May 22, 2020 6 min read
Opinions expressed by Entrepreneur contributors are their own.
Despite recent price volatility and global macroeconomic uncertainty, 2020 is a big year for Bitcoin. Although a large number of businesses and private individuals are still apprehensive about adopting cryptocurrencies, the number of blockchain-dependent businesses and Bitcoin users is steadily rising — having more than quadrupled over the past three years.
There are several very good reasons why it’s fair to assume Bitcoin is not only here to stay but about to positively flourish.
Bitcoin, due to blockchain technology, is decentralized. This means that there is no central authority — like a bank or state apparatus — in charge of the currency. Some argue that there are pros and cons to this, but one thing is certain — decentralization provides a higher level of security for the currency. The fact that Bitcoin is not centralized makes it less vulnerable to security threats and more resilient and efficient.
Additionally, while Bitcoin is more pseudonymous than anonymous, transactions are completed under a pseudonym but can still be linked to a physical user. Many users are uncomfortable entering their banking and personal details online, so Bitcoin offers an alternative that, at the very least, appears safer.
All that’s required to perform transactions with Bitcoin is a smartphone with internet access. Since no physical banking institutions are involved, cryptocurrencies like Bitcoin have an advantage, particularly in developing countries where traditional banking is lacking or underdeveloped, like in some areas of Africa. Since it’s easier to set up an internet connection than it is to create a physical banking network, Bitcoin is likely the currency of the future for many areas of the world.
Accessibility and ease of use
As we become increasingly used to apps and software solutions for everyday tasks and problems, we’re beginning to expect that "there’s an app for that."
If there’s an easier, more efficient way to conduct business or complete service through the use of technology, most people will take advantage of it. And Bitcoin — although its underlying technology is highly complex — is incredibly easy to use.
Anyone who’s ever completed an international bank transfer through traditional means can tell you that it’s not the easiest process — and certainly not the cheapest. Online platforms such as PayPal or TransferWise have made it both easier and cheaper than standard bank operations, but there are still fees and configuration issues involved.
Bitcoin, meanwhile, makes it possible to complete international transfers instantly and, most importantly, without third-party fees. This is particularly important for business owners. As markets become increasingly globalized, more and more customers are taking advantage of services and products provided by companies from abroad.
Let's consider basic economics. Part of the design of Bitcoin involves a limit as to how many coins will ever exist — setting the cap at around 21 million. This was a conscious decision on the part of Satoshi Nakamoto, the entity behind the invention and deployment of Bitcoin.
This limit effectively makes Bitcoin inflation-resistant, giving it a major advantage over traditional currencies, all of which are subject to losing value at certain times. The anti-inflationary measures mean that Bitcoin will always retain its value, and also make it a viable alternative to traditional currencies in countries where hyperinflation is rampant, such as Venezuela.
In addition, the halving will occur this year, which will slow the rate of introduction of new Bitcoin into the ecosystem as the total supply marches ever closer to 21 million.
Using Bitcoin — including its implementation in everyday businesses -— doesn’t require any specific alterations or complex systems to be put into place. The cryptocurrency’s accompanying apps and software are compatible with existing technology — smartphones and computers — meaning that no additional investment is necessary to start using Bitcoin.
Potential for increased investing
Bitcoin is valued not only as a currency but also as an investment — not unlike gold or other precious metals. Since Bitcoin appeared on the market, investors have expressed widely different opinions on the cryptocurrency as a potential investment. Some found it to be an ideal opportunity, many believed it too short-lived and/or volatile, and most knew too little about it to have an opinion.
A 2019 survey by Grayscale is highly illuminating on the subject. A sizeable portion of investors — 36 percent — stated that they would consider an investment in Bitcoin. Crucially, though, of the remaining 64 percent — those who wouldn’t consider investing in Bitcoin — a huge 89 percent said their lack of interest stems from having insufficient knowledge about cryptocurrencies.
It’s a logical prediction, therefore, that as the use of Bitcoin as a currency becomes more widespread and understanding of the nature of cryptocurrency more common, investors will be increasingly comfortable with considering it a worthy investment over the coming years.
Lack of superior competition
Superior is the keyword here because Bitcoin is no longer the only cryptocurrency around. Ethereum, for instance, was one of the first competitors to emerge, imitating the technology behind Bitcoin. However, for the competition to be a threat to Bitcoin, it would need to have some specific and tangible advantages.
Fiat currencies have failed because humans can’t help but print more money. There has never been a time where a deflationary alternative built on code and mathematics is needed. Bitcoin has a compelling use-case as a store of value, particularly in countries experiencing hyperinflation such as Iran, Turkey and Venezuela. Bitcoin also has a compelling use case in remittances, and greater adoption by financial institutions will help provide these services at more competitive rates.
One thing is certain: Bitcoin and digital currencies are here to stay.