This is an opinion editorial by Didar Bekbauov, the founder and CEO of group Bitcoin mining company Xive.
The financial industry as a whole is continually shifting toward the digital space, with the global digital payments market generating almost $100 billion in revenue last year, with projections to reach $303 billion by 2030. The penetration rate of digital payments among general consumers is also growing, as a McKinsey survey from 2022 found that nearly 90% of U.S. residents are using some form of digital payments.
And the Bitcoin market in particular is gaining greater attention, as the recent U.S. banking crisis and the negative outlook of the global economy serve to drive more individuals and businesses toward this sector. Bitcoin is seen by many as a sound store of value, independent from governments and banks, providing an attractive alternative to traditional financial investments.
But can it realistically replace fiat currencies to become the money of the future?
Bitcoin Attitudes: Progress To Date
Ten years ago, only a small niche community was interested in BTC. Now, it is estimated that 425 million people across the world own cryptocurrency, following a 39% growth in digital asset holders in 2022.
Up until the last few years, it was the norm for many to deride Bitcoin and call it a fraud. But after 2020, a drastic change in attitudes has taken place, with BTC’s perception evolving from a speculative investment to a legitimate store of value and medium of exchange.
The main reason behind this shift is the increasing institutional adoption of Bitcoin. Since 2020, institutional investors have entered the market en masse, fueling a major bull run and accumulating more than 7.8% of the total BTC supply as of May 2023. Consequently, bitcoin has become a legitimate asset class that is taken more seriously by more people.
Moreover, a 2022 Deloitte survey revealed that 75% of polled retailers are planning to accept cryptocurrency payments within the next two years.
Besides that, bitcoin has become legal tender in multiple jurisdictions including, most notably, El Salvador.
Sustainable Bitcoin Mining Is Shifting The Narrative
Due to the fact that they require significant computational power, Bitcoin mining operations are often associated with high energy consumption. And estimates that suggest these operations consume enough power to rival the annual electricity needs of some entire countries have resulted in Bitcoin facing harsh criticism in recent years, presenting a major barrier to mainstream adoption.
However, Bitcoin’s inherent energy consumption can actually offer significant benefits by stabilizing electricity grids and reducing the cost of power for consumers by balancing supply and demand.
Monthly and yearly electricity consumption is spread unevenly throughout the day. Peak demand often occurs in the morning and evening hours, while at night and on weekends, it is significantly reduced. In many places, Bitcoin mining may consume only the spare electricity that is not used up by local residents, thus allowing power plants to operate at full capacity. Meanwhile, the average consumers are spared from greater expenses meant to cover the production of that “excess” electricity.
Moreover, the fierce competition among validators and Bitcoin’s deflationary nature incentivize miners to find more efficient and sustainable ways to mine. As the mining process becomes more competitive, miners will likely continue investing in more advanced hardware and software to increase their chances of successfully mining new Bitcoin blocks. In addition, they will also take further steps to use renewable energy sources, such as wind and solar power, thus reducing mining’s environmental impact even more.
As a result, I expect the public perception of mining to become more positive in the next five years, and mining itself to become more sustainable as a business.
Following the Salvadoran Example
In recent years, there has been a growing trend toward accepting bitcoin as a legal payment method. Several countries have legalized using BTC for various purposes, such as buying goods and services or paying taxes.
In September 2021, El Salvador took this trend further by becoming the first country to make bitcoin a legal tender currency. Despite a somewhat troubled start, the nation’s experiment has come with many positive results, especially if we consider the Salvadoran GDP growth of over 10% in 2021 and the 30% increase in tourism since BTC’s adoption.
I believe more nations will follow El Salvador’s footsteps to find an alternative solution to protect their economies against the current economic uncertainty. For example, similar plans to make BTC a legal tender have sprouted up in Mexico, Arizona and Switzerland. Meanwhile, Liechtenstein’s upcoming legislation plans to enable Bitcoin payments for government services.
However, while the legalization of Bitcoin as a payment method has many advantages, independent cryptocurrencies have always been seen as a threat to fiat. Crypto adoption increasing worldwide is surely the reason why many governments are committed to developing their own central bank digital currencies (CBDCs). These are essentially national currencies with state control over their issuance and payment networks.
Arguably, CBDCs stand a greater chance of gaining mainstream adoption than Bitcoin in the coming years. This is due to their potential for integration with existing financial systems and regulatory frameworks, as well as the backing and support of central banks around the world. However, both Bitcoin and CBDCs are still in the early stages of development, and their adoption will depend on a variety of factors.
Is Bitcoin The Currency Of The Future?
With a shift in consumer and business attitudes, growing use as a store of value and a medium of exchange, as well as positive developments in the mining industry and among national governments, Bitcoin is gradually progressing toward mainstream adoption.
As bitcoin use cases continue to expand, I believe more individuals and organizations will realize its potential as a long-term investment tool.
This is a guest post by Didar Bekbauov. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.