The Bitcoin journey, starting from its launch in 2009, has lasted over a decade. Bitcoin is the world’s first major decentralized cryptocurrency and has held its position as the most popular cryptocurrency over the years. It is also the crypto asset with the most dominance, at 53.8% per CoinMarketCap data.
According to the Bitcoin whitepaper, pseudonymous creator Satoshi Nakamoto intended for Bitcoin to function as a decentralized digital currency that allows people to easily complete peer-to-peer transactions without any intermediaries. This initial intention that powers the asset’s use as digital cash may be the most basic use of Bitcoin. However, the evolution of Bitcoin has turned the asset into a popular store of value, a function that ties into its application as a hedge against inflation. Many people buy Bitcoin to preserve the value of their funds, possibly because they trust Bitcoin’s deflationary features more than fiat. Bitcoin functions as a trustworthy hedge against inflation and has already returned more than 160% to holders since January.
The Bitcoin Journey: Evolution
Bitcoin’s success over the years has inspired enthusiasts in the crypto community to begin extensive research into new and existing cryptocurrencies, in the hopes of finding those with the highest potential. However, Bitcoin wasn’t always this successful.
In its early years, there was a lot of skepticism and doubt in the Bitcoin space. The relatively new asset powered by a decentralized and unregulated network raised many concerns, especially around illicit activity. Many were concerned that the decentralized nature made it easy for criminals to move illegal funds or launder money. In addition, there were concerns about its volatility and whether or not it would stand the test of time. Nonetheless, a few people took the plunge and began buying and using it. In 2010, a man spent 10,000 BTC on two Papa John’s pizzas, a transaction widely credited as the first commercial use of Bitcoin.
The evolution of Bitcoin witnessed heavy struggles in its early years because of its extreme volatility. However, people gradually began to realize that it had an appeal as a speculative asset, which attracted investors looking for profits. Years later, traders have become used to the volatility and actively try to use it to their advantage.
Bitcoin’s Regulatory Development
Unfortunately, most regulators have not been as supportive as Bitcoin enthusiasts might prefer. Nonetheless, there is some good news in countries where laws are supportive and encourage the growth and development of the sector. For instance, El Salvador became the first country to make Bitcoin legal tender when President Nayib Bukele signed a bill into law in 2021 and purchased hundreds of BTC. Interestingly, the International Monetary Fund (IMF) recommended that El Salvador suspend Bitcoin’s recognition as legal tender last January. According to the agency, Bitcoin poses risks threatening consumer protection, financial integrity, and financial stability. Last April, the Central African Republic officially recognized Bitcoin as legal tender, making it the first African country and the second nation to do so.
Several countries do not recognize Bitcoin as legal tender but have introduced laws that govern its use. Countries like Israel, Japan, Singapore, Mexico, and Saudi Arabia all allow Bitcoin, but with varying limitations. Unfortunately, there are also several countries with blanket bans on cryptocurrency. For instance, China banned all crypto activity in 2021, including buying, selling, and mining.
Challenges Plaguing the Bitcoin Landscape
Despite successfully achieving a commendable level of mainstream embrace, the evolution of Bitcoin has faced more than a few challenges over time. In addition to the asset’s extreme volatility, Bitcoin is well known for its scalability issues. Initially, Bitcoin was designed to process around 7 transactions per second. Unfortunately, this makes adequate scalability largely unachievable as it limits the number of transactions the asset’s growing community can complete. Fortunately, Layer-2 solutions like the Lightning Network help process more transactions at cheaper rates by taking transactions off-chain.
Bitcoin has also been seriously criticized for its environmental disadvantages. Mining Bitcoin is an energy-intensive activity that requires costly equipment and high power usage. Critics state that the amount of energy used to mine Bitcoin is unsafe and generally unsustainable for the environment.
There also is a problem with security because of Bitcoin’s decentralization. Since there is no central authority, the Bitcoin network carries the risk of hacks, scams, and other vulnerabilities. The immutable nature of the network also makes it nearly impossible to redeem stolen funds or even reverse assets wrongly transferred.
Future Prospects
More than a few wins are projected in Bitcoin’s short-term and long-term future. For instance, the level of institutional interest in Bitcoin is expected to continue rising as adoption increases. There are also repeated calls for regulatory clarity in the Bitcoin space to guide creators, developers, and individual users on the right way to build or interact with Bitcoin and its community. As these prospects come to fruition, the Bitcoin journey is also expected to see expanding use cases outside of its function as an investment tool or a medium of exchange. For instance, developers will be incentivized to create solutions that can leverage technological advancements, like non-fungible tokens (NFTs). Also, the Bitcoin space will likely enjoy more integration with the traditional sector, gradually bridging the seemingly wide gap between crypto and traditional finance (TradFi).
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