Jun 12, 2021, 10:00 AM ETOther

Crypto: will the bitcoin dream succeed?

In 2021, Bitcoin's price exceeded $60,000, contributing to a total cryptocurrency market valuation of $2.5 trillion.
The market experienced extreme volatility, including a loss of over $350 billion in value within a single overnight period.
Despite the utopian goal of becoming a new form of money, Bitcoin functions primarily as a highly volatile investment asset rather than a currency.
Bitcoin fails to meet the three primary criteria for money: medium of exchange, store of value, and unit of account.
Transactions are highly inefficient, processing only 10 per second compared to Visa's 24,000 per second, making it impractical for daily commerce.
Price instability is exacerbated by the lack of a central bank or government to defend its value against market sentiment.
On May 19, 2021, Bitcoin's price dropped nearly $8,000 in less than an hour, illustrating its susceptibility to rapid devaluation.

Bitcoin was created in 2009 by an anonymous figure named Satoshi Nakamoto to challenge trust-based financial institutions following the global financial crash.
The system operates on a public, decentralized ledger called a blockchain, verified by a global network of computers rather than a central entity.
Mining serves two essential functions: introducing new bitcoins into circulation and verifying transaction legitimacy.
Miners compete to solve complex numerical problems to add blocks to the chain, a process that rewards them with newly minted bitcoins.
As of May 2021, Bitcoin mining consumed more annual electricity than the entire country of the Netherlands.
The total supply of Bitcoin is capped at 21 million coins, with approximately 19 million already mined to date.
Transactions are recorded permanently on code-based ledgers; lost private keys result in the permanent loss of funds with no central server recovery option.

El Salvador became the first nation to adopt Bitcoin as legal tender, a move the transcript describes as a "major gamble."
Major financial institutions, including Morgan Stanley, have begun offering Bitcoin investment funds to clients.
Regulators currently permit banks to provide market access but prohibit them from betting on the markets using their own capital.
Bitcoin is frequently used for illicit activities, including the purchase of drugs and stolen data on the dark web.
The sector suffers from significant theft from crypto exchanges and widespread fraud.
Critics warn that Bitcoin's price patterns mimic historical bubbles, such as the 1630s Tulip Mania and the late 1990s dot-com boom.

Leading economists and skeptics argue that Bitcoin is a dangerous bubble destined to burst like historically hyped investments.
Supporters contend that cryptocurrency represents a burgeoning asset class comparable to gold rather than a speculative bubble.
The ultimate value of Bitcoin depends on its ability to transition from a speculative tool to a stable, trusted asset class.
Satoshi Nakamoto is believed to own over one million Bitcoin, valued at approximately $37 billion, assuming the creator is still alive.
The original dream of a decentralized financial system beyond government control remains unachieved and elusive.