In 2008, a mysterious individual or group using the name Satoshi Nakamoto created Bitcoin, the first decentralized digital currency in the world. Since then, Bitcoin has been widely discussed not only by crypto enthusiasts but also by the general public.
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So, What Exactly Do We Mean By a "Store of Value"?
Any commodity that maintains its buying power over time and is easily convertible into other goods is considered a store of value. In other words:
A store of value would increase over time rather than decrease.
For something to serve as a medium of exchange, it must be able to be used to purchase other assets (like gold, or dollars).
For safe havens, this places new limitations. A good investment shouldn't perish quickly like fresh flowers or milk. Also, it should be liquid, which refers to how easily it may be traded. A gold bar may be converted into cash considerably more quickly and easily than a home.
Why is Bitcoin Better than Traditional Currencies?
Supporters of Bitcoin point to two benefits of Bitcoin over other currencies. One is that a governing body can't print an excessive amount of it and therefore lower its worth. This makes it considerably less likely to experience a hyperinflation crisis.
Yet, a shortage can be a problem since it makes it difficult to prevent deflation, which can have disastrous effects on the economy if it is allowed to continue unchecked.
Second, all Bitcoin transactions are said to be permanent and unchangeable. Very simply, a bank has the right to confiscate any funds kept in an account and pretend they were never there. Due to the decentralized nature of the Bitcoin network, no single entity can alter the transaction log.
Bitcoin's Drawbacks?
In situations when privacy during financial dealings is a priority, Bitcoin is the best currency to use. Yet, the costs associated with using it for anything other than monetary transactions can be rather high. Between 2 January and 31 October of 2020, the average Bitcoin transaction cost was 28 cents, 13.41 dollars.
Even if the price rises as many believe it will, that simply proves Bitcoin is a good speculative investment, not that it can be used as a currency.
Bitcoin's Future: A Currency, Store of Value, or Both?
It's still hard to say whether Bitcoin will become a currency or a store of wealth in the future. But, Bitcoin might potentially fulfill both purposes depending on the requirements of its users. It's conceivable that Bitcoin's function will become more apparent as its use and popularity continue to develop. Bitcoin, whatever its eventual use, is an innovative technology with the power to revolutionize the international financial system.
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