Bitcoin is one of the currencies recognized and used for transactions in many countries such as the United States, Canada, Brazil, the Philippines, New Zealand,… Since its launch, this currency has attracted the attention of investors. It has experienced peak development, decline, and resurgence in recent times. Therefore, the question arises: “Is Bitcoin the best-performing asset of all time?” Follow this article by Optimal Agency now!
About Bitcoin – A powerful virtual currency
What is Bitcoin?
Bitcoin is the first and largest cryptocurrency (cryptographic currency) created using blockchain technology. It is used as an online payment method, independent of central banks or governments. The emergence of the world’s first cryptocurrency paved the way for the development of the crypto market.
Unlike other transaction methods, Bitcoin uses a peer-to-peer network that allows direct exchanges between the sender and the recipient without intermediaries. This eliminates unnecessary fees and saves costs for international money transfers.
The total supply of Bitcoin worldwide is 21 million BTC, a number that cannot be changed. As of January 2023, about 19.2 million BTC have been mined, leaving approximately 1 million BTC yet to be mined.
The origins of Bitcoin
This first cryptocurrency plays a crucial role in the development of today’s crypto market. Satoshi Nakamoto created it in 2007. In 2008, the domain Bitcoin.org was registered, and on August 31, 2008, Satoshi first published his idea in a prospectus on the peer-to-peer payment method.
On January 3, 2009, Bitcoin was launched with the Genesis Block – the first block of Bitcoin. The first transaction took place between Satoshi and cryptographer Hal Finney on January 12, 2009, where 10 BTC were transferred. This marked the birth of a cryptocurrency not controlled by any government or central bank of any country. So, is Bitcoin the best-performing asset of all time? Follow the content below to understand more!
How does Bitcoin work?
This virtual currency operates based on three mechanisms:
Decentralized network
Bitcoin operates on a decentralized network, meaning its data is not centralized in one place. Instead, Bitcoin’s data is distributed across many nodes on the Internet. This ensures Bitcoin’s distribution and survivability, as data remains stored and transmitted by other nodes in the network during incidents.
Cryptography
Every transaction made with Bitcoin is secure and safe. When a transaction is made, it is transformed into an encrypted block and linked to previous blocks in the blockchain. Cryptography ensures that each transaction cannot be altered or forged and protects user privacy.
Supply and demand
The value of Bitcoin is determined by supply and demand factors. By limiting the maximum supply to 21 million Bitcoins, its price can be driven up. Similar to tangible goods, the price of Bitcoin increases when demand exceeds supply and decreases when demand is lower than supply.
After every 210,000 blocks are mined, the reward for each block is halved, a process called halving. This process gradually reduces the mining rate over time and affects Bitcoin’s new supply. Experts predict it will take about 120 years to mine the remaining Bitcoin. In addition, please see more information about How to see reels on Instagram On iPhone
Is Bitcoin the best-performing asset of all time?
There are two perspectives to answer this question. The first perspective supports Bitcoin as the best-performing asset of all time, while the second one denies this view. Let’s analyze these 2 points of view!
Bitcoin is the best-performing asset of all time
Since its emergence, many people have supported Bitcoin as a form of digital gold. Many believe that Bitcoin is one of the best assets humanity has ever known. Bitcoin is considered the best way to store wealth because its value does not change over time. This cryptocurrency is regarded as the best-performing store of value of all time due to:
Scarcity
The supply of Bitcoin is limited to 21 million bitcoins. To create new coins, they must go through a process of mining. Bitcoin miners must solve cryptographic puzzles using computational power. Over time, the reward for each block is halved. Initially, the system rewarded 50 BTC to any miner who created a valid block. During the first halving, this number dropped to 25 BTC, and in subsequent halving, the reward decreased to 12.5 BTC. This process will continue for another 100 years until the last coin is in circulation. This scarcity of supply makes Bitcoin the best-performing asset in terms of value storage.
Decentralization
Bitcoin operates on a decentralized network, meaning its data is distributed across many nodes on the Internet. This ensures Bitcoin’s survivability because, in case of an incident, the data remains stored and transmitted by other nodes in the network. This characteristic means that over time, Bitcoin is seen as the best-performing asset that can withstand volatility.
Attributes of a good currency
Bitcoin is not only a scarce digital resource but also shares characteristics with currency used for centuries. These attributes include fungibility, portability, and divisibility.
Fungibility: The specific Bitcoin you hold does not matter because all Bitcoins are of equivalent value. It only becomes complex when each BTC is linked to its previous transactions. Functionally, bitcoins can replace each other unless frozen or with a suspicious history.
Portability: This is a standout feature of Bitcoin compared to other assets like gold, cash,… It can be easily transported, allowing individuals to make quick payment transactions. You can store assets worth trillions of dollars on a small hardware device that fits in your palm. Moving $1 billion worth of gold (equivalent to 20 tons) requires significant effort and cost. However, with Bitcoin, you can send the same amount anywhere in the world for less than $1.
Divisibility: One notable aspect of Bitcoin is its divisibility. Despite there being only 21 million bitcoins, each coin is made up of 100 million satoshis. This gives users control over their transactions as they can specify amounts up to 8 decimal places. Bitcoin’s divisibility also allows small investors to obtain smaller portions of BTC more easily.
Store of value, medium of exchange, and unit of account
Bitcoin has undergone many difficult phases before becoming the most valuable currency. Initially, it was used as a collectible item accepted by a small niche market of enthusiasts and speculators.
As it became more widely known and maintained its value, Bitcoin transitioned to a store of value phase. Bitcoin users prefer spending fiat money as they have little faith in its long-term existence. They hold Bitcoin because they believe it will retain its value.
If the Bitcoin network continues to grow and more users accept it, liquidity will increase, and prices will stabilize. At that point, Bitcoin will be more widely used in commerce and daily payments as a strong medium of exchange. In a world dominated by Bitcoin, everything will be measured in bitcoin value.
Bitcoin is not the best-performing asset of all time
Contrary to the previous perspective, some people doubt the value storage capability of Bitcoin. Is Bitcoin truly the best-performing asset of all time? The reasoning for this perspective is as follows”
Bitcoin as digital cash
This argument posits that Bitcoin only has value if users spend it. By hoarding it, you’re not using it, which means it doesn’t have value. When Bitcoin is not highly regarded as digital cash, it becomes merely speculative and cannot be considered a store of value.
Some Bitcoin users want the system to have larger blocks, meaning lower transaction fees. However, increasing use of the original network leads to a significant rise in transaction costs. Without increasing the block size, Bitcoin’s usability as a currency is compromised.
Lack of intrinsic value
While gold is considered a safe-haven asset, Bitcoin is a digital asset used within its network. Unlike gold, which can be turned into shiny jewelry, Bitcoin is an intangible asset. This means Bitcoin does not have intrinsic value like gold; its value exists only within a niche market.
Volatility and correlation
Those who invested in Bitcoin early on have enjoyed its value increase over time, and for them, it does hold value. However, those who bought Bitcoin at its peak have not had the same experience. Many people have incurred losses by selling Bitcoin at any time afterward. Bitcoin is highly volatile, and its market is unpredictable. While Bitcoin’s price may eventually stabilize, at present, it is not the best-performing store of value.
Although there are two perspectives on whether Bitcoin is the best-performing asset of all time, it is still too early to assert that Bitcoin is a safe store of value similar to gold. During economic instability, the world might either shift to using Bitcoin or continue to use it within a niche market.
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FAQ
This powerful virtual currency is designed based on Blockchain technology. No one or any system can alter, delete, or overwrite data on the Blockchain. According to financial experts, Bitcoin has a very high level of security. The appearance and distribution of BTC are carried out automatically based on algorithms. Penetrating the Bitcoin system to attack and change the number of BTC is a tremendously difficult task. The Bitcoin network is protected by recording every transaction on a new block immediately upon creation. Bitcoin is considered one of the most secure and protected cryptocurrencies.
In recent years, the value of Bitcoin has increased significantly; however, this price does not fully reflect Bitcoin’s core value. Instead, it reflects market supply and demand laws. The important factor is that Bitcoin brings value based on its technology, as it is a peer-to-peer payment method that eliminates intermediaries in transactions. This fundamental reason is why Bitcoin continues to exist and be used.
