It's Time To Own Some Bitcoin
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One of the most misunderstood assets of all time is the Godfather and first cryptocurrency ever created… Bitcoin!
Most people call it a scam or valueless, yet if you ask them what it is and how it works, they will not be able to tell you. These claims are largely based on the volatility of the price, and probably because the source has either lost money investing in Bitcoin, or holds another asset class/business that is potentially threatened by its existence.
After all, if I were a bank or another part of the traditional financial system, I would be very critical of cryptocurrency as well, given its potential to make my industry irrelevant/redundant.
As with all things in life, it is important that you understand the facts first before forming your opinion on the subject matter. Today, we are often too jaded by media/neighbours/celebrities/friends on topics such as politics/finance/sports. As a result, our opinions on these matters aren’t our own and we basically become an echo chamber of our sources before we even gather all of the facts and take a minute to think for ourselves!
Do not make this mistake with Bitcoin.
Below I will explain to you its use cases and features, and from there you can decide whether Bitcoin is right for your risk appetite and investment portfolio.
What is Bitcoin?
Get ready, because this will be the simplest and most straightforward explanation you will have seen to date.
Founded in 2009, Bitcoin is basically a list of bank accounts but instead of having a centralized entity like the bank verifying the transactions/balances, anyone on earth with computing power and internet access can do so through the Bitcoin blockchain. As a result, all transactions are transparent, ensuring that accurate account balances are verified through a vast network open to all.
In addition, every individual has self-custody of their Bitcoin accounts, and it is impossible for anyone to access your account without your password (known as your “private keys”). This differs from a bank who holds your funds on your behalf, and can prevent you from accessing it for a variety of different reasons.
Bitcoin was created by an individual under the internet pseudonym “Satoshi Nakamoto.” To this day, it is not certain who Satoshi was or whether that individual/group is still alive. Instead of cents or dollars, Bitcoin is denominated in “Satoshis.”
100,000,000 Satoshis = 1 Bitcoin
Through the code of the Bitcoin blockchain, it was programmed by Satoshi to only ever have 21 million Bitcoin in existence, slowly released over the course of time through a method known as “mining”.
As of this article’s release, there are roughly 19.15 million Bitcoin in existence, with another 1.85 million left to be mined. It is estimated that the last Bitcoin will be mined by the year 2140.
Bitcoin is not collateralized by any assets, and the value is 100% determined by supply and demand. If more people want to buy Bitcoin than sell, the price goes up. And vice versa.
This is the point where most people become skeptical. Does this mean that Bitcoin is just made-up internet money? That definitely sounds like a scam.
However, if we compare it to current government currency that is also not backed by anything, we are able to see that fiat dollars only have value because of its use cases and the confidence of the community. Remember, almost everything you own has an arbitrary price based on supply and demand. A 1st edition Charizard is just a piece of cardboard… until it rockets in value because of its scarcity and demand based on nostalgia.
In the next section, I will lay out Bitcoin’s use cases to try and justify why Bitcoin is currently trading at a price above $0/BTC.
Why Bitcoin?
While there are a significant number of reasons why people choose to buy Bitcoin (with that number growing every day!), they all come back to the main reason that Bitcoin is the “hardest” form of money ever created.
Hard money refers to the inability to shake its core value due to the difficulty required to alter its supply, whether that is creating more money or destroying existing money. It is very much desired because of the perception that hard money will maintain relative value in most circumstances, given its inability to be materially altered in both its physical form and its total supply, which is quite the contrary compared to government fiat currency.
Before Bitcoin, it was widely accepted that the hardest form of money to ever exist was gold due to its theoretical limited supply on earth, as well as being one of the hardest metals to destroy. As a result, the supply of gold is very difficult to significantly alter.
However, Bitcoin is slowly proving that it is the hardest form of money ever created, largely based on the 4 points below:
Scarcity:
It is embedded in the code of the Bitcoin blockchain for only 21 million Bitcoin to ever exist. There is no ability for a government’s central bank to start minting more Bitcoins, unlike what happens to most government fiat currencies. The open-sourced blockchain also allows for full transparency of the number of Bitcoin mined and in circulation to date.
On the contrary, while the supply of gold is theoretically limited, the maximum supply compared to the current amount that has been mined is unknown.
Censorship Resistance:
Given the decentralization aspect of the Bitcoin blockchain, it is virtually impossible for a government or third party to prevent 2 parties from transacting on the blockchain. In addition, as transactions do not require a centralized party to settle, the government does not have a central or main actor that it can intervene to prevent transactions.
With the current state of global affairs, the ability to own assets that are censorship resistant and cannot be taken away from you because of your personal beliefs/opinions/etc. is quickly becoming one of the most desired items in the world.
Many countries have tried to ban Bitcoin in the past with very little impact to transaction levels, including China, India, Russia, etc.
Banning Bitcoin is one of the quickest ways to tell that a government does not actually understand how the Bitcoin blockchain works.
Malleability:
As Bitcoin is not actually a physical product, but rather a ledger on a digital blockchain, it is impossible to physically destroy. Sure, perhaps the mining rigs/computers used to secure and maintain the Bitcoin blockchain can be destroyed, but they will just be replaced by others.
On the contrary, while gold is one of the toughest metals to heat/scratch/alter, with enough effort gold can be mended into other forms and shapes.
Difficulty To Store/Move:
Like malleability, given that Bitcoin is not a physical product, the ability to store or move Bitcoin is very simple. By memorizing the private keys (or seed phrase) to your wallet, you can access your Bitcoin anywhere on earth that has internet access.
It is also impossible for anyone to know how much Bitcoin you possess at any given time by just looking at you.
This means you can literally move from one country to another and bring your entire net worth with you hassle-free. Try that with fiat currency.
On the contrary, gold is very difficult to store or move given how large and heavy a significant dollar value of gold can be. It is almost impossible to move large amounts of gold across a border without being interrogated or stopped. Possessing large amounts can also become difficult to store from a security perspective, as holding it at home leaves you vulnerable for robberies, and holding it with a 3rd party such as a bank vault leaves you vulnerable for confiscation.
Given the four major points above, it is evident that Bitcoin is the hardest form of money ever created. It is this very reason that Bitcoin is deemed to have value and currently trades above $0/BTC.
While the price of Bitcoin may fluctuate violently in the short term due to speculation, given the increasing divide in global politics, governments being fiscally irresponsible causing rampant inflation, and a number of other global factors, there is a larger and larger desire for hard money.
And as demand inevitably goes up ever so slowly over the years to come, so will the price of Bitcoin.
It’s time to give Bitcoin a much “harder” look.
PS: While you’re patiently waiting for the price of Bitcoin to go up, you can engage in the debate of whether referring to two of them should be “2 Bitcoin” or “2 Bitcoins”.