1 "Bitcoin is digital money"

1 "Bitcoin is digital money"

For something to be money, there has to be an agreement that ‘this something' has a particular value. Once that is established, then ‘it' can be used as a medium of exchange or a store of value among everyone who has agreed it is money. Such money is a belief system.

In the current financial system, a trusted third-party, a bank, is needed to process and approve transactions. Which puts a lot of power into one centralized authority. Bitcoin improved this by eliminating the need for trust in third parties. To transact in Bitcoin, you don't have to trust the person that you're transacting with. I can confirm who received it, how much, and I can also see what they do with it afterward. This system is a transparent public system that is not owned or controlled by anybody. It's fully decentralized.

In the past, gold was used as a currency. It is hard to actually use for transactions, so they created paper claims on gold. During this period, you could exchange a US Dollar and get gold in return. But in 1971, President Nixon decided to break from the gold standard. You no longer could take your dollars and turn them in for gold. The current fiat system was born. Fiat simply means that a currency is not backed by a commodity, like gold.

Central banks worldwide rely on the US dollar as the core unit of account for issuing money. Because the US Dollar is subject to an inflationary monetary policy, it devalues over time. This has resulted in the US Dollar losing at least 95% of its purchasing power over the last 100 years. You need way more money to buy the same goods and services. When a central bank prints money to quickly, people realize they are losing money. Risking a currency to become worthless, and people wanting to get out of it. We have seen in countries around the world what happens when belief in a currency is lost. Just look at Venezuela or Zimbabwe. They are fleeing to assets they do trust.

Currently, governments and central banks all over the world are devaluing their currencies by printing insane amounts of money. Unfortunately, many people can't comprehend this yet. They still have their pensions and savings accounts, and they're not worried as long as the actual number on their account isn't declining. However, due to the insane amount of money being printed, their purchasing power will lower significantly.

Bitcoin presents an alternative financial system that is deflationary and transparent. There will be a fixed amount of only 21 million bitcoin, ever. And everyone can verify that the majority of them, over 18 million, have already been distributed.

I'm confident that Bitcoin will not replace the current system, but it presents an option. With its growing adoption and market cap, it will force the legacy system to innovate. Bitcoin is undoubtedly the first successful attempt to separate state and money.