Bitcoin has become increasingly popular as an extremely innovative and autonomous means of transferring values between any two points. The protocol has been signed since 2009 when it was launched in the form of applications with open source, as an increasingly robust promise and with constant practical improvements. There is also the high volume of capital invested by large investors in companies of the sector.
The business model of many of these startups is based on making it easier, faster and safer to use cryptomoedas for different purposes such as online payments or international shipments. In some cases, one can even go for the ambitious goal of building entirely new forms of social, commercial and economic interaction.
Although the original application is aimed at maintaining an electronic money with its own means of payment and embedded in the system, the technology that had to be created to make this possible could be used for different purposes. Some examples come from the area of distributed file storage systems in the cloud like StorJ (as opposed to those that depend on servers or central operators for such as Dropbox and Google Drive) and others pass protocols for the safe exchange of asynchronous messages, for example of BitMessage.
In general, the most interesting thing is to observe the perfect match between the currency variables (the bitcoins themselves) and payment technology built into Bitcoin and many of the projects derived from its code or concept. Although there are heated debates in the community in this sense, I believe that not only are the two inseparable, this is the fact that makes Bitcoin unique in terms of sustainability and long-term economic efficiency: it links market incentives to growth and maintenance of a public network by nature.
In launching his whitepaper in 2008 describing in a practical way what would lead Bitcoin to work, while other projects with similar goals that preceded it failed just at this stage of implementation, Satoshi Nakamoto gave us not only a method of generating consensus in distributed networks, but the possibility of seeing a range of new applications born. This is because the technological barrier is already overcome, since Bitcoin works 24 hours a day, 7 days a week, without any systemic failure since 2009.
An important element in this virtuous cycle is the system of fees paid by the users of the network to those who contribute to its operation (the miners), yielding the processing power used in the processes that ensure the security of the transactions. That is, confirming that each user spends an amount equal to or less than what he has available in his portfolio, without the possibility of double forgery or expenses.
All this occurs in a decentralized way, since anyone can join the network as a miner and be compensated for it. Or, still, as a certifier of the balance of payments permanently updated by the miners from the financial movements occurred in the last minutes.
The fee is for miners to take their transaction as a priority and add it to the next block of transactions they are trying to validate and propagate to the other nodes in the network. This process is repeated, on average, every 10 minutes in a fully automated way.
Each miner can also customize the preferences of his network node independent of the others, and the fact that the only form of remuneration for this work in bitcoins generates an incentive to include transactions even if the user has not paid a value substantially non-priority rate.
Suppose each block accommodates up to 1000 transactions to be validated with a confirmation, on average, over the next 10 minutes. At a time when the network is down and the block you intend to mine is only with the 500 transactions of the last few minutes that paid significant fees, what governs your decision whether or not to add no-charge transactions to your block? The self-interest that the bitcoins you receive through the mining process increase in value!
From economic theory, value is governed by two variables: something has more value the greater its scarcity and utility. The scarcity of bitcoins is given (the number of units of the currency in circulation will never exceed 21 million) and inviolable in computational terms.
Therefore, the only way to increase the value of bitcoins is to make it more useful, hence it is reasonable to expect that the rational decision to add transactions without fee at times of less use of the network is taken, as this is what brings value to the system . That is, it becomes progressively more useful, safer, and relatively cheaper than its competitors.
The rate is an extra variable, but it is not the only variable and is not always decisive. Faced with this, the expected rational is to see it become more and more relevant as time passes, as Bitcoin becomes scarcer and this variable (scarcity) will lose its power to influence the market when we reach the limit of 21 million bitcoins, or very close to it, which will occur from 2025 onwards.
So by design, for now, it is a prize and not a strict necessity of the system. And this can even be accommodated by the market, considering that in a payment made by credit card, the merchant takes up to 40 days to receive the amount paid, not counting the months for which the consumer can still unilaterally apply a chargeback .
Basically, what I want to show is that the way the rate behaves in relation to the market variables that would characterize bitcoin as digital money (value reserve, common denominator of price and medium of exchange) always tends to remain neutral, since over time if it negatively affects one will positively affect another.
For example, fees will only be very expensive (making it "worse" as a medium of exchange, for making the transaction more expensive) on the day that bitcoin is a larger value reserve because people would tend to pay a progressively higher rate their purchasing power. These characteristics of a good coin are taken in most cases as a trilemma. That is, the three can never be fully hit at the same time.
In the case of national currencies, the clearest is how badly they have been shown as a long-term reserve of value, due to inflation that significantly reduces the purchasing power of many of them, and inferiority as a medium of exchange, when compared to Bitcoin's global character, which, with the blockchain's brilliant solution, reaches anywhere in the universe with access to the network without relying on trust in intermediaries.
However, in light of what has been explained so far, Bitcoin's potential is evident, not just as digital money. By linking a single technology to a distributed network and strong economic incentives, the doors opened for the decentralization of all existing economic relations that until then depended on a central entity to occur safely.
Think of the disruptive potential to radically transform traditional "industries" such as registration systems, stock exchanges and online trading, or even into automated services that will emerge from the internet of things. The future holds infinite possibilities and many of them will be - or are already being - based on Bitcoin technology. It is necessary to study them (and construct them)!
Source: Cripto.Digital
Tags: #Cryptocurrency #Bitcoin #PublicNetwork #Blockchain #Technology