Bitcoin, to a layman, is simply an electronic form of cash. To a computer savvy individual, Bitcoin is a snippet of a code created using the programming language C++. However, it’s best to leave the technical definition of bitcoin for now and focus on the part that makes you wonder why this ‘code snippet’ is very valuable to people and why it has a really high price tag. First, you have to understand that Bitcoin cannot be touched or held. It is digital money because of its characteristics and that therefore, gives it its value. Now let’s take a step back and try to remember the basic economics we were all taught in school.
Characteristics and a Brief History of Bitcoin
Everyone was taught about the characteristics of money, and they include durability, portability, divisibility, uniformity, limited supply, and acceptability. Bitcoin satisfies all of these conditions and even in a better way than the traditional fiat money we use today. This is why it has such a high price tag, and the price of a single Bitcoin is over $4,000 as of today. You must, however, wonder who came across the idea for Bitcoin. Well, his name is Satoshi Nakamoto. Actually, scrap the determiner ‘his’ in the last sentence. The whole of the cryptocurrency world doesn’t actually know if Satoshi Nakamoto is a ‘he’, ‘she’ or ‘they’. The identity of Satoshi was never revealed, and till today, the world has no idea. We do, however, know Satoshi was a genius who in the bid to tackle basic monetary problems, used his/her/their programming knowledge to create Bitcoin, the first in a line of several cryptocurrencies.
Satoshi created Bitcoin (BTC) in 2008 and officially launched on 9 January 2009. It was created in the wake of the global economic meltdown in 2008 and Satoshi sought to create a lasting solution to the economic problem plaguing the world. Bitcoin betters fiat money in almost every aspect. A brief insight on the improvements of Bitcoin on traditional fiat money is given below.
How Bitcoin Betters Traditional Fiat Currency
The supply of bitcoin is not restricted or handled by anyone. If every miner (bitcoin is created as a result of mining) decided to stop mining bitcoin, then the supply would remain fixed at its current 17 million-ish supply. In this aspect, bitcoin, if adopted as money in the world, will never give rise to inflation. Even the world’s most stable currency, the dollar, experiences creeping inflation every few years. If the price of 1kg of meat is one bitcoin today, then 300 years after now, it will remain one bitcoin. The total supply of bitcoin will be 21 million, and it will never be increased nor reduced.
Since bitcoin is digital, it will remain unchanged and able to be reused forever. A transaction on the bitcoin network can also not be reversed as opposed to electronic cash transactions where money can be charged back.
The Bitcoin network has a general ledger where every bitcoin transaction ever made from the beginning has been recorded. This would allow for easy auditing and tracking of money donations, revenue earned by firms and the likes.
Peer to Peer Transactions
When you transfer money to someone, you need the bank as a third party to facilitate that transaction. Bitcoin eliminates the need for a third party as transactions are carried out directly between users.
Allows for Flawless International Transactions
If you need to transfer currency to a friend or family in another country, you’d need to exchange your currency into the receiving country’s local currency and then transfer. Bitcoin solves this by being a universal form of payment, limited to no country. It is free to be used by all.
There are several other advantages of bitcoin, and if we really talked about them, we’d cover a whole lot more. The key thing to know about bitcoin is that it is better than traditional fiat money and will someday, be massively adopted by everyone in the world.