Bitcoin: an investment, a currency, or both?

As part of our ongoing series exploring the basics behind Bitcoin, today we’re exploring Bitcoin’s value. Is it a currency, an investment or a commodity?

What is money?

There are three fundamental values to describe what money is, and what it does.

• 🏦 It’s a store of value — you can save it and use it for later, knowing its value will remain.
• 💱It’s a medium of exchange — something we use to buy and sell things that everyone accepts.
• 📋It’s a unit of account — a way to measure the value of goods and services.

It’s important to understand this as it helps define how Bitcoin is currently perceived.

In places where adoption is low, it doesn’t satisfy any of the above. In areas where adoption is high, it can tick all three of the what is money boxes.

On a global scale, thanks to Bitcoin’s ‘GROWTH IN VALUE’ , it satisfies the criteria that the currency can be a Store of Value.

As a currency

Bitcoin’s original purpose — as laid out in the original paper published by ‘SATOSHI NAKAMOTO’ was to be a decentralised payment method.

What Satoshi wanted was to create a medium of exchange — a way to buy and sell goods.

However, as the popularity of Bitcoin has increased, its ability to serve as a quick, free way to transfer money has become hindered.

Transaction fees and the number of transactions that can be handled at once by the network has made Bitcoin seem less viable as a medium of exchange.

Read more about that in our article ‘BITCOIN’S LIMITS’ .

However, countries like Japan, Russia and Norway all accept Bitcoin is a currency.

The Lightning Network could fix many of the above issues, but for now it’s still in development.

Bitcoin as an investment

Thanks to Bitcoin’s amazing performance in 2017, many came to see the currency as a place to put cash and watch it grow. Like an investment.

Many have compared it to gold. The Winkelvoss twins — those guys who invested in Facebook — described Bitcoin as Gold 2.0. However, gold as an investment is regarded as somewhere safe to put your money when currencies aren’t faring so well.

As part of Bitcoin’s design, the amount of Bitcoin available increases in number at a rate of approximately 4% per year. It’s engineered to slowly decline to zero growth around the year 2140.

Bitcoin’s diminishing growth rate and finite quantity are comparable to gold in that sense. What’s more, Bitcoin’s volatility compared to other cryptocurrencies is lower — meaning it has potential to become the gold of crypto.

Want to know more?

This is just the tip of the crypto iceberg. LitePaper has a a whole host of easy-to-understand articles that make learning about cryptocurrencies, blockchain and DLT technology really simple.

Click here to learn more.