[The Editors' Verdict] The Future of Bitcoin

Recently, Bitcoin prices have experienced extreme volatility, with values halving from their peak. Bitcoin has crashed by more than 90% after reaching its all-time high, and there have been four instances in its 12-year history where it dropped over 80%. In February, Tesla CEO Elon Musk announced that Bitcoin could be used to purchase Tesla electric vehicles, which boosted Bitcoin prices. However, on the 12th of last month, he suddenly reversed his stance, stating that Bitcoin would no longer be accepted, triggering a recent Bitcoin crash. On the 21st, China further intensified the decline by announcing a strict ban not only on Bitcoin trading but also on mining.

China had suppressed Bitcoin speculation but had turned a blind eye to mining, resulting in about 65% of the world’s Bitcoin being mined in China. However, from China’s perspective, which aims to be the first in the world to introduce a central bank-issued digital currency, Bitcoin has become an obstacle that can no longer be ignored. China’s Bitcoin ban policies are expected to become even stricter. The U.S. Federal Reserve appears to be somewhat cautious about Bitcoin but currently seems to be using it as a refuge amid the indiscriminate printing of dollars. Once this critical phase passes, the U.S. may also begin to actively regulate Bitcoin, just like China. Central banks are unlikely to easily relinquish their vested interests.

Bitcoin was first created during the 2008 financial crisis. At that time, the U.S. Federal Reserve was printing dollars recklessly, and it is known that a Japanese programmer named Satoshi Nakamoto (a pseudonym) created Bitcoin to establish a currency system whose value could not be arbitrarily controlled by central banks. The total issuance was capped at 21 million from the start, and it was designed so that mining would require significant effort, similar to gold. As the total mining amount continues to halve and acquisition becomes increasingly difficult, Bitcoin’s scarcity has grown, leading to an increase in its value.

Some in the market equate Bitcoin with blockchain technology, but Bitcoin is only one of many applications of blockchain. Bitcoin uses blockchain technology to create a currency that cannot be counterfeited. Blockchain is a distributed ledger technology where blocks containing transaction data are linked like a chain. Unlike centralized systems that store all transaction data on a central server, blockchain distributes the ledger recording transaction information across the network, allowing participants to jointly record and manage it. Through the process of sharing and cross-checking transaction details among participants, blockchain verifies the authenticity of transactions, making it a technology resistant to hacking and tampering. Blockchain technology is considered one of the greatest innovations since the internet.

Bitcoin was created to be a trustworthy currency, but its extreme price volatility makes it difficult to function properly as money. Bitcoin’s market capitalization has caught up to about 10% of gold’s market capitalization, and the number of cryptocurrency investors in South Korea has reached 5 million. Considering that the younger generation in their 20s and 30s forms the core of investors, it seems unlikely that Bitcoin will disappear easily. In terms of intrinsic value, the dollar is just a piece of paper, and gold is valued for its scarcity, but Bitcoin’s scarcity is much higher than gold’s. While the fate of similar altcoins is uncertain, Bitcoin, which accounts for half of the total cryptocurrency market value, is believed to have sufficient value as a digital asset.

Im Juhwan, Honorary President of the Korea Communications Society

This content was produced with the assistance of AI translation services.