“A purely peer-to-peer version of
electronic cash”: that’s how Satoshi Nakamoto defined Bitcoin in the original
whitepaper. Electronic cash or not, Bitcoin has now attracted the
attention of everyone: tech enthusiasts, consumers, traders, investors, bakers,
and even regulators.
Although Bitcoin dominates the
multitrillion-dollar market, there are tens of thousands of other
cryptocurrencies; some were developed for particular purposes, while others are
based on mere internet jokes.
So, the question remains: Does Bitcoin
or any other cryptocurrency have the potential to replace existing forms of
fiat currencies?
Well, the governments of two sovereign
countries, El Salvador and the Central African Republic, think so, as Bitcoin
is a legal tender there. However, things are different in other countries,
especially the developed ones that dictate the global economy.
Understanding the Basics
Before diving into the details, it is
crucial to understand the fundamental difference between fiat currencies and
cryptocurrencies. Although the basics might be distinct on the surface, the
adaptation of both has created co-relations.
Fiat currencies, such as the US
dollar, euro, or yen, are issued by the central banks of the countries. The World Bank defines fiat currencies as “any
legal tender designated and issued by a central authority that people are
willing to accept in exchange for goods and services because it is backed by
regulation.” The government backs them, ensuring legal guarantees for them.
Interestingly, some fiats, like the Belize dollar, the Hong Kong dollar, and
the United Arab Emirates dirham, are pegged to the US dollar.
On the other hand, cryptocurrencies
are decentralised and not backed by any centralised authority. According to the
World Bank, cryptocurrencies are “a type of unregulated, digital money, which
is issued and usually controlled by its developers, and used and accepted among
the members of a specific virtual community.”
But what was the psyche of Satoshi
Nakamoto, the creator of Bitcoin, in creating it?
In the Bitcoin
whitepaper, the mysterious Satoshi Nakamoto
