Since Bitcoin was first introduced to the world, it’s had a whirlwind journey. It came about as an encrypted digital currency that was meant to challenge conventional money and potentially change the way we conduct financial transactions.
And this concept hasn’t necessarily disappeared. Just last year, the CEO of Coinbase wrote that bitcoin would replace the dollar within 15 years. It’s optimistic, perhaps – but then no one thought bitcoin would be trading over $7,000 toward the end of 2017 either!
The trendier view in the last couple of years, however, has been that bitcoin is, in fact, a commodity. People have been referring to it as “digital gold” for years now, suggesting that it could represent a “safe haven” in times of financial hardship or when a given stock market or currency crashes. Because it operates independently of any government or currency and its value is determined on a basis of universal supply and demand, bitcoin does indeed share some similarities with gold.
This debate – currency versus commodity – has been fairly lively for some time now. Recently though, the bitcoin community may have actually taken its most definitive step toward actually deciding the debate (at least in an unofficial sense).
It did so when it essentially decided against an update called SegWit2x. More accurately, SegWit2x backers canceled their plans for a bitcoin hard fork – which, for those unfamiliar with the term, basically means an adjustment to bitcoin protocols that can change the nature of the currency either minimally or in some cases fairly drastically.
So, what does this have to do with the currency versus commodity debate?
Well, it’s really about the nature of SegWit2x. Things can get pretty technical when discussing cryptocurrency hard forks, but the basic idea was that it would establish new protocols resulting in larger blocks of transactions being confirmed at a given time.
One of the points of doing this was to make transaction speed faster for individuals, which was meant to keep bitcoin competitive as an actual transactional currency.
Right now when we think of bitcoin as money (rather than a commodity) we imagine it being used in online purchases. There are indeed many internet-based merchants that allow bitcoin payments – but most allow PayPal as well, and several still allow PayPal exclusively.
For instance, we heard earlier this year that a few online casinos (which do extraordinarily good business) were adopting bitcoin. However, many are still relying on tried and true PayPal. As one platform specifically writes, PayPal benefits customers because funds are transferred immediately. Bitcoin cannot make the same claim, with transactions often taking 10 minutes or more for users.
The other use of bitcoin as money, rather than as a commodity, is in transactions between peers. Digital money transfer is getting more and more common among friends and family members, or even between strangers completing a transaction, for say, a set of tickets or a sold item. Bitcoin represents a very secure option in these cases, but some of the alternatives (altcoins) that have sprung up, do just the same – and do it faster. In particular, litecoin and bitcoin cash are essentially advertised as bitcoin clones, but for that, they’re worth less, and can conduct transactions in a fraction of the time. The thinking among some SegWit2x supporters was that it would allow traditional bitcoin to close this gap.
When SegWit2x was essentially rejected by the bitcoin community, however, it signaled that a majority of those closely involved with bitcoin may not care about closing the gap. That doesn’t explicitly or officially confirm the cryptocurrency as a commodity – but it certainly sends a message that being “digital gold” rather than the future of currency is okay by them.