Although it would be difficult to find someone who hasn’t already heard the name “Bitcoin”, its history isn’t that long, nor is it straightforward. Since its creation in 2009, its value has increased a thousandfold. It wasn’t a steady rise – the value of this cryptocurrency has often suddenly plummeted, only to increase several times in value over the span of weeks. How did we get there? In a second, you’ll learn why Bitcoin became so popular, and whether it’s #1 spot among cryptocurrencies could be threatened. Let’s go!
How did Bitcoin become so popular?
Many people use Bitcoin as a means of payment, but also as a speculative asset. There are several factors that have contributed to its popularity.
- Anonymity is an essential element that has attracted many individuals. Bitcoin is not controlled by any financial institution. It means that its users are free to make financial transactions without being tracked by any government agencies. Why is it so important? You might live in a country where certain products or services are made illegal. If you think that some of those regulations do more harm than good, then there is a way to circumvent them – pay with Bitcoin. This way, you will remain anonymous. You might think that it only applies to harmful products like drugs or guns, though it is not true. People who live in authoritarian countries could use Bitcoin to avoid being jailed for ordering products that have to do with their religion or nationality.
- Though initially, countries and companies were reluctant to allow people to pay with Bitcoins, soon, the public perception of this new technology has changed. Some of the countries, like Australia or Belarus, even encourage foreign companies that deal with Bitcoin to do business on their soil. There are also some countries where it is illegal to use Bitcoin, though that’s usually the case in countries with authoritarian regimes. When it comes to companies, some of the bigger ones that allow its users to pay with Bitcoin are Twitch, Microsoft, CheapAir, or Sportsbet.
- It is also important to note that Bitcoin was created in 2009. Why is it important? The popularity of cryptocurrencies increased after the financial crisis of 2007-08. That’s because people became disillusioned with the financial system, and tried to find other means of payments.
- There are also those who don’t use Bitcoin to make transactions to buy products and services. Instead, they use Bitcoin as a speculative asset. In comparison to foreign exchange trading, Bitcoin is much less stable. It means that if they happen to be unlucky, the investors might lose much more money. However, if their predictions are correct, Bitcoin trading is also much more rewarding.
Those factors caused Bitcoin to reach its current status, though it doesn’t mean that it will remain the most popular cryptocurrency forever.
- The number of new cryptocurrencies is growing exponentially, and although they might not have the same user base or the funds for the development, they might have something else – the innovativeness. Some of the other cryptocurrencies allow its users to make transactions with almost no delay. If Bitcoin ignores this fact for too long, some of its users could choose the services of its competitors instead.
- Although Bitcoin is more stable than the national currency in countries like South Sudan, or Zimbabwe, it cannot compete with the great majority of fiat currencies. People who try to make some money with Bitcoin trading might not complain about its volatility, but the users who use it as a means of payment would prefer it if it were more stable. If another cryptocurrency becomes competitive in this regard with fiat currencies, people might turn away from Bitcoin.
- Although currently, Bitcoin is one of the most secure cryptocurrencies, the attacks of hackers aren’t that rare. Sure, there are ways to increase your safety, f.e. by using digital wallets. Still, if Bitcoin hopes to attract more people, it should focus on making the transactions almost as secure as the ones that go through a traditional banking system. People won’t start relying on Bitcoin if they fear that all their savings could easily be stolen by hackers. Even if another company does not offer instantaneous transactions or better stability than Bitcoin, but it makes the transactions noticeably safer, the position of Bitcoin could become threatened.
The king is dead, long live the king?
Taking into account the speed at which the new technology is being developed, it is impossible to predict whether in the near future, Bitcoin will remain the most widely used cryptocurrency in the world. It has already proven that it’s surprisingly resilient. Cryptocurrencies are a concept that is definitely here to stay, though in 5 years, the competitors of Bitcoin might offer more convenient, fast, or secure services that would change the current state of affairs.