Despite obstacles such as fluctuations in value and unpredictability in regulations, Bitcoin is still a workable medium of exchange that may eventually find wider adoption in conventional banking institutions.

What is money?

Money is defined as anything that is commonly accepted as payment for goods and services. It serves as a trade medium, a unit of account, and a store of value.

Why do we value 1 dollar = 1 dollar?

The US dollar is not backed by any tangible asset, such as gold or silver, because it is a fiat currency. Rather, its value stems from the collective trust and confidence of the people in government. Because the US government declared it legally acceptable for the exchange of goods and services and the settlement of all debts, both public and private, people are more inclined to accept US dollars as payment for goods and services when they consider them a stable and trustworthy currency.

Why do we pay for a commodity at a given price?

The price of a commodity is typically determined by both the seller and the buyer when the buyer is willing to buy a product, service, or commodity at a predetermined price and the seller is willing to sell a product, service, or commodity at a predetermined price for mutual benefit. A price is a psychological event, a difference of opinion between buyers and sellers.

How Bitcoin is fulfilling all the characteristics of money

Bitcoin effectively satisfies the requirements for money. It is durable, portable, fungible, divisible, scarce, and accepted. Additional benefits of Bitcoin include security and decentralization. Because of these attributes, Bitcoin is a valued currency that has the potential to be very significant in the world financial system.

Bitcoin durability

Durability refers to the currency's resistance to deterioration over time, wear and tear, and decay. Bitcoin is a digital currency; unlike tangible forms of money like coins or paper money, it does not exist in the real world and can be stored and used indefinitely. Rather, the blockchain's structure and the underlying technology ensure its resilience.

Here is proof of Bitcoin’s durability in the past. The Chinese government banned the transaction of Bitcoin in 2017. The Bitcoin network, however, carried on as usual. Even when they could no longer trade bitcoins on Chinese exchanges, consumers could still send and receive bitcoins.

Bitcoin portability

As far as currency goes, bitcoin is incredibly portable. It takes only a few seconds to send or receive from any location in the world with an internet connection. Because of this, using it for cross-border payments and other operations where portability is crucial is quite convenient.

Because Bitcoin is a digital currency, its portability is enabled. Bitcoin can be utilized without having to be physically moved, in contrast to conventional fiat money. It can be electronically transferred and stored using a range of hardware and software wallets.

Bitcoin divisibility

Bitcoin can be divided into tiny pieces known as satoshis. A single bitcoin is worth one hundred million Satoshis. This implies that both modest and huge purchases can be made with Bitcoin. Because Bitcoin is a digital currency, its divisibility is possible. In contrast to conventional fiat currencies, Bitcoin has no value loss when divided into extremely small portions.

Due to its divisibility, Bitcoin is an incredibly flexible form of payment. It can be used to establish micropayment channels as well as make both small and large transactions. Because of this, Bitcoin is a useful tool for both individuals who wish to use it for regular spending and those who want to use it for online donations and payments.

Bitcoin fungibility

This implies that each bitcoin has the same value and that they can all be traded for one another. Money should be fungible because it makes it possible for people to transact with faith in one another. People would be concerned about obtaining bitcoins that were somehow tainted or less valuable than other bitcoins if they weren't fungible. Bitcoin is a more attractive form of money for businesses as it eliminates the risk of receiving bitcoins that have been stolen, counterfeited, or used for illegal purposes.

Bitcoin scarcity

There are only going to be 21 million bitcoins in circulation because of the process by which fresh bitcoins are created; bitcoins are scarce. The process of "mining" produces new bitcoins. To earn bitcoins, miners utilize powerful computers to solve challenging mathematical puzzles. Every two weeks, the mining difficulty is changed to produce new bitcoins at a constant rate of 6.25 per block.

Because of its rarity, bitcoin is an excellent store of value. It also aids in preventing inflation on the Bitcoin network. The gradual decline in the purchasing power of money is known as inflation. An expansion in the money supply is the root cause of it. Since there are fewer bitcoins in circulation, inflation can be avoided.

Bitcoin acceptability

An increasing number of businesses are using Bitcoin as payment. This can be attributed to several causes, such as the growing acceptance of Bitcoin, the simplicity of utilizing Bitcoin payment gateways, and the minimal fees related to Bitcoin transactions. The acceptance of Bitcoin will rise as more businesses accept it, making it simpler for consumers to use for regular purchases.