Final answer:
The potential risk associated with Bitcoin is primarily based on user conduct rather than the cryptocurrency itself, which is evolving as a form of money. As a digital currency, Bitcoin serves as a store of value and unit of account; however, its acceptance as a common medium of exchange is limited.
Step-by-step explanation:
The question posed is whether Bitcoin as a means of payment is a threat, or whether it is more about the people using Bitcoin. In my view, it is not Bitcoin itself that is a threat, but rather how it is utilized by people that presents potential risks. My rationale is that while Bitcoin, as a decentralized digital currency, offers innovative approaches to transactions and financial exchanges, it can be exploited for illicit activities due to its unregulated nature. However, Bitcoin does fulfill certain roles of fiat money, and as technology advances, it may even become a more common medium of exchange for general commerce.
It is integral to understand that for cryptocurrency to function as money, it must act as a store of value, a unit of account, and a medium of exchange. While Bitcoin satisfies the first two by being convertible to traditional currencies like the U.S. dollar and offering secure ownership, its role as a widely accepted medium of exchange is still developing. Presently, cryptocurrencies are more often associated with illicit transactions than with everyday purchases like groceries or rent, which reflects societal and regulatory challenges rather than the technology itself.
Any form of money experiences a transition period, as did the paper dollar bill when it replaced previous forms of trade like the cowrie shell. The evolution of currency is inherent to human economic development, and Bitcoin might pave the way for future digital currencies that could offer reduced transaction costs and increased convenience compared to conventional money.
While Bitcoin does not have the sanction of legal currency by any country or regulation by a central bank, it continues to grow in use and influence. This underscores the need for understanding, regulation, and responsible use to determine whether digital currencies will be beneficial or detrimental to economic systems.