The future of bitcoin?
Will the finite amount of bitcoins be a limitation?
Bitcoin is unique, therefore, never more than 21 million bitcoins will be created. However, this is never going to be a limitation because transactions can be termed in smaller sub-units than a bitcoin, such as bits - there are 1,000,000 bits in a bitcoin. Bitcoins can be divided into up to 8 decimal places (0,000,000 01) and potentially even smaller units if necessary in the future as the average size of the transaction decreases.
Will not Bitcoin fall into a deflationary spiral?
The theory of the deflationary spiral says that if prices are expected to fall, people will delay their purchases to be able to benefit from the lower prices. This fall in demand will cause traders to lower the prices of their goods, to stimulate demand, bringing a worse problem and ending in an economic crisis.
Although this theory is a popular way to justify inflation among central banks, it does not always appear to be true and is considered controversial among economists. Consumer electronics is an example of a market in which prices fall steadily but that is not in depression. Likewise, the value of bitcoins has increased over time and yet the size of the Bitcoin economy has also grown dramatically with it. Because both the value of the currency and the size of its economy started from scratch in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Nevertheless, Bitcoin was not designed to be a deflationary currency. It is more accurate to say that Bitcoin tends to inflate in its early years and to become stable in the future. The amount of bitcoins in circulation will only fall when people carelessly lose their wallets by not doing backups. With a monetary base and stable economy the value of the currency should remain the same.
Is speculation and volatility not a problem for Bitcoin?
This is the egg and chicken situation. For the price of bitcoin to stabilize, a large-scale economy needs to develop with more companies and users. For a large-scale economy to develop, businesses and users will seek price stability.
Fortunately, volatility does not affect Bitcoin's key benefits as a payment system that transfers money from point A to point B. It is possible for merchants to convert payments into bitcoins to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being adversely affected by price fluctuations. Since Bitcoin offers many unique, customary and proprietary features, many users choose to use Bitcoin. With so many solutions and incentives it is possible that Bitcoin will grow and develop to a degree that price volatility will become limited.
What if someone bought all the existing bitcoins?
Only a fraction of bitcoins issued to date are found in the foreign exchange markets for sale. Bitcoin's markets are competitive, that is, the price of a bitcoin will rise or fall due to supply and demand. In addition, new bitcoins will continue to be issued in the coming decades. So even the most determined buyer could not buy all the existing bitcoins. This does not suggest, however, that markets are not vulnerable to price manipulation because they do not yet have a significant amount of money to prevent someone from moving the market price up or down, and so , Bitcoin remains a volatile asset so far.
What if someone creates a better digital currency?
This can happen. For now, Bitcoin remains by far the most popular decentralized virtual fashion, but there is no guarantee that it will maintain that position. Already there are a series of alternative coins inspired by Bitcoin. However, it is probably correct to assume that there should be significant improvements for a new currency to exceed Bitcoin in terms of the established market, but this remains unpredictable. Bitcoin could also adopt competitive currency improvements as long as they do not change the fundamental parts of the protocol.