By Dr. Soha Maad
Imagine if your boss told you “you did a great job and you will be paid in bitcoin”. How would you react? Are you being deceived or is it an advantage? In this article we discuss the validity of the Bitcoin currency and explore it from various angles.
Numerous forms of currencies evolved throughout time: goods, gold, silver, banknotes, and electronic money. Today Bitcoin is emerging as an innovative payment network and a new kind of currency. It uses peer-to-peer technology to operate with no central authority or banks. Bitcoin cryptocurrency is a virtual currency that uses Blockchain paving the way for cashless, digital economy. However, the essence of Bitcoin is still unclear. Is it money, commodity or simply a hype? The answer is not straightforward and distinct views are plausible.
The popularity of bitcoin has boomed since it was invented in 2010 capturing the interest of investors looking for an alternative to traditional investments. Investors consider cryptocurrency as a good investment in times of economic uncertainty because of expected high returns. Large investment in Bitcoin led to a surge in Bitcoin value. Bitcoin are traded on independent exchanges worldwide. The advantages of investing in Bitcoin are high accessibility, liquidity, returns, and transparency. The disadvantages on the other hand are lack of regulation, limited use, volatility, and lack of security.
Today there is over a thousand of Cryptocurrencies worldwide. There are two ways for obtaining Cryptocurrencies: buying or mining. Buying involves signing up with a cryptocurrency exchange. Platforms for buying Cryptocurrencies include Coinbase, Binance and Coinmama. Mining is generating new cryptocurrency by solving complex algorithmic problems.
The computational resources needed to mine bitcoin use huge electrical power. Hence bitcoin mining is not environmentally friendly.
Bitcoin can be spent in various places online and offline. Bitcoin ATMs allow exchange of bitcoin for cash. Bitcoin can be converted to cash by selling it in a cryptocurrency exchange.
Many Muslims are reluctant to trade cryptocurrency due to surrounding uncertainty and speculative nature. Bitcoin is not compliant with Islamic economy where investment serve the real economy and promote its growth. Thus, Bitcoin is not ideal Islamic investment unless a regulated framework is established. However, Shariah Advisory Council of Malaysia’s advised that it is permissible to invest and trade cryptocurrencies on registered crypto exchanges. Shariah-compliant crypto exchange won license from Bahrain central bank. CoinMENA is offering spot trading in five major cryptocurrencies.
Bitcoin was designed to replace fiat currencies and becoming a global digital currency. Bitcoin estimated growth is high reaching over $100,000 by 2025. However, Bitcoin cannot replace banks. The rush for cryptocurrency is attributed to a misunderstanding of how money is created. The value of bitcoin is not backed by anything. Hence, no one can predict the future of Bitcoin. Various scenarios arise: Bitcoin may be digital gold of digital economy; Bitcoin may be regulated and taxed; Bitcoin may be used to buy goods and services; Bitcoin network might be down or hacked; World financial institutions like IMF and central banks might start mining their regulated Cryptocurrencies; Bitcoin will replace cash money.