BITCOIN: IS IT THE FUTURE OF COUNTRIES?

What are bitcoins and cryptocurrencies? In this article we will discuss what could be the future of the economy!

Bitcoin, Blockchain and new trends. The future of countries.

New technologies are bringing about a radical change in the global economy, especially in the financial sector. One of these is the rise and spread of cryptocurrencies, also known as “virtual currencies”, including the first cryptocurrency ever created and the most famous: Bitcoin. Bitcoin was introduced in 2009 by Satoshi Nakamoto, who wanted to create an independent, digitalised electronic payment system based on mathematical laws and cryptography.

But let’s start from the beginning and let’s clarify.

What is a cryptocurrency?

The term is made up of two words: “crypto” and “currency”. It is therefore a hidden currency, not visible and not usable without knowing a certain computer code. In essence, cryptocurrency is a digital currency used as a medium of exchange in a certain network of users that allows participants to exchange it in peer-to-peer mode (i.e. between two users without the need for intermediaries).

Unlike traditional banking systems, these transactions are marked in a public digital ledger commonly called a blockchain, which consists of a chain of interlinked blocks each containing a certain amount of data including all recent transactions. The peculiarity of the Blockchain is that the blocks are public and visible but cannot be altered. This means that every single new block inserted into the chain cannot be changed after insertion, precisely because they are protected by cryptographic codes. Blockchains, in fact, are able to guarantee the immutability of data and to certify the complete history of all operations linked to each transaction.

However, it must be borne in mind that virtual currencies are not like the ones we physically use every day and take out of our wallets. In fact, cryptocurrencies are not legal tender so acceptance as a means of payment is on a voluntary basis. However, every day, the bitcoin network processes many transactions, which are the result of trade, speculation and the creation of new companies.

Furthermore, virtual currencies are not regulated by central governmental bodies, but are generally issued and controlled by the issuing body according to its own rules, to which members of the relevant community agree to adhere. To date, the countries that have decided to issue their own cryptocurrencies are Ecuador, China, Japan, Lithuania, Malta, Senegal, Singapore, Switzerland, Tunisia and many other countries such as Sweden are planning to introduce their own currencies.

Economics and technology have gone hand in hand for many years now and during the Covid- 19 epidemic the cryptocurrency market was also hit hard but, according to the charts, virtual currencies were able to react positively faster than other financial markets. In fact, for example, after an initial slump in the Bitcoin price, there was also a recovery thanks to its third halving. In a nutshell, this is a mechanism of halving the new bitcoins generated when a new block (of the Blockchain) is resolved. This is done to regulate inflation and thus manage the supply of BTC (Bitcoins), which must not exceed 21 million.

Therefore, thanks to its recovery and trend, it was also possible to talk about future trends. Among these is the idea born out of the importance of some previously unusual practices (e.g. working remotely) that could now turn society around by eliminating cash in circulation and making more crypto payments.

Another idea that is gaining momentum, and is being planned in many countries, is the creation of CBDCs (central bank digital currencies). China in particular, which is a very fertile ground for new technologies, already has a local digital asset. Clearly, such a project may be possible, but a solid foundation needs to be laid.

The projects seem to be many and the trend continues to grow. Clearly, we cannot know whether cryptocurrencies will remain just a fad or whether they will be destined to become an alternative to the official monetary system. What we do know so far is that China is about to christen its first state-owned cryptocurrency in the world, and that there are still many points to be clarified in terms of legality. What we can say for sure is that if the trend continues to grow and if a way can be found to close the legal loopholes, great changes in both the economy and society are on the horizon.

Sources:

https://markets.businessinsider.com/cryptocurrencies

https://www.forbes.com/sites/billybambrough/2020/06/06/bitcoin-will-appreciate-unless-something-goes-really-wrong-price-expected-to-double/#4aa9f46d1050

https://www.forbes.com/sites/ronshevlin/2020/07/27/the-coronavirus-cryptocurrency-craze-whos-behind-the-bitcoin-buying-binge/#14cbb1222abf

https://it.cointelegraph.com/news/the-top-5-defining-trends-for-crypto-in-late-2020http://www.consob.it/

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