Bitcoin (BTC), the first and biggest cryptocurrency, is often debated by financial experts and enthusiasts. Recently, amid ongoing discussions of BTC becoming a U.S. reserve asset, David Schwartz, Chief Technology Officer at Ripple, highlighted some unique advantages of BTC that are not always well understood.
The conversation began with a question about whether the Federal Reserve should consider holding Bitcoin as a reserve asset. As a reminder, Senator Cynthia Lummis introduced a bill calling for the creation of a strategic BTC reserve in the U.S.
This is supposed to reduce the national debt by purchasing one million BTC over five years. In turn, the purchased BTC would be held for a minimum of 20 years.
However, there are concerns about Bitcoin’s ability to handle more users, especially as transaction costs rise with increased demand. This raises questions about its practicality as a day-to-day currency.
Beauty of Bitcoin
Schwartz responded by explaining BTC’s flexibility in handling transactions. He noted that users can conduct transactions directly on the blockchain or through other methods that better suit their needs. The blockchain is a secure, decentralized ledger that guarantees at least a basic level of reliability and transparency.
However, for some situations, centralized services can handle transactions more efficiently without using the blockchain, balancing security with cost-effectiveness, says Schwartz.
This dual capability — using the blockchain for its secure record-keeping while also allowing for more efficient transactions through centralized systems — demonstrates the adaptability of cryptocurrency. Schwartz pointed out that the blockchain offers a minimum standard of quality, giving users the freedom to choose the best method for their needs.
