As we continue to traverse the technological era, financial systems are constantly evolving. Post the introduction of Bitcoin in 2009, digital or cryptocurrencies have sparked a contentious debate on defining ‘what essentially constitutes as money?’
Bitcoin, the formative cryptocurrency, enjoyed a meteoric rise in popularity and value which led many to view it as a new form of money. Yet, strictly speaking according to economic norms – Bitcoin is not money.
Traditionally, money serves three functions – a medium of exchange, a unit of account, and a store of value. While Bitcoin provisionally satisfies these conditions, it falls short in the overall assessment.
Bitcoin’s volatility undermines its capacity as a store of value. Its value fluctuates rapidly and unpredictably, making it unstable. Furthermore, it’s not widely accepted as a medium of exchange and is infrequently used in ordinary business transactions. These factors highlight the current limitations of Bitcoin as money.
Nevertheless, the potential of Bitcoin and other cryptocurrencies should not be dismissed. With technological progress and wider adoption, these digital assets may carve a new path in our financial framework. Read More
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