From an eagle-eye view, Bitcoin is decentralized money, it allows currency issuance by the masses, as opposed to a central bank. It is said that Bitcoin is the internet of money, but Bitcoin is even more decentralized than the internet itself. Most think of the internet in some sort of virtual reality, when in fact there are entities who control these servers where all of our favorite websites, and personal data are stored. They can view, alter, or even delete all web traffic that passes through their servers. Money, today, is no different. There are central authorities in every country like the Federal Reserve Bank in the US that have an overpowering effect on the global monetary system, and in turn so many aspects of our lives. They control the issuance and interest of the currency directly, and even control inflation indirectly.
It is in this environment where Bitcoin is born, and so before I share with you why I believe Bitcoin or decentralized money, is an advantage to our current global financial system, allow me to illustrate further why centralized money is not.
There was a time, when the issuance of money was backed by real assets, most commonly an equivalent amount of silver or gold, even the US dollar bill had these words imprinted on the front: ” ONE DOLLAR IN SILVER PAYABLE TO BEARER ON DEMAND”.
That time has come and gone. For the reason stated above, and for so many more, to give the authority of money issuance to a handful of decision makers concentrates tremendous power and is therefore a terrible idea. The proof is the world we live in today, a completely different financial reality than the ones previous generations have known. Currency is issued at will, for any reason a central bank desires, funding wars, and bailouts, and then financing the government debts it created from the wars and bailouts.
All the while, as more money is printed, the value of savings fall, and as the value of money falls, even more bills need to be printed to finance those same debts, and the cycle continues. When money was backed by real assets such as gold, savers were rewarded as the value of the assets grew, today savers are penalized through inflation.
A dollar today doesn’t buy nearly as many things as it did a 100 years ago, whereas an ounce of gold will do just that today.
So What is Bitcoin and How Does It Work?
Bitcoin is a P2P(Person to Person) payment network that is completely digital in nature and that bypasses any central authority to transfer monetary value. Bitcoin is algorithmic in nature and is completely backed by math. Anyone can view the entire Bitcoin future supply because it’s issuance is predetermined. There will only ever be 21 million bitcoins, with each bitcoin divisible to a 100 million units, and the smallest unit is called a Satoshi.
The issuance of Bitcoin happens through a process referred to as mining. A network of computers verify all transactions that occur on the network and are rewarded with Bitcoin for doing so. This process secures the network and ensures no one is trying to engage in double spending.
There is a plethora of literature on the technical attributes of Bitcoin and its workings under the hood. This article’s purpose is to serve as an introduction to Bitcoin for the majority of the public that has yet to appreciate the invention of Satoshi Nakamoto.
I discuss in more detail the underpinnings of Bitcoin and what makes it possible in my new book: Decentralized Revolution. You can purchase the first chapter here:
The complete Book will available shortly.
Let me know if there is anything in particular you would like to learn about either Bitcoin or the Blockchain, and if I haven’t included it in the book already, I will do just that and give you a shout-out mention.