- Business Insider UK spoke with Garrick Hileman about Bitcoin and whether it should be considered more of an asset or a currency.
- Hileman explains that there are several prohibitive factors that could prevent Bitcoin becoming a mainstream currency.
- Two of those factors are fixed transaction fees for small purchases and the increasingly volatile nature of Bitcoin.
He explains that there are two key factors that would limit Bitcoin’s ability to become used for everyday purchases. One of those factors is high-transaction fees for every Bitcoin exchange.
Another factor is the high volatility of cryptocurrencies which means that it’s value fluctuates much quicker than other traditional, more stable currencies.
Read the full transcript below.
Garrick Hileman: Is Bitcoin an asset or a currency? Well today I think the data suggests that it’s primarily used as an asset, as an investment vehicle, so the comparisons to gold and the name ‘digital gold’ is getting a lot of favour in regards to how to describe Bitcoin.
I think that’s a fair point to make. I think the term ‘crypto-asset’ is actually more helpful for describing what Bitcoin is today than cryptocurrency which implies it’s being used predominantly for payments.
It is used for payments but with transaction fees running as high as $20 per transaction that makes using Bitcoin for something like buying coffee prohibitively expensive.
So will Bitcoin ever become a currency? It certainly has the potential to become a more widely used currency especially with the rate of growth and the user base.
With tens of millions of people using Bitcoin already as an asset and the rate of growth, if that were to sustain it wou ldn’t take long for Bitcoin to get to a user base of 100 million or more.
When you start to look at a user base of 100 million or even a billion people are holding something that can function as a currency that commonality, that common asset that everyone is holding, it can make it much more likely for people to start to use it not just as an asset but actually to settle payments with each other.
Having said that, the transaction fee situation would need to improve with new technologies like Lightning, for example, that may be on the not-so-distant horizon.
The volatility of Bitcoin is another thing that would probably prevent it from being a widely used currency and here you could look at the advent of stable coins as another potential solution to Bitcoin’s volatility problem.
So Bitcoin may have a future just as an asset class, just as ‘digital gold’ but it’s certainly possible that it could become a currency or something else, some other cryptocurrency steps in and becomes a currency for people.