While bitcoins may not stand the test of time, they have led a lot of financial analysts to applaud the general concept of a digital currency. The idea of a crypto-currency that can be traced is an appealing concept and many think it is only a matter of time before governments begin using some form of digital currency as a replacement for paper money. So, how did this all come about? Let’s go over the facts about bitcoins and why financial analysts are taking notice.
How Did All Of This Start?
Bitcoins were launched in 2009 as a form of digital currency has been accepted by the online community as a breakthrough in the way we do online trading. After online merchants began accepting bitcoins as a form of payment, the value of bitcoins as a real currency became legitimate. This doesn’t mean that banks and governments were willing to jump on the band wagon. In fact, the opposite, most banks and governments don’t recognize bitcoins as currency and have attempted to thwart it wherever possible.
Bitcoins are Unstable
While the bitcoins market is unstable, people continue to trade with them daily. There are a number of websites that provide an exchange similar to the way other websites facilitate the trade of stocks and currencies already. Without regulation, banks are unwilling to recognize bitcoins as currency, making the websites that operate bitcoin exchanges extremely vulnerable to the closing of their bank accounts. The past couple of months had already seen a large fluctuation in prices of the bitcoin, doubling in value before dropping below its initial value.
If Bitcoins are Unstable, Why Is It the Future of Currency?
It’s easy to pass bitcoins off as a fad that will eventually pass, leaving those that invested in it with empty pockets. This doesn’t mean that it has proven a point. The trade of bitcoins has shown that a digital currency can be accepted and traded in the real world. There are several reasons that governments may already be looking into similar methods for their own currency.
Part of bitcoins appeal is that when they are mined from the computer network that holds them, the user that uncovered the bitcoin is anonymous. This makes it easier for hackers to use bitcoins for the purchase of illegal goods. If a government was to issue its own digital currency, it would be able to trace it very easily. By having an easier way to track money, a government could limit the availability of that currency for illegal purposes. Governments would love to have a method in place to track money easier.
There is also a lot less cost involved in monitoring a digital currency than there is in printing and distributing a paper currency. The factories minting coins and printing paper currency would eventually not be needed, saving money. If nothing else, the trade of bitcoins has been an incredible success as a social experiment and it’s only a matter of time before the government takes a serious look at it.