THE RISE OF CRYPTO CURRENCY AND THE ECONOMIC IMPACT OF ADOPTING IT AS A MEDIUM OF EXCHANGE

CHAPTER ONE
1.1 Background

The ideology of cryptocurrency came into place after the great recession that occurred in 2007 -2009 which let the world’s financial and economic breakdown. Cryptocurrency is actually a form of money is digitalized that is, it can’t be touched, seen physically, its fast and used for the payment for the goods and services. The idea of a cryptocurrency was brought up by Satoshi Nakamoto the great, the inventor of the first digital crypto known as Bitcoin. His aim was to create a decentralized currency that will be made available to everyone in all parts of the world. He also wanted a currency that will not be under the control of a government or state influence.

He also aimed at reducing the gap between the rich and the poor because in capitalist or communist economy, the poor are the ones carrying most of the burden. Satoshi Nakamoto created bitcoin in 2009, with a total amount of 21million in circulation. During the early stage of mining in 2009 and 2010, one could mine about 50 bitcoins a day. After creating bitcoin just went out of public scene, which has been since 2009 up till now people don’t know how Satoshi Nakamoto looked like so many people have been laying false claims to be Satoshi Nakamoto but all their efforts were shattered. Presently there are more than 3000 cryptos currently existing. Actually cryptos can be identified in two kinds; coins and tokens coins have their blockchains while tokens are been created on existing blockchains. Coins with their own blockchains are Ethereum, Solana, Cardona, BNB, Polygon.

Ethereum which is the second largest cryptocurrency in the space has been best known and successful as a result of its diverse blockchain and projects built on it. There are various types of coins that exist in the crypto space, some of them are alt coins and meme coins. The total market capitalization of cryptocurrency presently stands out at about 1.2trillion dollars and presently about 92 percent of the total bitcoin in circulation have been mined which accounts for about 19.5 million of its total supply which is 21million. Bitcoin started at a price of 0.08cents which started rising up to till its present price 28000 dollars. Bitcoin hit or recorded its highest price of 70,000 dollars in November 2021. Crypto as a whole is highly volatile that is, crypto is not stable as price can fluctuate or change at any time.

The crash of one, the worlds largest stocks and crypto-exchange FTX (future exchange) in 2022 led to a drop in the price of bitcoin to 16000 dollars in 2022. Since the beginning of 2023, the crypto market has been on the rise, bitcoin starts pumping from about 16000 dollars to its present price which is 28000 dollars. This pump has also been influenced as a result to the collapse of some banks in the United States such as the Silvergate bank, Silicon Valley bank United States largest bank, Signature bank and Credit Suisse (one of the largest bank in Switzerland and Europe have all fired for bankruptcy.

All this have pushed so many people to lose interest in the banking system, so many people even call banks as scams all these have boost the crypto industry and increases the adoption of cryptocurrency worldwide presently they are about 500,000,000 million crypto users statistics has shown that by 2030 about 2-3 billion of the worlds population will get into cryptocurrency because the banks are not to be trusted any longer and with crypto you are your own bank, no one can have access to your money. Bitcoin have helped in reducing the gap between the rich and the poor in the world especially in third world or less developed countries in Asia and Africa.

Nigeria has principally become one of the principal countries in Africa in the adoption of bitcoin and the recent crisis going on in Nigeria sparked by CBN (Nigerian central bank) in limiting the inflow of bank notes in ATM and banks has pushed so many Nigerians to depend solely on bitcoin and other cryptocurrencies because people are being prevented from having access to their money. This crisis result to the attack on banks and ATM in Nigeria. Another case happened in Lebanon which led to series of rioting by the Lebanese people and attack on series of banks in Lebanon. The influence of bitcoin and cryptocurrency in the world has pushed the United States to come up with the central bank digital currency to be able to compete with bitcoin and crypto but the decision has been vetoed by the governor of South Dakotta, Florida and California. Antonio Ron Desantis (governor of Florida) was against the creation of CBDC because he believes in financial freedom.

The sole aim of the Biden administration is to have access to peoples funds because the state cant control crypto which has dealt with state currencies like the United State dollars which is best known for his performance against other currencies like the pound and the euro. Cryptocurrency have played a great role in the ongoing Ukraine war. The Ukrainian government have received a total amount of 70 million dollars payed in bitcoin and crypto from exchanges, crypto humpbacks and whales as support. It has also led to the adoption of cryptocurrency in Ukraine and as a result of this president Zelensky signed a bill adopting cryptocurrency payment in Ukraine legal. Cryptocurrency exchanges donated humanitarian support to Turkey and Syria with recent earthquakes there that killed a lot of people.

Champeng Zhao the owner of Binance crypto exchange donated each Binance user in turkey one Binance coin each which costs about 300 dollars. El Salvador became the first country in the world to accept bitcoin as a legal tender in 2021, a bill legalizing bitcoin was been signed by president Nayib Bukele of El Salvador since then, El Salvador has been a visiting site for touristic attraction thereby boosting their touristic industry and economy with the help of bitcoin. El Salvador has payed about 800,000,000 million dollars debt they owed and after El Salvador Central African Republic became the second country to legalize bitcoin as a legal tender. Bitcoin and crypto adoption has been in a widespread since its creation and have been backed by world billionaires like Michael Saylor of micro strategy, Elon Musk of Tesla and Spacex, Tim Draper, Mark Cuban and Cathie wood. Despite the widespread of bitcoin and crypto in the financial industry, it has been kicked against by billionaires like Warren Buffet the owner of Berkshire Hathaway and Charlie Munger who is a co-owner. 

Munger has described bitcoin and crypto as rat poison, that is crypto does no good but harm to humans. Bitcoin the very first cryptocurrency to ever exist has given rise to numerous cryptocurrencies and while some have been successful others have turned out to be scams so that is why before investing into a crypto project for fruitful gains, you need to know more about the project before that is the legitimacy of the project before getting on board and to do so,various web handles like Binance news and coin telegraph have been created to get vital informations. To know the total supply of a crypto coin or token maximum supply volume within 24 hours, market capital, all time high, all time low and ranking of a crypto, crypto apps like coin market cap, coin gerko has been created to know the progress of a crypto coin or token, details and status of cryptocurrency.

There are principally two types of crypto owners; crypto holders and crypto traders a crypto trader is someone who buys and sells crypto for maximum profit while a crypto holder is someone who buys and keeps for long term benefits holders mostly buy cryptos and keep when price falls because crypto is extremely volatile .The best moment to buy crypto is when the market is extremely bearish than bullish just few people can afford to buy when its pumping. There are various centralized exchanges where one can buy, swap and sell crypto and exchange for fiat, some of these exchanges Binance, coin base, okexx, Bitmart, Hotbit, Mex Globaland Houabi exchange.

There are also decentralized exchanges like pancake swap, shadow swap and ice cream swap cryptocurrency however is very portable to an extent that it is more preferable to hold than any other form of money. An individual can walk with freely with billions of dollars without fear or attack from bandits and it is the fastest in the payment of goods and services, doesn’t prevent international trade involving the payment of goods and services, banks are not available all the time but crypto currency has solve this problem by making the payment of goods and services available in our day to day life. Online shopping companies like Amazon, Wallmart, Alibaba accept crypto payment through the buying of their giftcards to purchase their goods but are still to accept crypto payments directly, but eventually have no choice to accept crypto payments directly in the future. Tesla also accepts crypto payments through Dogecoins and Bitcoins but bitcoin payments have been suspended for the moment.

Fast food companies like MacDonalds accept crypto payments through bitcoin in the city of Lugano in Switzerland and some other locations worldwide. There are three types of wallet where crypto currency is kept which are; custodial wallets, non custodial wallets and cold wallets. Some examples of of non custodial wallets are: trust wallet, metamasks wallet, coin base wallet, blockchain wallet and element wallet while examples of custodial wallets are: okexx, kraken, Binance, hotbit, bybit, bitmart and coin base. Bitcoin holders are ranked into different forms, a holder with less than 1 btc is called a shrimp, 1-10 btc a crab, 10-50 btc an octopus, 50-100 btc a fish, 100-500 btc a dolphin, 500-1000 btc a shark, 1000-5000 btc a whale, and above 5000 btc a humpback. The highest bitcoin holder is Satoshi Nakamoto with number of total bitcoins amounting to about750,000 to 1,1000,000.

1.2 Statement of the problem
This study seeks to bring out an analysis on the rise of cryptocurrency and how it can be used as a medium of exchange with the case of bitcoin, while also bringing out the challenges faced in being adopted as a medium of exchange and how those challenges are being resolved.

1.3 Research Questions