Bitcoin – Utopia or the Future of Finance?

16 January 2025

Bitcoin (BTC) was invented in 2008 – a time where no one, but a few, could fathom the need of a digital currency. Over the years, BTC has garnered significant attention, becoming one of the popular and talked-about investment vehicles within the cryptocurrency domain.

In fact, most individuals resonate BTC with the digital gold, which may become a currency benchmark for global superpowers in times to come.

But is it possible? Could we witness BTC influencing global finance or is it just a speculative bubble?

In this article, we’ll build the case from the ground-up to understand BTC’s dynamics and how it will play out in future.

Let’s begin.

Bitcoin’s Origins: Why Was it Created?

Bitcoin’s Origins Why Was it Created - Nakatomi

In response to the global financial crisis in 2008, an unknown person, Satoshi Nakamoto, developed a decentralized digital currency, which came to be known as Bitcoin.

In 2008, FEDs printed money to bail out banks who approved subprime loans cluelessly and drove the mortgage housing market. Therefore, the main motive of BTC was to protect individuals’ wealth.

BTC was based on Distributed Ledger Technology (DLT), wherein its main objective was to de-link Financial Institutions (FIs) from the currency, and protect individuals from fraud and monopolization of FIs.

The digital currency wanted to revolutionize how people used to access and control their money, offering a safe haven and inflation hedge.

But did BTC succeed in achieving its objectives? Let’s talk about it.

BTC’s Success: Meeting its Underlying Objectives

BTC’s Success Meeting its Underlying Objectives - Nakatomi

In several aspects, BTC did succeed in meeting its initial objectives.

First, the currency was decentralized operating without any central authority. Further, BTC had an open-source code – anyone could contribute to it. There was transparency of all transactions, and anyone could obtain its copy and become a miner.

Therefore, BTC successfully set the stage of decentralization, whereby the digital coin eliminated all the intermediaries and provided users with complete control over their finances.

If you view it from the aspect of de-linking currency from FIs, BTC was successful. It revolutionized the way people could store and transfer their money digitally without any intermediary.

Moving on, BTC also, in some form, provided inflation hedge to the investors. Ask how?

Well, BTC has a limited supply – 21 million – which gives it the ability to naturally hedge inflation. Additionally, the halving also enhances BTC’s value. At this point in time, miners can only mine 3.25 BTC every ten seconds, which was previously 6.5 BTC.

Historically, BTC’s value has also gone up when it was halved every four years. Hence, we could expect the value to grow as the halving continues.

If we take a step forward, BTC has also raised security standards in a way never seen before. Due to its decentralized nature, all the transaction records are available to everyone, and they are immutable. Therefore, the chances of frauds when dealing with BTC sharply reduces.

Where did BTC fail?

Where did BTC fail

BTC ticked nearly all the boxes when it came to meeting its initial objectives. However, things took a turn when investors started to speculate and take bets on the value of the digital coin.

The speculative nature has made BTC quite volatile, which raises concerns about its stability and ability to store value.

But that’s not all.

The quick processing speed, decentralized nature, and lack of regulatory oversight increases risks of illegal activities, ranging from money laundering and frauds. This is prevalent in emerging and frontier markets where payment systems aren’t mature enough to process quick transactions.

Furthermore, BTC isn’t scalable since it’s capped at 21 million and mining requires enormous amounts of computing power. BTC is based on proof-of-work consensus, meaning that the miners with computers powered by strong GPUs will always succeed. This requires heavy initial investment, and is usually not worth it.

Can Bitcoin be the Foundation of a New World Order?

Can Bitcoin be the Foundation of a New World Order

After analyzing all the features of BTC, we will now discuss whether BTC can become the next financial benchmark.

BTC has seen incredible lows and unprecedented highs, dropping below $20,000 in 2023 while crossing $100,000 in 2024. This reflects extreme volatility, which raises concerns for stability.

On the other hand, gold has grown at a CAGR of 6% over a 30-year period, which shows that it’s a stable alternative investment.

To become a benchmark for FIs, an asset needs to be stable in value, but the inherent speculative nature of BTC suggests that the digital coin is quite volatile.

Furthermore, there also needs to be widespread adoption of an asset to make it a benchmark. However, individuals today are hesitant to adopt BTC due to security and stability concerns.

Gold, on the other hand, has been used as a medium of exchange since medieval times. In fact, the dollar was linked to gold till the 1970s, after which Nixxon abolished the gold-backed currency system.

The inherent feature of gold was that it offered a natural inflation hedge and was widely adopted. However, this isn’t witnessed with BTC. The only common thing is that both BTC and gold are scarce, which may continue to provide value in the future.

Considering these factors along with limitations of BTC, the digital currency might not be a benchmark in the future.

However, things are changing and are poised to change further…

BTC: The SteppingStone for Financial Revolution

https://nakatomi.pl/wp-content/uploads/2025/01/BTC-The-SteppingStone-for-Financial-Revolution.jpg

In 2024, a notable development in the crypto space came in the form of SEC’s approval of Bitcoin ETFs. After this, multiple asset management giants like Blackrock developed BTC ETFs, which led to the widespread adoption of BTC, pumping its value. This new change garnered interest from institutional investors, who started to allocate certain funds for cryptocurrency.

Following the blockchain revolution, banks have started to realize the importance of fast digital transactions. Therefore, top global financial centres, such as JP Morgan, have launched their coins for quick transactions.

But that’s not all…

Central banks are also making the move. Central Bank Digital Currency (CBDCs) are being developed globally, which are digital counterparts of fiat currencies issued by central banks. This reflects that countries view cryptocurrencies beneficial and want to adopt them as a medium of exchange in the future.

The point is that BTC set the stage for digital currencies and blockchain. After its resurgence, ETH, stable coins, and multiple cryptocurrencies have been launched which have driven the financial revolution.

DeFis and smart contracts have revolutionized the way people can access financing quickly without going to FIs.

So, BTC planted the roots for financial revolution, but it is being evolved by actions of global economies.

Parting Thoughts!

BTC is here to stay, and it’s alway will fluctuate based on halving and geopolitics situations. But due to its volatility, the digital currency might not become a benchmark for global economies.

Nevertheless, the continuous innovations in blockchain and willingness of economies to develop their own CBDCs suggests that blockchain will likely be the future of finance – a world where transparency prevails.

That’s it from our side.

Share your thoughts—how do you see the future of cryptocurrencies?

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