Bitcoin 101 – What is Bitcoin?
Bitcoin is new form of digital money
Just like any money, you can…
- save and lose it
- buy and sell it
- receive and spend it
All bitcoins in existence are on a digital public ledger called the blockchain. Bitcoins can be transferred anywhere on the bitcoin network.
Each owner of bitcoin has keys (a fancy password) that control their bitcoin. You can hold keys on a piece of paper, in your head, in your mobile device, on a computer or in a special device called a hardware wallet. You can send bitcoin anywhere in the world, without asking anyone’s permission.
Bitcoin is…
Bitcoin is scarce
Scarcity is one of the key features of things that have great value. If something is free, ubiquitous, and easy to produce, we humans don’t value it much. There will only be 21 million bitcoins, ever. Don’t worry, you can buy a fraction of a bitcoin. Because of its scarcity, over the last 10-years, the bitcoin price has gone from 0 (ZERO) to today’s value of:
Bitcoin is…
Bitcoin is sound money
What backs the US dollar? “Faith and Confidence”? The US went off the gold-standard in 1971. How much does it cost to create $100 million digital ledger entry at the Federal Reserve (the FED)? Literally nothing. Just a couple of keystrokes on a computer. The FED also does this in secret. They can credit any account, and aren’t audited.
How much does it cost to print a $100 bill? Approximately 5 cents. The FED has been printing dollars since 1913. Over that time, their money-printing has consistently caused a loss in the “purchasing power” of the dollar. Today, in 2020, it has lost more than 97% of its original purchasing power.
The reason the dollar loses purchasing power is because it’s NOT sound money. The FED routinely inflates the money supply on the order of 10-14% annually.
During crises, their bailouts to the banks can exceed those amounts. When they print this much money, it dilutes the value of each dollar in circulation, including the money you have in your savings account. By printing money, they’re not exactly stealing your money, but they are stealing the value from your money.
Bitcoin on the other hand, has a fixed supply. There will never be more than 21 million bitcoins.
Because bitcoin is hard money, its purchasing power has increased steadily, year over year.
Bitcoin is…
Bitcoin is…
Bitcoin is global money
Bitcoin is not just money for the United States, like the US dollar. It works all round the world, and is early in its adoption. Millions of people around the world who can’t get bank accounts can use bitcoin to preserve their wealth. Only about 1-2% of people own some bitcoin.
Bitcoin is ethical and fair money
Bitcoins are produced in a process called “mining”. The term is apt, as there is work performed to find the bitcoins. On average, over time, the cost of production of 1 bitcoin is about 1 bitcoin. So a miner, depending on a number of factors, may make a little profit, or lose some money mining bitcoin. This form of distribution means that nobody in the bitcoin ecosystem is unfairly getting the value from someone else by producing the money.
Fiat money, like the US dollar is printed out of thin air, at little to no expense. The people at the FED and the banks close to the FED get access to this freshly-printed money at very low interest rates. By the time the money circulates through the economy, the money has lost value for the average Joe & Jill. This redistribution of wealth from poor to rich is called the Cantillon effect. See How Central Banking Increased Inequality at Mises.org for a quick overview of the Cantillon effect. No insiders get to print money in bitcoin. The rules in the software don’t allow it.
Bitcoin is…
Bitcoin is censorship-resistant
Depending on where you live, you may have a government or perhaps a company that cuts off your ability to transact money with their organization or over their network. Nowadays, if you have a particular political view that opposes those in power, you may be at risk. And who knows who will be in power next? Social media companies, banks and credit card companies can cancel your accounts for any reason. By doing so, these companies/banks/governments are censoring your financial freedom.
And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.
Revelations 13:17
If you control your private keys, and are connected to the network, no one can censor your bitcoin transaction.
Bitcoin is…
Bitcoin is secure
The bitcoin system uses a special math called cryptography, that makes it impossible for others to steal your bitcoin. The bitcoin network has never been hacked. You still need to protect your keys (your special password) from theft. Plenty of individuals and companies who own bitcoin have been hacked. Just like money, you need to take care of it, and secure it properly. There are all kinds of great solutions for securing your bitcoin.
Bitcoin is…
Bitcoin is unconfiscatable
Bitcoin can be stored in a number of ways such that you could theoretically walk across a border with nothing on your person, and you can reconstitute your wealth on the other side. As you can hold your own bitcoin keys, a hacker can’t take your funds from the bank. The government can’t shut down your account. You are your own bank in bitcoin.
Bitcoin is…
Bitcoin development is an open, permission-less, process
Bitcoin software is developed out in the open, on the internet in what computer geeks call “free and open-source software” (FOSS). Any changes in the system are debated in the open, in public. Anyone can review the code to make it is technically sound, fair to the system, and to guarantee that the software does what it says it does. There are thousands and thousands of software developers who have contributed to or reviewed the bitcoin software code. Anyone can contribute to the codebase of bitcoin. Anyone can build applications on bitcoin.
Many developers in bitcoin are pseudonymous (we don’t know their real identity). It doesn’t matter what skin color, religion, sexual-orientation or gender. The ideas and the code are all that matters in bitcoin. There is no secrecy in bitcoin development. There is a very conservative, and rigorous process to contribute to the bitcoin code because bitcoin is holding a lot of wealth, and the developers see that as a sacred trust.
When changes are made to the code, they are “backwards-compatible” meaning you don’t have to use the new code. You can just run the old version with which you are comfortable.
The bitcoin network is decentralized
There is no bitcoin company/corporation. Bitcoin lives on the internet. Anyone can run the bitcoin node software for free if they have a computer and internet connection. Anyone can mine bitcoin. No individual, business or government can shut down the bitcoin network. Since 2011, the network has had 100% uptime.
Bitcoin is…
Bitcoin is…
Bitcoin is… a lot of things to a lot of people. For me, it is money that will grow in value over time. It is unconfiscatable. It is good money for a better world. It is the best financial opportunity in generations, and will represent one of the largest wealth transfers in history.
I challenge you, my friends, to learn more about bitcoin.
–RadVladdy
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