There were times the barter system was the only means of trade. The valuables with equal value variables were exchanged. Then came precious metal as a standard exchange currency for business. Gold, for instance, became the currency of trade. Since it was impossible to hoard gold and to carry it in the pocket to buy the smallest essentials, note currency soon took over. Time transition and technological advancements termed in the garb of globalization established the US dollar as the international standard variable to all other currencies. Now in the age of the internet and digitalization, the virtual world seems to usher into a virtual currency materialization. The centralization and enormous pitfalls in note currencies with several phases of intermediaries like banks and government agencies, the conceptualization of virtual coinage mellowed.
A paper by an anonymous person or a group of people named Satoshi Nakamoto in 2008 changed everything. Titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” proposed a digital cash system that would enable person-to-person direct amount transfer without involving any financial institution. The paper claimed that the proposed Bitcoin would be completely decentralized without control and influence of any government or private agency, unlike other currencies being facilitated by banks and other government financial institutions. In 2009, Bitcoin came into existence as a virtual currency after Satoshi mined the first coin by creating the first block of the chain known as ‘genesis block. Before disappearing and handing over the system to Gavin Anderson in 2010, Nakamoto is estimated to have mined about one million Bitcoins.
Operated on a decentralized financial (De-Fi) system, bitcoin is imagined to replace the existing centralized banking system. Bitcoin works on a system called blockchain, considered to be impossible to penetrate. It has an automatic online ledger that keeps the account of all the transactions. It is supposed to ensure transparency in terms of transactions and their circulation. The beginning and end of a transaction may easily be traced as blockchain consists of a virtual ledger of transaction records. Therefore, illegal transactions may easily be busted.
The cryptocurrency was an invention as a revolt against a heavily centralized, controlled, and profusely taxed cash system. It seeks to do away with intermediaries from between two independent transactors. With no banks or a central authority administering it, the system rids itself of an institutional setup such as banks, offices, and a vast chain of employees. On the contrary, all the transactions are controlled and verified by independent miners or a chain of millions of computers. The information once added to the system cannot be undone. All these factors minimize the space for theft and fraud. Transactions can be made 24/7 from any part of the world without any hindrance.
Bitcoin has been accused of having an ugly side as well. Being a volatile currency and not being accepted by most of the countries at the moment for eligible free-flow cash transactions, trust deficits are apparent. The large computation requires a huge load of electricity transmitting an equal amount of transmission, which makes the environment unfriendly. Tesla owner Elon Musk denied bitcoin transactions in his company, citing environmental issues.
Recently, Elon Musk has occupied the limelight for turning into an abrupt detractor of Bitcoin. His tweets and rigorous attack on Bitcoin are deemed to have made Bitcoin soar after hitting the zenith of appreciation. On May 16, Mr. Whale tweeted that “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their Bitcoin holdings.” The next day he was responded by Elon Musk with “indeed.” The same day nevertheless, Elon Musk tweeted with a contradicting statement- “To clarify speculation, Tesla has not sold any Bitcoin.” In the crypto sphere, he is being criticized for his deliberate spurious play to de-stabilize Bitcoin. His investment in Dogecoin helped it grow manifold.
The current plunge is also being attributed to his erratic attempts. At the time of writing this piece, Bitcoin has plunged to its recent lowest with a 50% fall from its April 14, 2020 high of $64,870 to May 19, 2021 low of $30,000. If Musk’s influence on cryptocurrency is to be assumed, the claims of the cryptosphere to be decentralized lie flat when an individual alone may manipulate the whole crypto market.
Many view the Bitcoin crisis to be momentary. The Galaxy Digital chief Novogratz considers the current crypto crisis to be temporary and predicts its value to triple or quadruple up to between $6 trillion and $8 trillion in the coming year. While metal gold is considered to have the greatest social value, “Bitcoin has that space in the universe” to replace it, he asserts. With an optimistic attitude, he hopes that Elon Musk’s criticism widens scopes for bitcoin to improvise on clean energy.
Anthony Scaramucci, the founder of SkyBridge Capital in a Bloomberg interview, defended bitcoin to be the only resilient cryptocurrency to have achieved ‘escape velocity. In contrast to the US dollar, he deemed it to be the only valuable cash. Taking a dig at Dogecoin, a meme-inspired cryptocurrency that is now the fifth-largest cryptocurrency, Scaramucci termed it silver compared to bitcoin, which is termed as gold. He suggests that silver is more volatile than gold; thus, Bitcoin shall be placed in the uppermost echelon of supremacy.
Bitcoin has a lot of challenges to surmount. There are several rival cryptocurrencies like Ethereum, Tether, Binance Coin, and Dogecoin that are posing constant challenges to it. However, undoubtedly, Bitcoin has retained its place of supremacy. Bitcoin’s intra-year fall is nothing new. In retrospect, since 2014, except for the years 2016 and 2017, it has fallen by 50% or so. We know that the future promises infinity to cryptocurrency. If Bitcoin manages to improvise on its loopholes, it is certainly going to hold the center. In an age of universalization, we may perceive Bitcoin to be a global currency with lesser volatility wider acceptance and circulation. Henceforth, its future shall not be deemed shadowy, taking into account its transitory fall.