Nowadays Bitcoin can be described not only as just a form of a digital currency but clearly, it’s more a cultural and financial phenomenon of our age. The spread of this popular cryptocurrency raises rapidly and more and more people become involved in the crypto market. Even though it’s hard to find a single person who has never heard of Bitcoin, its success is not enough to understand how it really works, and actually, most of the people who are frequent bitcoin users don’t even know what Bitcoin even means.
The common opinion is that Bitcoin is a digital currency that allows people to make peer-to-peer transactions without any type of involvement of third parties like the banking system or the government. Everybody knows that it’s virtual money that you can store on your e-wallet and not a physical coin and use to transfer money to each other easily and quickly. The main reason why it is regarded as a revolutionary is that it works even across international borders. But nowadays financial experts believe that it’s more of an investment than a currency as many people usually buy Bitcoin as a financial investment rather than using it for making transactions.
So, after all, what is bitcoin, currency, or financial asset? But more importantly, another important matter of concern is whether it has the ability to become a medium of exchange as the line dividing currencies from financial investments is not clear.
The potential of becoming a medium of exchange
Today many financial experts believe that bitcoin has the potential to become a real medium of exchange which is important for increasing the efficiency of trade-related activities. In fact, the most essential function of a medium of exchange is that it has a real value, so this way bitcoin may have a steady purchasing power and therefore, it could be widely accepted.
Nowadays most of the time Bitcoin is used as an investment. People have seen the possible benefits of buying bitcoin as an investment because they can easily trade bitcoin for cash or even assets like gold with pretty low fees. The main reason why it is considered a great investment is the high liquidity associated with it.
Also, there is a high market demand for bitcoin which is why it can help you gain both short-term and long-term profit. Investing in Bitcoin is a really great deal for online gambling sites as well because it’s not necessary to cover processing fees. Therefore, you can find many BTC casino sites where fees in bitcoin are way cheaper than those associated with leading credit cards or e-wallets. But on the other hand, some may argue that bitcoin can’t be considered a medium of exchange because of its volatile nature. That’s because bitcoin doesn’t have a value like commodities such as gold. As a result, some financial experts believe that bitcoin can’t play the role of a medium of exchange.
Will bitcoin ever be used as a medium of exchange?
Plenty of research has been conducted in order to reveal ways to help bitcoin become a real medium of exchange. For this experts have been evaluating the circulation of bitcoin. They have revealed different factors that can help bitcoin to act as a medium of exchange. In case you are not sure what it means, the medium of exchange is an intermediary system that aims to facilitate the process of selling, purchasing, or trading goods between different parties. And for this, it’s important to represent a standard of value.
As this research shows, becoming a medium of exchange is dependent on bitcoin’s scalability, liquidity, and adoption. First of all, bitcoin has to solve the scalability issue which means attaining the ability to be easily changed in size. Bitcoin is only capable of conducting about 4 transactions per second while payment systems like Visa are making more than 150 million transactions per day. The solution may be using the lightning network which is a second layer of the blockchain and has the potential to conduct millions of transactions per second, but for now, bitcoin has to overcome this issue to compete with other payment systems and operate as a medium of exchange.
Another important thing that bitcoin needs to achieve is liquidity - the potential to buy or sell this digital currency at a fair market price. However, currently, as a lack of liquidity bitcoin’s price is usually volatile because it needs to be convertible to other asset classes. Therefore, bitcoin has to overcome these price swings to start acting like a more stable market. And the one last key factor for bitcoin to become a medium of exchange is the adoption. The number of bitcoin users increases daily and currently, there are more than 700 000 bitcoin wallets. But adoption is important and governments should globally enable using blockchain to raise the possibility of more user-friendly financial services. That way bitcoin can become a legitimate use of money.
Using Bitcoin in e-commerce
It is widely believed that Bitcoin is an innovation that changed the world and as the technologies develop, it can have important effects on the e-commerce industry as well. In fact, using Bitcoin in e-commerce may help bitcoin to turn into a real medium of exchange, and here’s why. Nowadays e-commerce merchants are paying more and more attention to bitcoin payments because it can actually be pretty beneficial to your online store. Specifically, there are some major advantages to e-commerce stores.
First of all, BTC is chargeback-proof which means that if a customer successfully disputes an item on their account, the charge can be returned to a payment card. So, they keep the purchased BTCs and the dollar amount of the transaction. Another benefit is that bitcoin-associated transaction fees are very low and also, accepting bitcoin usually makes the business look more attractive for certain types of customers, as we mentioned above.
Therefore, using the e-commerce industry can help bitcoin to turn into a real medium of exchange and this will help the crypto market rise because generally, being a medium of exchange is one of the most important functions of money in an economy. For being an effective medium of exchange, it’s important for the money to be accepted in exchange for goods and services. However, now bitcoin is only used for a limited number of goods and this is why it needs to be used in e-commerce to serve as a medium of exchange. Considering the fact that people generally prefer a medium of exchange that maintains stable value over time, bitcoin really needs to meet all these discussed requirements to become a medium of exchange.