This is What Happens When There’s No Government Control

Bitcoin, a decentralized digital currency, has recorded meteoric growth over the past few years. In fact, no other asset in history has ever delivered such phenomenal growth. The reason? This currency is not issued, regulated or controlled by any government or central agency.

Has Bitcoin Growth Really Been Jaw-Dropping?

In 2009, when Bitcoin was launched, it was worth only a few cents. By January 2016, one Bitcoin was worth around $400. This digital currency started 2017 by reaching a price of around $900. After this, there has been no looking back. It rose from below $1,000 to $4,000 in less than eight months. Amid skepticism, Bitcoin’s price skyrocketed to $6,000 by September. Proving the naysayers wrong, this digital currency was worth $8,000 in October, only to climb past $9,000 in a couple of weeks and surge past the $10,000 mark on November 29.

What is Bitcoin Anyway?

Bitcoin is the largest cryptocurrency today. Cryptocurrency is the name given to virtual currencies that were created by individuals and soon became a popular medium of exchange. Several corporate giants, including Microsoft’s Bing, Amazon, Dish, Subway, Dell, Apple’s App Store, Bloomberg and TechCrunch, accept cryptocurrency as payment for offering their goods and services.

So, how are cryptocurrencies different from fiat money (like Rupees and Dollars)? Cryptocurrencies are neither minted by the government of any country, nor are they regulated by any central agency. They are completely decentralized and transactions in these virtual currencies are authenticated by a strong peer-to-peer network.

Why Did Bitcoin Become So Popular?

As with anything that is free of government regulation, transactions in Bitcoin are simpler, faster and much cheaper. Let’s say you had to send money from India to the US, you would use a wire transfer, make a credit or debit card payment or maybe use a payment service like PayPal, right? Whichever method you use, you would be paying a significant transaction fee. We’re so used to paying this fee, that we don’t even think about it or question it. When sending money via Bitcoin, the transaction fee is zero!

If that’s not enough, think about the time funds take to travel between two accounts. It could take anywhere between a few hours or a couple of days, depending on the method you’re using. When sending Bitcoin, however, the transfer is instantaneous. Why? There’s no unnecessary bureaucracy to deal with.

Let’s look at the security aspect. You’ve read how hackers can steal money from your account or credit card, right? What’s more frightening is that there’s risk of identity theft when you’re transacting online. Bitcoin transfers are much safer than any other method of online payment and your identity is protected.

But Why the Rising Popularity of Bitcoin?

Advantages like identity protection, simplicity and speed of transactions and negligible costs were reasons enough for individuals and businesses to choose cryptocurrencies over fiat money. As the global acceptance of this digital asset grew, so did its liquidity. And, this attracted investors and traders.

For investors, Bitcoin and other cryptocurrencies offer a number of advantages. Again, this is because of the absence of government control. As you know, inflation eats into the value of fiat money. This is not the case with cryptocurrencies; they are immune to inflation.

The value of fiat money would fall when there is political instability or an economic downturn. Such factors have an impact on all assets (like equities, currency and commodities). However, they do not impact cryptocurrencies, since they are not limited to a particular geography.

Cryptocurrency prices are determined purely by the market forces of demand and supply. This is probably what makes traders and investors value these assets to diversify their trading or investment portfolio.

Experts and financial analysts are now predicting continued growth of Bitcoin and cryptocurrencies in general. There are going to be some setbacks, like China declaring these as illegal and the governments of other nations discussing how to regulate them. Despite these setbacks, the inherent ‘free market’ nature of cryptocurrencies could continue to work in their favor.