Bitcoin, the first cryptocurrency, has already been around for more than a decade. Bitcoin was presented as a revolutionary phenomenon that would radically alter the financial landscape of the whole world.
Since its conception, governments throughout the world have been wary of Bitcoin and have been slow to adopt the cryptocurrency as legal cash in an effort to preserve the stability of their economies. In contrast to the fiat currencies that embraced the new global order in the early old days, the digital token was extensively used as an alternative. Bitcoin now has been approved as legal cash in the tiny South American nation of El Salvador. This effectively makes Bitcoin a "currency" under the law for the first time.
Bitcoin fans are excited by the news, but economists and other financial professionals have pointed out potential drawbacks that might outweigh the benefits. Understanding the benefits and drawbacks of using Bitcoin as legal cash is, therefore, crucial.
Perhaps the most alluring aspect of the Bitcoin network as a currency is its decentralized nature. The cryptocurrency network operates on a P2P basis that eliminates the need for intermediaries in financial transactions. Bitcoin payments are validated by the ledgers, which are confirmed by PoS, unlike traditional banking and payment systems, which rely on the inputs of central authority or third parties. At least 51% confirmation by other network members is required before any party may execute payments from their wallet. Bitcoin transactions are not regulated by a central authority. This makes it hard to halt or undo financial transactions. As a result, bitcoin is secure against hacking.
Bitcoin is quick and affordable
Bitcoin is a more cost-effective option for international transactions. Because the Bitcoin network can function without a central authority or much governmental oversight, it's a good idea to utilize it for cross-border trade.
It can conveniently (or virtually) go to its destinations. The P2P network makes it quick, contributing to the network's cheap cost and low price.
Bitcoin is a mechanism designed to combat inflation
There will never be more than 21 million Bitcoins in circulation, yet there are presently 18 million in circulation. This implies there is a hard cap of 3 million Bitcoins that may be mined and placed into circulation.
The block reward halving scheme is another anti-inflationary strategy used by the Bitcoin network. This technique halves the payment for adding a block to the Bitcoin blockchain every four years.
Bitcoin, which launched in 2009, has maintained its rising trajectory thanks to these two mechanisms. On the other hand, inflation can be intentionally created by the government by printing additional fiat currency.
Regulator Wariness Is One of Bitcoin's Downsides as a Form of Legal Tender
Without revising existing rules and introducing new ones, it will be extremely difficult to establish a flexible and robust economy founded on Bitcoin. Taking this route facilitates the development of consensus-based standards across all related sectors and parties for Bitcoin processing, exchange, and acceptance.
While taxing fiat currency transactions is straightforward, keeping tabs on Bitcoin users—especially those who utilize unregulated, non-custodial wallets—can be more of a challenge. End-to-end encryption further complicates things.
Market Uncertainty
The value of cryptocurrencies can fall or rise dramatically in a matter of hours, making them unsuitable as a medium of exchange in any jurisdiction. Bitcoin's inherent volatility makes it a risky investment. However, the asset's highly speculative character is the primary driver of this volatility.
