Critics have constantly expressed concerns that Bitcoin is a bubble that will soon burst. Find out the truth about Bitcoin.
Many critics insist cryptocurrencies are speculative assets, threatening the stability of the global economy. According to them, Bitcoin and other cryptocurrencies threaten fiat currencies and encourage a wide range of illegal financial activities, including money laundering and fraud. Other critics have also described Bitcoin as a bubble burst with severe financial risks.
While such criticisms have slowed Bitcoin adoption, it remains the most prominent cryptocurrency. Bitcoin is increasingly attracting recognition and acceptance far beyond the financial realm. Many organizations and individuals now use Bitcoin to pay for various goods and services worldwide.
Institutional investors, market makers, and traders use Bitcoin to trade crypto and fiat currencies. Many corporations have accumulated vast Bitcoin reserves to diversify their investments and hedge against inflation. So, why do some people still think that Bitcoin is fake money? The following article highlights the key elements that distinguish Bitcoin from counterfeit currency.
Counterfeit-proof
Fake currencies are counterfeits that mimic the original central bank-issued fiat money. However, Bitcoin is a digital currency whose accessibility and usage are limited to the online space. The only way to counterfeit Bitcoin is through double-spending, using the same token for two separate transactions.
However, the Bitcoin network has special measures that make double-spending almost impossible. Manipulating Bitcoin transactions would mean hacking 51% of the network, which requires overwhelming effort, money, and computational power. That renders the attack highly unlikely.
The blockchain digital ledger is Bitcoin’s first defense against bad actors. The blockchain verifies and validates all Bitcoin transactions on an encrypted digital ledger. The validated data is irreversible, making it impossible for users to cancel transactions or use the same tokens twice. Like https://immediate-edge.co/ that tracks crypto price movements, blockchain maintains a clear record of all Bitcoin transactions flowing through the network.
Fixed Supply
Fake money is not subject to government regulations or central banks’ policies. Criminal enterprises are the sole custodian and decision-makers, regulating the supply of counterfeit money based on their individual needs. In their view, producing more fake currencies contributes to increased profitability. Thus, they are inclined to create as many counterfeit coins as possible.
Bitcoin is also a decentralized currency without any central governing entity. However, its supply and circulation strictly depend on the underlying protocols. Bitcoin has a fixed reserve cap of 21 million tokens only, with about 19 million already minted. Miners generate new tokens at a pre-determined rate based on the Bitcoin algorithm.
Bitcoin also undergoes halving, reducing the rewards issued to miners by half every four years. Those in-built protocols make Bitcoin pretty scarce, driving its demand and value over time. The inability to regulate Bitcoin’s supply significantly distinguishes it from fake currencies that criminals can create and circulate at their convenience.
Robust Legitimate Applications
While criminals use counterfeit currencies for various transactions, their applications are mainly limited to the black market or low-profile marketplaces where they can avoid detection. Today, many businesses have enhanced tools and technologies to detect fake money instantly, discouraging criminals from using it in mainstream transactions.
Bitcoin attracts increasing prominence as a legitimate means of payment and store of value, recognized worldwide. Several industries, including real estate, finance, healthcare, e-commerce, travel, and retail, have integrated crypto payments, allowing consumers to buy various goods and services in Bitcoin.
Bitcoin is also a highly profitable asset with better resilience to inflation. Thus, investors increasingly buy and hold it to hedge against inflationary threats. Bitcoin’s underlying blockchain technology is an open-source platform, facilitating ground-breaking innovations such as smart contracts and decentralized finance.
Overall, Bitcoin has some characteristics that could make it seem like fake money to some people. However, it is a legitimate currency and asset recognized worldwide.
