What Is Bitcoin? Why Should You Care?
What Is Bitcoin?
For simplicity sake, Bitcoin is often referred to as digital gold — but it's much more than that.
Bitcoin is monetary technology; a closed-loop system consisting of a ledger and its own native currency.
The "blockchain" is the ledger. It's an ongoing, public record of every transaction on the network since its inception in 2009. Roughly every 10 minutes, a “block” of transactions is verified and added to this ledger by “miners”, who are rewarded bitcoin for securing the network.
This "block reward" is how currency is added into the system; it's bitcoin you can buy, sell, trade, transact, and most importantly — self-custody.
The Bitcoin Network
Technically speaking, bitcoin is the best form of money in human history.
It's the first digitally native money; engineered from the ground up to hold specific properties and characteristics of good money.
Bitcoin Is Scarce
Bitcoin cannot be debased, which is the most important quality of any store of value. It’s why gold became a global reserve asset and silver didn’t. But unlike gold, Bitcoin achieved perfect scarcity.
It is a mathematical certainty that there can never be more than 21 million bitcoin. Here’s Andreas Antonopoulos on why:
Bitcoin Is Perfectly Divisible
You don’t have to buy a full bitcoin; you can buy a fraction.
1 bitcoin = 100,000,000 sats or "satoshis", named after the anonymous creator, Satoshi Nakamoto.
Bitcoin Is Portable
Bitcoin allows for peer-to-peer transactions without the need for any trusted third-party like Western Union, Visa, Chase, etc.
Here's the Lightning Network, a secondary layer built on the rails of Bitcoin, being used as a smarter, better, faster, cheaper tool for remittence payments.
"Bitcoin is the internet of money."
The internet dematerialized communication. Just think how PDFs and websites dematerialized entire libraries. Or how email dematerialized the post office. Or how Netflix streaming dematerialized movie rentals; toppling Blockbuster without breaking a sweat.
Bitcoin is the internet of money. It is a global standard connecting the entire world through a single, digital monetary language.
It’s difficult to understand at first, but so was the internet in 1994 😂
4 Reasons Why You Should Care About Bitcoin
Bitcoin is the best chance we have, as individuals and society, to increase the human condition en masse.
1. Global Financial Inclusion
Bitcoin offers anyone on the planet with a cellphone financial inclusivity. Banking, point-of-sales, remittance payments, crowdfunding, etc.
It's free and open monetary technology; all without the 3rd party institutions that have historically acted as rent-seekers in the monopoly of money.
2. Bitcoin Is A Lifeboat
The ability to save and store value through time and space is foundational for building generational wealth. Unfortunately, the debasement of the fiat currency diminishes one's ability to save.
If you have dollars in a “savings account”, it is not growing faster than it is being debased.
In the long run, you are losing purchasing power.
In Alice in Wonderland, the Red Queen says to Alice something that perfectly describes the hamster wheel reality.
“My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.” — Lewis Carroll
The real problem is that this disproportionately affects those who don’t own assets. In an inflationary environment, asset prices (homes for example) rise along with everything else.
But if you don’t own assets, your purchasing power is diminishing while your cost of living is getting more expensive.
This is the underlying force driving the widening wealth gap. Again...this is the underlying force driving the wealth gap.
Wealthy individuals and corporations who own assets get to ride the inflationary wave; everyone else gets pushed further behind the starting line.
This problem was cranked to eleven in 1971, when President Nixon broke the dollar's last tie to gold and transitioned the world to a pure fiat monetary system (note: this chart ends in 2018).
How Bad Is Fiat Debasement (Money Printing)?
Between January 2020 and January 2022, the United States M2 money supply increased from 15.4 trillion dollars to 21.7 trillion dollars. 29% of the total money supply, ever, was created in 2 years.
Here's a visualization to help you grasp what one trillion dollars looks like.
And if you want to know how this is all possible, here’s Fed Chair, Jerome Powell to explain:
Westerners, living under a stable currency, may not be phased by this. But the people of Zimbabwe and Venezuela understand the dangers of rapidly increasing the money supply.
Ali Hamam from Tahinis Restaurant
My family and I grew up in Egypt and decided to move to Canada after the Arab Spring of 2011. My father was a hard working math teacher and had worked his entire life, only to watch the money that he had in the Egyptian banks get devalued by 65% against the US dollar over the course of a few years. — Ali
In summary, Bitcoin today is a lifeboat for those living under a failing currency; a store of value offering protection from debasement.
3. Bitcoin Incentivizes Better Energy Practices
Securing the Bitcoin network requires a tremendous amount of energy. You may have seen headlines like, “Bitcoin Uses More Energy Than Some Small Countries.”
I’m here to tell you it’s worth it and it’s a good thing.
Miners use energy to run specialized computers called ASICs, which secure the Bitcoin blockchain in exchange for a reward ("How Bitcoin Mining Works?" - 30 Mins).
And while this does consume a lot of electricity, it's important to understand that it uses less energy and emits less carbon than tumble dryers.
Arguably...creating a secure, free, open, neutral, global monetary network using a fraction of the energy needed to run the gold and banking industries, adds more value to the world than tumble dryers.
The beauty of bitcoin mining is that it’s portable. Miners just need energy and minimal internet. Which means they can move directly to any source of stranded or curtailed energy.
This incentivizes mining operations to seek out the cheapest electricity; energy that would otherwise be wasted.
For example, in Texas, miners are capturing gas that would normally be flared. But more importantly, the ability to turn real-world energy into money, without ever needing to connect to a grid, offers a way to fund innovative energy projects...👀
Texas "Green Energy" Case Study
Are you a proponent of wind and solar? 👀
The downside of wind and solar are:
- They are intermittent — it's not always windy or sunny
- Curtailment — i.e. wasted energy when there's more supply than demand
- Transmissions loss — which limits the ability to export electricity
Ultimately, the main challenge comes to grid stability. Enter Bitcoin:
If you are still gripped by the energy consumption FUD (fear, uncertainty, doubt), then I highly suggest watching This Machine Greens (produced by Swan Bitcoin).
4. Bitcoin Is An Asymmetric Bet
Bitcoin can either fail and go to $0 or succeed and become a world reserve currency; increasing in price forever.
I’m comfortable betting that Bitcoin's adoption will continue to rise. Not out of faith, but because I understand that the existing system, globally, is mathematically certain to debase.
Currency debasement will drive individuals, familes, small businesses, coroporations, retirement funds, and nations to seek better stores of value; which will bitcoin to a certain extent. And because of the fixed supply — as demand increases, so does price. That’s economics 101, baby.