Exactly 11 years ago today (May 22), a software developer from Florida, Laszlo Hanyecz, used the new cryptocurrency for the very first time for commercial transactions.
On May 22, 2010, Hanyecz bought two pizzas for 10,000 Bitcoins. The cryptocurrency traders are celebrating this day as “Bitcoin Pizza Day”.
It must be sounding enormous today as Bitcoin is being traded at $ 36,406.56 (around Rs 26.56 lakh) presently according to CoinDesk, but back then it was not much of a bargain.
At the time, the pizzas cost $25, while the value of 10,000 Bitcoins was around $41. Now, over a decade on, as per the current value of Bitcoin, 10,000 Bitcoins would be worth around $ 364,065,600 (around Rs 2,654 crore).
Bitcoin, created in 2009 by Satoshi Nakamoto, uses peer-to-peer (P2P) technology to operate with no central authority or banks managing the transactions. An open-source network, whose design is public, collectively issues Bitcoins.
During a recent interview with CoinDEsk, Hanyecz said people see Bitcoin as a way to get rich. “Bitcoin is a way to harness greed,” said Hanyecz.
Why banks are not in favour of crypto transactions?
When Satoshi Nakamoto wrote his Whitepaper in 2008, during the global recession, about using blockchain technology for a new payment system, the idea was that Bitcoins would be a replacement for fiat currencies.
Though there is frenzy around cryptocurrencies and Bitcoin has emerged as a giant in the crypto market with a market cap of over $693 billion, banks have maintained a well-guarded distance so far from crypto exchanges.
The Reserve Bank of India, earlier this year, expressed concerns about the impact of cryptocurrencies on financial stability. Recently, banks in India and at least once financial service providers have severed ties with cryptocurrency exchanges, thus disallowing such transactions through their platforms.
China too has not only banned financial institutions and payment service providers from providing cryptocurrency services but also recently ordered a crackdown on crypto mining in the country leading to a bloodbath in the industry.
In the United States, the treasury department has called for stricter compliance of crypto transactions with the internal revenue service. Many see cryptocurrencies being used as ransomware or to finance terrorist transactions.
A Bank for International Settlements survey, published in Moneycontrol, said 86 percent of the world’s largest central banks, including the Reserve Bank of India, are planning their own digital currencies. On May 20, the US Fed Chair Jay Powell said the central bank is accelerating the development of its digital currency.
The volatility that makes Bitcoin attractive to investors also makes it difficult to use as money, the Bitcoin white paper says. The volatility of the cryptocurrency can be understood from the fact that its value significantly fluctuates after every tweet from Tesla founder Elon Musk.
In January, when the Tesla owner added the hashtag, #bitcoin, to his Twitter bio, the cryptocurrency’s price rose by as much as 20 percent. In February, Musk again tweeted that his electric vehicle company, Tesla, bought $1.5 billion worth of Bitcoin and would accept the cryptocurrency as a mode of transaction, leading to a further rise in the price of the digital coin.
Three months down, its value fell when Musk tweeted against Bitcoin, citing environmental concerns in mining cryptos.
Similarly, China’s decision and Musk’s tweet of not accepting Bitcoin for Tesla cars gave the cryptocurrency a rough ride last week. In such a condition, an average person would think twice before parking his hard-earned money in cryptocurrencies.
Apart from the concern of financial instability, there are environmental concerns. Cryptocurrency mining is an energy guzzler. As per a CNBC report, hundreds of billions of dollars were wiped off the entire cryptocurrency market last week after Musk tweeted that the electric vehicle maker Tesla would not accept payments in Bitcoin for its cars.