The topic of a great deal of in-depth discussion just recently has been Bitcoins. The digital currency has had a busy couple of weeks, fluctuating wildly between all-time highs and crashing lows. While there are many who may consider that an electronic, untraceable currency is a useful thing, there may be one thing that most have not even thought about – while it is unique at the moment, it may not be for long.
While more and more people are starting to shun cold hard cash in favor of Bitcoins, real currencies do have one massive advantage over electronic ones. There isn’t a great deal in the way of competition. Yes, there are a few countries, those who have exceedingly weak currencies that will never pick up, who do us alternative forms of currency other than their own – some use dollars or euros, and others even use cigarettes or other goods as a form of exchange. However, it doesn’t matter how you look at it, a national currency is a requirement; it is needed for all to accept it and use it in buying and selling and that’s what gives it its value.
Compared to other, more well-known currencies, the Bitcoin doesn’t have any real definition. This affects its value as a unique currency. It’s a currency that is based on an unknown, seemingly uncrackable algorithm, developed by someone who is, well, also unknown. Because of this, there isn’t a great deal of trust in whether this algorithm will generate theses Bitcoins, as it promises to do, or whether it is just going to take your cash and run. There is also very little in the way of security against fraud or mistakes and there is no real authority.
What’s to stop another mysterious, unknown person (or machine) from creating another digital currency? It is a real possibility, especially if things start to go wrong or too many mistakes are made with Bitcoins. And, what if all those who previously dealt in Bitcoins, or who were thinking about doing so, switched over to the new digital currency, what would happen then? Quite simply, the value of Bitcoins would come crashing down in an instant. The reason for this is very clear – the value of exchange between Bitcoins and other, real currencies, is entirely dependent upon supply and demand, it’s what makes the world go round at the end of the day. If nobody wants to buy Bitcoins, they have absolutely no value. And, it won’t necessarily take a problem with Bitcoins for a new currency to get up and running – it would only take the originators to come up with a better, more attractive scheme and Bitcoins would disappear, almost as quickly as they arrived.
Putting it in perspective though, it would take a great deal for people to switch sides just because something might look better – the old adage, “the grass always looks greener on the other side” springs to mind and, as we all know, looks can be deceiving. The point is, Bitcoins has been successful as the first ever virtual currency but it’s not say it will be the last, or indeed, the only one to make its way into the market.