably.
The Bottom Line
Investing in cryptocurrency is not for everyone, but those who do choose to invest often consider Bitcoin to be a digital gold standard due to its similarities to precious metals like gold. While there are some risks associated with investing in Bitcoin, there is also potential for significant rewards.
Those interested in learning more about cryptocurrency and blockchain technology should consider taking an online cryptocurrency course. These courses can provide a solid foundation for understanding how cryptocurrency works and the implications of using it.