sixteen years ago today Bitcoin White Paper introduced a vision for digital cash, allowing people to transfer money directly to each other without relying on banks. Today, Bitcoin is largely seen as “digital gold” – a rare asset for storing value rather than digital cash – but its real potential may lie in its dual role as both a valuable asset and a network for decentralized payments . Critics like European Central Bank Ulrich Bindseil call Bitcoin speculativebut proponents argue that its power is both as a store of value and a network for payments beyond central control. MYTH Christian Catalini believes that “the Bitcoin network is as important as the Bitcoin asset”.

From cash to digital gold

Bitcoin’s deflationary design is at the heart of its appeal and function. However, originally intended as a peer-to-peer cash alternative, Bitcoin’s rising value and transaction costs have gradually made it less practical for everyday payments, shifting its role more towards a depository. value. Its fixed supply sets it apart from fiat currencies, which central banks can inflate at will. This lack makes Bitcoin attractive to those concerned about monetary decay, positioning it as “digital gold” – a means of storing wealth and protecting against inflation.

Central Banks Blind to Bitcoin’s Value

Last week Ulrich Bindseil, Director General of Market Infrastructure and Payments at the ECB, questioned the economic legitimacy of Bitcoin in a paper arguing, “Promoters of this investment vision have made little effort to tie Bitcoin to an economic function that would justify its valuation.” Bindseil argues that Bitcoin is speculative and benefits early adopters at the expense of others – a position that reflects mainstream finance’s skepticism about Bitcoin’s lack of economic utility.

Bitcoin: The Network of Assets and Payments

While central bankers argue that Bitcoin’s appeal is based on speculation, its supporters insist that central banks are missing the point. “The early adopters of Bitcoin are no different from the Rothschilds in banking, the Vanderbilts in railroads, or the Gates in software,” says Christian Catalini, co-founder of Lightspark and founder of the MIT Cryptoeconomics Lab. For Catalini, Bitcoin’s real utility lies in its network, resistance to central control, and deflationary nature, providing a powerful alternative to the inflationary limitations of fiat currency. As he explains, “Bitcoin is the basis of a truly open and neutral protocol for money.”

Bitcoin is advancing as a payment network

Bitcoin has sparked a vast crypto ecosystem, driving innovations like stablecoins and decentralized finance (DeFi) that are transforming traditional finance. Ethereum’s launch of smart contracts in 2015 accelerated crypto growth, and by September 2024, active blockchain addresses exceeded 220 million, with crypto wallets reaching 29 million users. Only stablecoins processed $8.5 trillion in Q2 2024— doubles Visa’s $3.9 trillion — leading major players like Stripe, Visa and Mastercard to embrace crypto wallets and stablecoin technology. Bitcoin’s own network utility is also expanding; recent innovations such as Lightspark’s Bitcoin-based network — co-founded by David Marcus, the former head of Facebook balance project—allows near-free, self-custodial cross-border transactions, signaling Bitcoin’s potential renewed role in global payments.

The Bitcoin Paradox of Central Banks

Ironically, while central banks criticize Bitcoin as an asset, they rely in part on its technology, but for centralized digital currency networks. However, the ECB’s Digital Euro project intends to force adoption across the entire eurozone – a top-down model in stark contrast to Bitcoin’s voluntary grassroots expansion. Responding to Ulrich Bindseil’s aforementioned criticism of Bitcoin, Christian Catalini noted of X: “The partiality of the status quo is hard to shake,” suggesting that while central banks recognize the benefits of blockchain, they are hesitant to embrace the principles its basic decentralization and deflationary nature.

The fixed supply advantage of Bitcoin

As inflation erodes the purchasing power of fiat, the fixed supply of Bitcoin becomes increasingly attractive, especially in regions experiencing currency depreciation. For many, the independence and deflationary nature of Bitcoin is a compelling alternative to fiat, a way to store wealth free from the reach of monetary policy. And if central banks worry that Bitcoin rewards early adopters, its open and permissionless design means they are free to join, too.

Bitcoin’s Way Forward

At 16 years old, Bitcoin is at a crossroads between skepticism and growing adoption. While central banks dismiss it as a bubble, proponents see it as a liberating alternative with the potential to outlast fiat systems, both as an asset and as a network. With major players like Visa, Stripe and Mastercard investing in the future of crypto, Bitcoin’s impact on global finance looks poised to grow. Whether central banks embrace it or resist it, Bitcoin’s trajectory as a decentralized and deflationary alternative to fiat seems unstoppable.