Bitcoin is used for various types of online payments, where the user sends funds to the recipient’s address in the message, combined with a private key known only to the sender. Each user has a file on their side serving as a wallet, representing an arbitrary number of key pairs. This allows access only to their funds and the use of an amount just one time when it comes to real money.

Reviews of this phenomenon in the beginning were more disbelieving and lacked serious dedication to the issue. The assumption that caused many economists to draw wrong conclusions is that Bitcoin works as real money, which is not the case. Although it serves as a medium of exchange, it does not replicate all the traditional functions of money, such as being a store of value and unit of account.

This can be explained more clearly using the example of the significant rise in the value of Bitcoin in the last few months. In classical economics, this is equivalent to discussing deflation, as well as moments when, after reaching an extremely high value, the Bitcoin bubble bursts, and its value drastically drops, resulting in inflation.

However, with Bitcoin, this is not the case since inflation and deflation have no effect on the growing Bitcoin economy. Its value is created when users voluntarily accept it as currency in actual transactions. Bitcoins can be exchanged for existing currency, with the value applied on a particular day, but not as a Bitcoin price denominator. It is, however, a part of many investment portfolios, and the laws of supply and demand are affected by banks that had owned it and lowered its value by offering it to the market at extremely low prices. This lasted only until the bankers exhausted their stocks and lost the ability to continue affecting the value of Bitcoin, gradually realizing the original idea: that money is managed by all who use it, not just selected central banks.

This idea easily becomes accepted by the worldwide population, burdened by debt and loan installments until their currency differences are not in their favor. Alternative payment methods existed before, but Bitcoin became interesting to the public for a completely different reason. The total value of bitcoins on the stock market could be represented in billions of dollars, but the topic’s popularity in economic circles raises questions about whether it involves someone’s hidden intention to destroy the entire financial and banking system globally.

This is the reason many reviews point to the potential danger and risk, which exactly highlights the systems’ powerlessness at the time of dealing with their own limitations. At this time, bankers are becoming aware that the era in which sovereigns dominated the world of money is coming to an end. Hence, the public is increasingly warned that Bitcoin is a dubious and risky form of investment.

A lesson drawn from current trends and the orientation of a large number of market investors is a decline in confidence in the euro and dollar, along with the announcement of a new gradual redistribution of wealth. This is initiated by citizens’ distrust in the financial, primarily banking system.

Under these circumstances, confidence in Bitcoin grows because its value is not affected by decisions made by any center of power, such as the political and economic establishment. This revolutionary influence on financial flows is something that might be considered certain. The dominance of the financial elite that caused the crisis is slowly coming to an end, and the fear of Bitcoin, along with identifying its deleterious effects, is only the initial stage of entering the market for a long fight, from which the most damaged system will emerge as the loser.

This article is part of the academic publication Dividing by Zero by Ana Nives Radovic, Global Knowledge 2018