INTRODUCTION
As humans, we have been consistently evolving. weve constantly develop more accessible alternatives to make life “Easy and comfy”. We came from mailing at the post office and waiting for days to get a response, to sending electronic mail powered by the internet and many other advancements.
It takes around 3-4 days to settle a transaction between banks in the US. and It can take up to 3-4 weeks to settle a transaction from the US to Nigeria. But the 21st-century businessman wants an infrastructure that will allow him to settle business transactions as fast and as easily as possible. Peer-to-peer transactions were the trend in the past, and it looks like we might be going back to those days but this time it will happen On-Chain.
What is Bitcoin?
Bitcoin is a decentralized digital currency that was created in 2009 by an anonymous person or group of people using the pseudonym Satoshi Nakamoto. It operates on a technology called blockchain, which is a distributed immutable ledger that records all Bitcoin transactions.
Bitcoin has gained significant attention and significance in the financial world due to its potential to revolutionize the way we make payments. It offers several advantages over traditional fiat currencies and has the potential to serve as the world’s reserve currency and best payment alternative.
Transaction settlement on the Bitcoin network
Bitcoin settles transactions through a decentralized peer-to-peer network. When a transaction is initiated, it is broadcasted to all network participants. Nodes validate the transaction and once confirmed, it is grouped with others into a block. Miners compete to solve a puzzle and add the block to the blockchain. Once added, the transaction is settled. The speed of settlement depends on factors like network congestion and fees. No middlemen are involved, ensuring speedy and direct transactions.
A step-by-step approach to how Bitcoin transactions are settled:
A user initiates a Bitcoin transaction.
The transaction is broadcasted to the Bitcoin network.
Miners (which are computers) compete to add the transaction to a block.
The block is verified by the network.
The transaction is added to the blockchain.
The transaction is settled and the recipient receives his bitcoins.
note that these transactions happen in a few seconds or minutes without an intermediary and cannot be stopped or censored.
Problems facing Bitcoin as a Means of payment
Price Volatility: Bitcoin is known for its extreme price volatility. The value of Bitcoin can fluctuate significantly within short periods, making it challenging to determine its precise purchasing power. This volatility poses a risk for both merchants and consumers, as the value of Bitcoin at the time of a transaction may differ greatly from its value when received or spent.
Scalability: Bitcoin's blockchain has scalability limitations, meaning it can handle only a limited number of transactions per second. During peak times, transaction confirmation times can be slow, resulting in delays and higher transaction fees. The scalability challenge hampers Bitcoin's ability to serve as a widely adopted payment system, especially during periods of high transaction volume.
Regulatory Uncertainties: The regulatory landscape for Bitcoin is complex and varies across different jurisdictions. Governments worldwide are still grappling with how to regulate cryptocurrencies, including Bitcoin. The lack of clear and consistent regulations can create uncertainties for businesses and consumers, potentially hindering the widespread adoption of Bitcoin as a means of payment.
User Experience and Technical Complexity: Bitcoin transactions can be complex for non-technical users, requiring an understanding of wallet addresses and seed phrases. The user experience of Bitcoin wallets and payment interfaces may vary, leading to potential usability challenges. The technical creates an adoption barrier for individuals less familiar with cryptocurrency technology.
Is Bitcoin sustainable as a peer-peer payment network?
Although Bitcoin has steadily gained popularity and acceptance over the years due to its ability to scale several financial challenges. The minds of the public especially none crypto users have continued to wonder;
What could the possible future of Bitcoin be?
What will regulators do about it?
Will the network ever fail?
To further strengthen the network, make it suitable for growing demand and clear the doubts in the minds of potential users, important upgrades have to be made. There has recently been a lot of innovation to help Bitcoin become the currency of the future.
Here are a few Technological Upgrades On bitcoin
Lightning Network:
One significant innovation that has increased the usage of Bitcoin globally is the Lightning Network. This layer-two scaling solution addresses the network's scalability issue by enabling faster and cheaper transactions. By leveraging payment channels, the Lightning Network facilitates instant transactions with reduced fees, effectively increasing Bitcoin's potential for everyday use. The development and growing adoption of this technology underscore the belief that Bitcoin can become a viable medium of exchange for microtransactions and everyday purchases.
Taproot upgrade
The most significant upgrade for Bitcoin in the past four years is the recently implemented Taproot upgrade. This groundbreaking update introduces the ability to batch multiple signatures and transactions together, resulting in a more efficient and expedited verification process for transactions on the Bitcoin network.
Furthermore, Taproot incorporates a mechanism that blends transactions with both single and multiple signatures, enhancing privacy and making it considerably more challenging to identify specific transaction inputs within Bitcoin's blockchain. By streamlining transaction verification and bolstering privacy measures, Taproot holds the potential to facilitate the scalability of the Bitcoin network, by accommodating a higher volume of transactions.
Decentralized finance on Bitcoin
While Ethereum has traditionally been the dominant platform for decentralized finance (DeFi), recent innovations have brought DeFi capabilities to the Bitcoin network. Projects such as Rootstock (RSK) and the Liquid Network offer smart contract functionality on top of Bitcoin, enabling the creation of decentralized applications, that will facilitate the building and usage of Decentralized finance on Bitcoin.
The introduction of DeFi on Bitcoin goes to show that Bitcoin's secure and robust network can be leveraged for a broader range of financial applications, like borrowing, lending, staking, and storing of data.
Early this year, the BRC20 token standard an experimental token standard on the bitcoin network became a trend, alongside ordinals which are bitcoin NFTs.
Data from Brc-20.io shows that there are currently 37,200 brc20 with a market cap of over $1 billion. Goes to show that people believe so much in the innovations on the bitcoin network and are ready to continuously support the ecosystem
Institutional and General Interest in Bitcoin
In recent years, we have witnessed a surge in institutional interest and adoption of Bitcoin. we have seen big institutional fund managers including BlackRock with over $9 trillion in assets apply to offer bitcoin spot etfs to their clients.
Renowned companies, including Tesla, MicroStrategy, and Square, have also allocated significant portions of their treasury reserves to Bitcoin, signaling confidence in its long-term value.
The interest of the general public in Bitcoin has witnessed an impressive upward trajectory, this is evident in the continuous increase in the number of active addresses.
Data from Glassnode shows that Over 44.15 million unique addresses have a non-zero Bitcoin balance. On May 13th, the number of Bitcoin wallet addresses holding one full BTC or more surpassed one million, according to Glassnode data.
This signifies that the number of people that use Bitcoin is increasing by the day. As people worldwide realize the benefits and potential of Bitcoin, they are increasingly embracing it as a viable financial instrument.
Financial Inclusion and bitcoin
Bitcoin offers accessibility to anyone with an internet connection, enabling financial inclusion for the unbanked population. This inclusive nature of Bitcoin has attracted users from all corners of the globe.
Technological Advancements have also contributed immensely to its growth and usage. User-friendly interfaces, improved security measures, and enhanced accessibility has lowered the barriers to onboarding new users.
Bitcoin Stands Tall
Bitcoin's relentless evolution and constant upgrades are testaments to its robustness and potential as the payment system of the future. With an unyielding commitment to scalability and security, Bitcoin will solidify its position as a global peer-to-peer payment network.
Additionally, the ongoing advancements in environmental sustainability, with the integration of renewable energy sources and the adoption of greener mining practices, further reinforce Bitcoin's viability as a sustainable payment system.
As it continues to evolve, Bitcoin stands poised to revolutionize the way we transact and pave the way for a more inclusive financial future