Bitcoin can be considered the most successful cryptographic currency today. After its emergence in 2009, bitcoin rapidly grew into a multi-million industry. (Bonneau et al., 2015) As the influence of bitcoin grew, more and more news related to bitcoin emerged to the public. People automatically fantasize about the future and whether bitcoin will have the same impact on banks as email had on the postal industry. Will bitcoin eventually replace today's currency and become the future mainstream currency? 

This essay will primarily discuss whether bitcoin will influence the entire banking industry while also analyzing its dominant traits. Decentralization is one of the most notable traits of bitcoin that distinguishes it from today's currency that the government heavily controls. If governments could develop a suitable monetary policy, the economy could thrive, and people could enjoy better lives. However, if governments fail to manage currencies effectively, the effect on civilians could be disastrous. When people find that an oftentimes irrelevant third party could easily influence the result of their hard work, it's no wonder why some people want another system. The decentralized bitcoin could be the answer, but the question remains whether it will be a similar impact as email, which brought us into a new era; however, doubts remain since bitcoin has several fatal defects that prevent it from ever being brought into the mainstream.

In May 2010, bitcoin miner Hanyecz purchased two pizzas with 10,000 bitcoins. (Bonneau et al., 2015) This was the first time that bitcoin was used as a currency. Though it might seem ridiculous in hindsight, this is where Bitcoin really began. For the first time, bitcoin had value; the bitcoin holder would have some leverage from then on. At this very early stage, bitcoin was easier to obtain than today, so a minority of people held a large amount of bitcoin. These possessors in the early stages of bitcoin would love to increase the currency's value. One of the easiest ways to achieve this is to win more people's approval of the currency. As demand exceeds supply, the price of bitcoin rises automatically; thus, early gamers started to propagate the power of bitcoin. Their effort wasn't wasted, and the value of the bitcoin began to rise with increasing recognition. During this time, thanks to bitcoins' anonymity and decentralized nature, they acted as a currency for some illegal websites. People's demand increased when they saw how convenient bitcoin could be. For most people, though, they didn't have the machines or funds to mine for bitcoin, so the only way to purchase it was with money.

The first bitcoin exchange was arranged in July 2010. From May to July, the speed of bitcoin's propagation and the formation of the bitcoin exchange made access to it easier. Therefore, the number of bitcoin users was boosted again. More participants meant more value-added to the coin in the mechanism, so more was gained the earlier someone entered the game. It's similar to the notorious pyramid scheme invented by Charles Ponzi. Bitcoin is not evenly distributed but is possessed by a small group of people. To maximize their profits, they're more than happy to attract new people into the game by paving the road for them.

However, the question arose of who was really in charge of this decentralized currency - the eldest gamer or the largest bitcoin possessor? If these people had the power to manipulate the entire bitcoin market, aren't they assuming the same function as the government that controls centralized currency? If capitalists have total control over the bitcoin market, this could be more dangerous than a centralized currency held by the government. For example, let's take those capitalists as a center and compare them to the current system. It's no doubt that the government is a more stabilized leader. As the governing body responsible for a country and its people, governments already have more responsibility and a higher baseline to function. Unlike the government, capitalists are people motivated purely by interest. Once they notice anything wrong or out of their control, it's easy to picture how they could escape unscathed, leaving all the other people to suffer from the burst of the bubble, similar to what Ponzi did in 1920. Once compared in this way, it's still a question of whether bitcoin can be regarded as a currency that could change the world. It's only a speculative bubble for sure and a powerful tool of making money for a minority of people that potentially exploits the public. Besides, isn't it ironic that such currency that aims to replace the current monetary system still needs to be valued by them?

According to the present situation, the current monetary system is relatively stable. It would be hard to alter in the short term, not to mention all the other risks bitcoin involves. For instance, the bitcoin exchange can be untrustworthy; according to the statistics, 40 bitcoin exchanges have vanished out of nowhere. Since the bitcoin network surpasses the legal system, people who have been deceived in such games can hardly safeguard their rights. Additionally, the machines for mining bitcoin have high maintenance costs; in the past year up to May 2021, global bitcoin mining consumes 134.9 billion kilowatt electricity. This is a terrible waste, and it also matches some countries' annual total electricity consumption, such as Malaysia. 

Unlike the vision of a lot of people, bitcoin didn't influence banks as much as expected. Firstly, bitcoin is not within the range of law, so there's an absence of a tax and monitoring system that makes it difficult to safeguard one's rights. This makes it nearly impossible to become a stable currency. Every transaction and contract has terms and conditions in the real world, and international transactions are routinely bankable, legally guaranteed, and traceable. Bitcoin's market structure makes individuals extremely susceptible, and it can be hard for them to trust bitcoin as their everyday currency in return. Additionally, the unstable price of bitcoin, high service charges, and additional barriers of entry discourage many users. Therefore, bitcoin can hardly be used on a large scale, which prevents it from having an enormous impact on banking. 

In conclusion, bitcoin will not do to banks what email did to the postal industry for various reasons, including - but not limited to - the substantial amount of energy needed to operate it, volatility and insecurity, and a wide range of illegal usage. Most importantly, the hypocrisy of the aforementioned capitalist, who holds most of the coins and manipulates the bitcoin market, takes advantage of bitcoin's decentralized nature and creates a bubble-like centralized sphere. In hindsight, bitcoin has gone too far from its original intention of creating a system that will free people from a centralized currency. What has happened is far more ferocious and exploits some minorities who have invested in bitcoin's system. The public will never accept such a system, and there's no doubt that bitcoin is a speculative bubble.

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Androulaki, E., Karame, G. O., Roeschlin, M., Scherer, T., & Capkun, S. (2013). Evaluating user privacy in bitcoin. Financial Cryptography and Data Security, 34–51. doi.org/10.1007/978-3-642-39884-1_4 

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Androulaki, E., Karame, G. O., Roeschlin, M., Scherer, T., & Capkun, S. (2013). Evaluating user privacy in bitcoin. Financial Cryptography and Data Security, 34–51. doi.org/10.1007/978-3-642-39884-1_4 

Eyal, I., & Sirer, E. G. (2018). Majority is not enough. Communications of the ACM, 61(7), 95–102. doi.org/10.1145/3212998 

Bonneau, J., Profile, V., Miller, A., Clark, J., Narayanan, A., Kroll, J. A., Felten, E. W., Contributor MetricsExpand All Joseph Bonneau Stanford University Publication Years2006 - 2019Publication c, Joseph Bonneau Stanford University Publication Years2006 - 2019Publication counts10Available for Download3Citation count271Downloads (cumulative)2, & Authors: Joseph Bonneau View Profile. (2015, May 1). SoK: Research perspectives and challenges for Bitcoin and cryptocurrencies. SoK | Proceedings of the 2015 IEEE Symposium on Security and Privacy. dl.acm.org/doi/10.1109/SP.2015.14.