In our previous articles, we talked about several aspects of Bitcoin already. First of all, we looked at the ideology of Satoshi Nakamoto when Bitcoin was created a few years ago. After that, we briefly talked about the technology of the blockchain that powers the Bitcoin network. In this article, we will talk more about the monetary aspect of Bitcoin.
Bitcoin – A Currency, A Commodity or Something Else?
That will always remain a topic of debate until we see more regulation come into the field of digital currencies. Several countries clearly see Bitcoin as a currency [which means you have to pay taxes on profits made in Bitcoin if they pass a certain amount], while others have no opinion on whether or not it has any value to begin with. But we will get into that in a future article.
Regardless of how you look at it, Bitcoin has a value, simply because there are people in the world willing to pay you money for it. The value of Bitcoin fluctuates quite often, which is due in part to supply and demand, but also due to market manipulation. People who have money will always look at ways to make even more money, regardless of the consequences.
But can you label Bitcoin as a currency simply because it has value? Not per se, although there are some asterisks to be made regarding that statement. Can you use Bitcoin to buy goods or service online or in-store at various locations? Either directly (on sites such as Takeaway.com, Expedia.com, and Overstock.com) or indirectly (by using sites such as Gyft, All4BTC, and others).
So, people are willing to spend physical money [also known as “fiat currency”] in order to get Bitcoin, and you can also exchange Bitcoin for fiat currency. Plus, you can use Bitcoin to pay for goods and services that would otherwise cost you fiat currency. If you look at it from that point of view, Bitcoin is a currency. But that doesn’t make it a viable currency just yet.
Units of Distribution
Bitcoin wouldn’t be a payment method if you couldn’t divide it into smaller pieces. In fact, one Bitcoin can be moved eight places to the right of the decimal point. The lowest “unit” of a Bitcoin is 0.00000001 BTC and is called a “Satoshi,” an homage to Satoshi Nakamoto, who created Bitcoin back in 2008.
Other than Satoshi’s, we also have microbitcoins (0.000001 Bitcoin) and millibitcoins (0.001 Bitcoin). But here is an interesting fun fact for you: the term “microbitcoin” is scarcely used, as this monetary unit is more often referred to as “bits”. This “bits” trend started during last year and has officially been integrated as a monetary unit by several Bitcoin payment processors such as BitPay.
When you look for Bitcoin on exchanges or other platforms that have incorporated Bitcoin in one way or another, you will usually come across the abbreviation “BTC”. Technically, this term is both correct and incorrect at the same time. In fact, we might see the official “ticker” changing from “BTC” to “XBT” in the near future.
The reason for this change is simple. If we want Bitcoin to have a future as a tradeable instrument on exchanges such as Nasdaq, we need an ISO 4217 code for our currency. ISO 4217 codes are recognized worldwide when it comes to currency codes used in business and banking on a global scale. For example, gold is listed as “XAU” and silver is listed as “XAG”.
Fun fact: There are currently four non-national currencies not requiring the backing of any third-party institution : gold, silver, palladium and platinum. Bitcoin could be the fifth currency on that list.
But there is a different reason for changing to the XBT ticker as well. The ISO 4217 standard means that the first two alpha characters in “BTC” would represent its country of origin, which is unknown up until this point. Any currency starting with “X” means that this currency is non-country specific, which fits the profile perfectly when it comes to Bitcoin.
In our next “What is Bitcoin?” article, we will talk more about Bitcoin ownership and transactions!