What problems can Bitcoin solve?

Many people have applauded bitcoin as the future currency that would effectively address the frequent shortcomings of dealing with fiat currencies and traditional banking institutions. Since Satoshi Nakamoto released Bitcoin back in 2009, it has risen above the ranks to become a centerpiece for financial transactions, serving both as a store of value and exchange medium. So, what are the specific problems that bitcoin can solve? Well, here are some of the main issues that bitcoin can address.

Reversibility of electronic payments 

According to the bitcoin inventor Satoshi Nakamoto, online commerce relies almost exclusively on financial institutions acting as trusted intermediaries to process electronic payments. As a result, ensuring completely irreversible transactions is not possible. That creates room for malpractices such as fraud and theft, amounting to huge losses.

That is one of the problems that bitcoin seeks to solve. Unlike fiat currency exchanges based on trust, bitcoin transfers rely on cryptographic proof. The bitcoin network uses proof-of-work to secure and validate transactions without any third-party involvement. Bitcoin’s use in financial transactions cushions sellers and buyers from fraud since no third party can willingly or unwillingly reverse the payments.

Blockchain technology does more than just securing and validating payments. It also keeps a shared digital ledger with all the transaction data, making it very hard for users and unauthorized parties to manipulate transactions. Even if the network experiences glitches, it will not cause inconsistencies in the digital ledger, hence, the impossibility of reversing electronic transactions.

If there is an attempt to alter the ledger, the entire network will reject the copy since it would not match the data shared by the other nodes on the web. That makes it impossible to counterfeit bitcoin.

Inflation 

Bitcoin’s supply can’t exceed 21 million, which means only that amount of bitcoin will ever be in circulation. Miners have already produced about 18 million bitcoins to date, which leaves only 3 million more. Since free markets usually fluctuate based on supply and demand, the increasing demand for an asset in limited supply like bitcoin would undoubtedly drive its unit price up.

The bitcoin mining process also contributes to its scarcity. In the first four years of bitcoin’s release, miners received 50BTC. That limit was halved in 2012 and will continue to decrease by half every four years. The most recent one was in 2020, with bitcoin miners receiving 6.2BTC. That indicates it would take until 2140 to attain the 21 million bitcoin cap. The halving makes bitcoin scarcer, thereby increasing the value of the available reserves.

Bitcoin’s capped supply and halving create a long-term value growth system, which helps keep inflation in check.

Transparency and accountability in financial transactions 

Bitcoin’s underlying blockchain technology also ensures greater transparency and accountability in all financial transactions. It maintains a public digital ledger with all the users’ details, including transaction records, which they can access via the internet anytime. Even if you use multiple key pairs for different transactions, the bitcoin network will still capture the data in the ledger.

Blockchain ensures that all bitcoin transactions are public, traceable, and permanently encrypted in the bitcoin network. Bitcoin’s transparency and accountability are among the reasons why reputable platforms such as bitcoin revolution continue to attract traders and investors from all over the world. Despite the high-level transparency, bitcoin users can remain anonymous.

Overall, bitcoin has the potential to solve a wide range of problems related to financial transactions. So far, it has proven instrumental in addressing issues such as the reversibility of Bitcoin transactions, inflation, transparency, and accountability.