When the mysterious and still unknown Satoshi Nakamoto started Bitcoin, nine years ago, he was very clear about the new technology’s objective, namely, to do away with all fiat currencies and to get rid of the world financial system.
This statement was (and remains) so ambitious, and the blockchain technology was so unknown that hardly anybody took him seriously at the time. Mr. Nakamoto’s words were especially unwelcomed (even derided) by experts in the financial sector.
But a new study released by UBS, one of the most important banks in Switzerland suggests that Mr. Nakamoto could still be proven right. After exploring Bitcoin’s features and characteristics, UBS researchers have concluded that it could indeed replace the USD if and when it reaches a price of around 213,000 USD per token.
While there is no way to predict when this could happen, the study implies that, in principle, there is no reason why it shouldn’t. The token will hardly hit this mark any time soon, but some expert/enthusiasts as John McAfee are very confident that it will hit as much as a million in price sooner or later.
Bitcoin was the first cryptocurrency and, as such, it’s still the most important one. It’s the one that gathers more attention and interest from both experts and layman. Many people around the world think, for instance, that the words Bitcoin and cryptocurrency are interchangeable.
UBS placed another restriction on Bitcoin’s success: it has to be considered money first or, at least, a viable asset class. That begs the question of why is Bitcoin not money already or not viable? UBS addressed the viability issue “our findings suggest that Bitcoin, in its current form, is too unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.”
But is it money? USB doesn’t think so but if Bitcoin is not already money or an asset class then why is it being taxed as such already. Moreover, several financial experts (even traditional ones who are not very well inclined towards crypto assets) are on the record affirming that Bitcoin is, indeed, money. So why is there still any controversy?
The disagreements are rooted in a definition of money given by a research paper called ” Cryptocurrencies: Overcoming Barriers to Trust and Adoption.” In this paper, it’s stated that a cryptocurrency must be able to perform three different functions to be considered real money. It must store value, be a medium of exchange, and an accounting unit.
The current consensus (led by a study performed by the Imperial College London and eToro) is that Bitcoin and many other digital assets are already meant to store value so that one is covered. But regarding the other two Bitcoin must first solve some of the current limitations it has. Lack of scalability, time of transfers, design, and regulation are still problems that plague it and are an obstacle to fulfill the role money should in everyday use.
The Bitcoin community is already taking steps to solve those problems. New features such as the Lightning Network, Bulletproof, SegWit, Bitcoin Core 0.16.0 are already deployed or in the works, and they aim to fix those very issues. This means that Bitcoin could indeed qualify as real money very soon, before a couple of years at most.
The UBS’ study is crucial (along with the one from Imperial College London) because it shows that both academic and traditional financial circles are starting to read the writing on the wall when it comes to crypto coins.
This is critical development and the crypto community at large would benefit to listen to this external observers and learn something from them. It’s still too early to know if digital assets will indeed end up replacing all the fiat currencies in the world and replacing the financial system, as Mr. Nakamoto imagined. But now we know they could.
Image Courtesy of Pixabay.