Bitcoin is used for different types of online payments by the user is sent to the recipient’s address in the message, combined with a private key, known only to the sender. Each user on the side has a file that serves as a wallet that represents an arbitrary amount of pairs of keys. This allows access only to their money and the use of an amount just one time, when it comes to real money.
Reviews on this phenomenon in the beginning were far from analytical, more in disbelief and without a lot of serious dedication to this issue. The one thing that caused many economists to bring wrong conclusions is the assumption is that bitcoin works as real money, which is not the case. Although there is as a medium of exchange, it does not imitate all the traditional functions of money, what is of value and unit of account.
This can be explained more clearly by using the example of that in the last few months have seen a big rise in the value of bitcoin. In classical economics, that is the same as bitcoin money here to talk of deflation, as well as when it is in the moments when, after reaching an extremely large amount of this bitcoin bubble bursting, a value drastically drops coming inflation.
However, with the bitcoin this is not the case, since the inflation and deflation have no effect on the growing bitcoin economy, because its value is created after the users voluntarily accepted as currency in actual transactions. They can be exchanged for the existing currency, the value applying on a particular day, but not bitcoin price denominator. It is, however, a part of many investment portfolios, and the laws of supply and demand are the banks which have had owned it and bowed their value by offering it to the market at extremely low prices. At the same time, it lasted only until the bankers have not exhausted the stocks and lost the ability to continue to affect the value of bitcoin, which gradually comes to the realization of the original idea – that the money managed by all who use it, not just the selected central banks.
This idea certainly easily becomes accepted by the population worldwide, overburdened debt and loan installments which we come to collect exactly the moments until their currency differences are not in favor. Alternative payment methods existed before, but the bitcoin become interesting to the public from a completely different reason. The total value of bitcoins on the stock market could be represented in billions of dollars, but it is what has become so popular topic in economic circles just questioning whether it is about someone’s hidden intention to destroy entire financial and banking system in the world.
This was the reason that in many reviews of this phenomenon points to the potential danger and risk, and is not that exactly what make systems at the time of dealing with their own powerlessness. At this time bankers are becoming aware that the end of the era in which sovereign dominated the world of money, which is why the public is increasingly placed a warning that it is a dubious and risky form of investment.
A lesson as such can be drawn from current trends and orientation of a large number of market investors is decline of confidence in the euro and dollar, as well as the announcement of a new, gradual redistribution of wealth, which is initiated by distrust of citizens in the financial, primarily banking system.
Under these circumstances, a confidence in bitcoin grows because its value is not affected by the decision of any center of power such as the political and economic establishment, which is why his influence in financial flows revolutionary. One thing that might be called as certain is the dominance of the financial elite that caused the crisis is slowly coming to an end, and the fear of bitcoin and identifying its deleterious effects only the initial stage of entering the market for a long fight from which will go out as losing those most damaged system.
This article is part of the academic publication Dividing by Zero by Ana Nives Radovic, Global Knowledge 2018