CUDOS Markets: Bitcoin and Beyond: Towards a More Inclusive Financial Future
October 2008. A character using the alias ‘Satoshi’ released a whitepaper outlining a financial technology that would change and unite the world. Bitcoin was born.
In the preceding decade-and-a-half, Bitcoin’s meteoric rise has influenced every country in the world, changed how we view finance and investments and inspired (or induced scepticism) investors, entrepreneurs, and policymakers. Hype. Volatility. Ponzi. Revolutionary. We all see Bitcoin through our own lens, but what is hard to argue is that this financial innovation has the built-in ability to create a more equitable and accessible global economy. Democratised and inclusive finance is here, and here to stay.
What Powers this Revolution?
Literally speaking, Bitcoin is powered and secured by an enormous network of miners and their mining hardware, distributed throughout every corner of the world.
Through the mining process, which has now been replicated by many other cryptocurrency projects, Bitcoin offers a new model for financial systems that is open, democratic, and resilient. However, despite their potential benefits, many people remain sceptical of these new technologies due to widely circulated myths and misconceptions. Is there truth to what is being said, or does an anti-Bitcoin campaign from certain parts of society aim to stifle this innovation with misinformation?
Debunking Bitcoin Myths
Despite its potential to create a more inclusive financial future, Bitcoin has been subject to a considerable disinformation campaign. What is being said, and how far off the mark is it?
Myth #1: Bitcoin is only used by criminals and illegal activities
While it is true that Bitcoin has been used in some high-profile cases of illegal activity, such as ransomware attacks and money laundering, this is not unique to Bitcoin. Traditional currencies such as the US dollar and Euro have also been used for illicit activities. Cash is king when it comes to crime.
The truth is that the vast majority of Bitcoin transactions are legitimate and legal. More than that, the transparency and traceability of blockchain technology actually make it easier to track down and prosecute criminals. In fact, some governments have even started using blockchain technology to improve their own law enforcement efforts, building crypto divisions and hiring blockchain engineers to support their work.
Since anyone can use Bitcoin, the law of averages would suggest some will use it illegally, perhaps unaware of its immutability and transparency.
Myth #2: Bitcoin is a bubble that will eventually burst
Price fluctuations are normal for any currency, and of course, Bitcoin appears to be more volatile than most of the existing major currencies (if we can consider it that). These fluctuations increase scepticism among investors, which is natural, but it completely overlooks the fact that Bitcoin adoption has significantly grown, year-on-year. Can it be a bubble if such a large part of the general public uses it?
The bubble argument further falls apart when you consider that Bitcoin is not only something you can buy, sell, or spend. The applications of blockchain technology extend well beyond currencies and are already being applied in national elections (Japan, US, Russia), supply chain management (Microsoft, Huawei, Oracle), and fashion (Gucci, Nike, Adidas). If Bitcoin’s price drops, does the value of the incredible applications being built on it fall too? Absolutely not.
Myth #3: Bitcoin mining is bad for the environment
It’s quite easy, looking at the significant electricity consumption required to power the Bitcoin blockchain, to label it an environmental disaster. Dig a little deeper, however, and you’ll see that the full picture paints a very different story. Perhaps, after all, Bitcoin is anti-global warming.
Firstly, the traditional money system consumes a huge amount of energy. Banks, data centres, and ATMs use far more energy than the infrastructure it takes to maintain Bitcoin. So, cash isn’t as eco-friendly as we’d like to think, and currency printing only puts another win in Bitcoin’s column.
Secondly, when we look at which sector drives more innovation in renewable energy, Bitcoin is the surprise winner. The banking sector, with all the financial muscle in the world, typically favours investment types other than renewable energy, whereas Bitcoin miners are constantly incentivised to find the cheapest source of energy possible. Long-term, the cheapest energy you can find is the one you produce yourself. For this reason, hydro, solar, and wind are being sought by mining farms that want their own on-site energy production to continue processing blocks.
Thirdly, the rise of eco-friendly practices in the industry has driven the movement towards proof-of-stake (PoS) consensus algorithms, which require much less energy than the traditional proof-of-work (PoW) algorithm used by Bitcoin. Ethereum, which was previously a proof-of-work network, like Bitcoin, released Ethereum 2.0, reducing the power needs of the network by 99.95%.
Finally, new sustainable marketplaces, like CUDOS Markets, are innovating on top of all of the green mining advancements that have been built over the last few years. By taking the hash rate — the measurement of the computational power of the Bitcoin mining network — and affixing it to Non-Fungible Tokens (NFTs), suddenly, a huge market opens up. Traders can now buy NFTs and receive the Bitcoin rewards of the hash rate their NFT represents, supporting Bitcoin miners in the process. Since only sustainable miners are allowed on the platform, this adds another dimension to incentivising more eco-friendly mining.
Anticipating a Brighter Financial Future
As we’ve seen, Bitcoin and other cryptocurrencies have the genuine potential to create a more inclusive and accessible financial future. The breakthroughs made by blockchain technology and decentralised networks will allow us to build financial systems that are more transparent, democratic, and resilient. As explored, despite the myths and misconceptions surrounding Bitcoin, it really can make the world a better place.
From enabling financial inclusion for the unbanked and underbanked to promoting innovation in renewable energy and sustainable markets, Bitcoin is here, and it’s paving the way for a more equitable world. It is also encouraging greater financial education and literacy, as more people become interested and involved in the world of cryptocurrencies. So let’s embrace the potential of Bitcoin and beyond, and work towards a more democratic and inclusive financial future.