Why Bitcoin's World Reserve Currency Dream is nothing more than a Fantasy
Bitcoin, the world's first and most well-known cryptocurrency, has been touted as a potential world reserve currency for some time now.
TLDR: Firstly, bitcoin is not regulated and operates on a decentralized network, making it a risky proposition for banks and governments. Secondly, the unknown creator of Bitcoin holds a significant portion of the total supply which could lead to market manipulation. Thirdly, Bitcoin is energy-intensive and environmentally unfriendly.
Bitcoin, the world's first and most well-known cryptocurrency, has been touted as a potential world reserve currency for some time now. However, as we delve deeper into the topic, it becomes clear that there are several reasons why Bitcoin is unlikely to ever become the world reserve currency.
Firstly, Bitcoin is not regulated. Unlike traditional currencies, which are backed by governments and central banks, Bitcoin operates on a decentralized network. This means that there is no central authority controlling its value or supply. While this is one of the main appeals of Bitcoin for some, it also makes it a risky proposition for banks and governments. Without regulation, there is no guarantee that the value of Bitcoin will remain stable, and this makes it an unreliable store of value.
Secondly, the creator of Bitcoin, Satoshi Nakamoto, is unknown and holds around 5% of the total supply of Bitcoin. This means that a single individual or group of individuals could potentially control a significant portion of the Bitcoin market. This level of centralization is not acceptable for a world reserve currency, as it undermines the principle of decentralization and could lead to market manipulation.
Thirdly, Bitcoin is energy-intensive. It requires a tremendous amount of energy to maintain its decentralized network, which is known as mining. This makes it environmentally unfriendly and also raises questions about the long-term sustainability of the currency.
When it comes to the question of whether Bitcoin could be used as a world reserve currency, the answer is a clear no. The lack of regulation, the unknown creator, and the energy-intensive nature of the currency are all major barriers that make it an unacceptable option for banks and governments. Additionally, it has failed to be “Digital gold” and a non-correlated asset which are the main reasons why many people invest in it.
In conclusion, while Bitcoin has undoubtedly disrupted the financial industry, it is unlikely to ever become the world reserve currency. Banks and governments require a stable and reliable store of value, and Bitcoin simply does not provide this. The lighting network is fast but it is not enough to overcome the above-mentioned factors. As we move forward, it will be interesting to see how the cryptocurrency industry develops and whether any other digital currencies can successfully challenge Bitcoin's position as the leading cryptocurrency.