Over the recent past years, Bitcoin has become a popular name as a result of the steep rise in its value. Many people have begun to get Bitcoin with the expectation of a further increase in value and price.
However, many people remain skeptical about this digital currency and want to be sure it is real money. After all, it may not be so valuable if it can not serve as a medium of exchange for goods and services.
What makes for “real” money? Every money (commodity used for payment) must possess some qualities. We will find out these characteristics in this article and compare them to Bitcoin to answer the question “Is Bitcoin real money?” You will also find answers to popular questions like “Is Bitcoin traceable?” or “who created Bitcoin?”
Characteristics of Money
Table of Contents
● General Acceptability
This is the very first characteristic of money and its very essence. Everyone must accept money as a medium of transactions. It should have some intrinsic value that makes it a suitable commodity for getting another commodity.
● Portability
Money should allow for convenience in case you need to carry it about. This spells high value in small bulk.
● Durability
Money should not retain its value over a long period and it must not deteriorate easily when you keep it in a reserve.
● Homogeneity
All specimens of the substance used as money should be the same in weight, value, and quality across the globe. all units of a commodity must be similar in all regard to qualify as a means of exchange.
● Divisibility
Money material should be divisible and the units when brought together should possess exactly the same value as before.
● Cognizability
Money should have certain marks that distinguish it from other substances. No one should need to scrutinize it to recognize it.
● Stability
The value of money should not always fluctuate, money should be stable in value as a medium of exchange.
Key Characteristics of Bitcoin
If we can answer the question “What is Bitcoin”, understanding its characteristics may not be a task. Bitcoin is a kind of cryptocurrency, which is a digital currency. This means that Bitcoin does not have a physical form, it is entirely virtual. So, you don’t need to ask “what does Bitcoin look like?” or “are there physical Bitcoins?” Bitcoin can’t be seen or felt.
Created in January 2009, bitcoin is the brainwork of Satoshi Nakamoto. There is not so much recorded about him as his real identity remains unknown.
Also, you may ask, “what is Bitcoin backed up by?” There is no traditional system that backs up Bitcoin, hence, the value of Bitcoin is not dependent on any economic or political situation. Now, the key characteristics of Bitcoin include:
Fast
Normally, the exchange of traditional money in a bank may take up to days in some cases, the exchange of Bitcoin takes only a couple of minutes. The Bitcoin system works with digital technology.
You don’t need to go to a bank to send or receive Bitcoin, from the comfort of your home, you can perform transactions with your computer.
Transparent
Falsifying transactions with Bitcoin is not easy because blockchain technology records all exchanges. So, how much Bitcoin you have is readily available in your wallet. Although you can keep a solitary wallet, you will need painstaking measures to achieve that.
Decentralized
Bitcoin is a “decentralized currency”. This explains that the Bitcoin system is autonomous, it is not dependent on any administrative functions to exist. Even if some portion of the system crashes, the currency will still be in circulation.
Safe
Bitcoin works with a blockchain technology that keeps records of all transactions. This makes it extremely difficult to tamper with it. For someone to tamper with a blockchain system, they would have to access all blocks in the chain, including the distributed versions.
Anonymous
Some ask ” Is Bitcoin Anonymous?” The answer is yes. There is no institution stores your database, financial record, telephone number, and addresses. Practically, no one manages users’ data or Bitcoin wallet, nor interferes with Bitcoin exchange.
Relationship Between Bitcoin and Money
Just like traditional money, Bitcoin has value. Currently, many online marketplaces accept Bitcoin as a medium of exchange. And, even though many countries reject the use of Bitcoin as a form of money, the narrative is changing. Not long ago, El Salvador broke the record as the first country to accept Bitcoin as a medium of exchange.
This means that Bitcoin can now be said to share the same characteristics as money, even though this may not be based on physical properties.
The major difference between Bitcoin and traditional currencies is that Bitcoin is decentralized. No one or institution controls it. Bitcoin fits perfectly into the description of a “system”.
FAQs About Bitcoin
How Does Bitcoin Work?
Typically, Bitcoin works with a wallet through which users can send and receive the currency. There is also a decentralized technology called “Blockchain”. It keeps a record of all Bitcoin transactions, making it traceable.
To own a Bitcoin, you can either mine or buy it. Mining Bitcoin simply means using high-powered computer hardware to crack a code for a certain amount of Bitcoin as a reward. Alternatively, you can buy Bitcoin from people who own it already, this is called P2P.
Does Bitcoin Have Value?
The value of Bitcoin is equivalent to the number of its users. This means that as more people become aware and use Bitcoin, it becomes more valuable. In other words, the value of Bitcoin comes directly from people’s willingness to accept it as payment.
What Determines the Price of Bitcoin?
The price of a bitcoin is a function of the market forces of demand and supply. As the demand for Bitcoins increases, the price increases, and vice-versa.
How Many Bitcoins Are There?
The highest amount of bitcoins that can ever be in existence is 21 million, and currently, 18.5 million has been mined. So, how many Bitcoins are left?” There are approximately 2.5 million bitcoins left to be mined. However, you can always use the peer-to-peer option, which is buying from other users.
Conclusion
So, is Bitcoin real money? Although Bitcoin doesn’t have a physical form and is decentralized, it is relatively acceptable as a medium of exchange. Aside from acceptability, it also shares other characteristics with real money.
