On January 3rd, 2009, the world changed forever. All were shocked when governments bailed out centralized banking institutions around the world, but a mysterious someone, or group of someones, using the name “Satoshi Nakamoto,” quietly made the first entry in a decentralized digital ledger known as Bitcoin. Satoshi coded a headline into this first ledger entry: “The Times 03/Jan/2009 Chancellor on Brink of Second Bailout for Banks.” This newspaper headline served as a marker in time pinpointing the inception of the Bitcoin network. Many also believe it displays Satoshi’s distrust of centralized banking and why she/he/they dreamed up this revolutionary technology—to make unnecessary the centralized entities of trust.
WHAT IT IS
Bitcoin is a decentralized, peer to peer, trust-less, payment network anyone can download and participate in. It doesn’t require a third party payment processor to make payments possible. It doesn’t need permission from banking institutions or government organizations to be processed. It doesn’t require the user to trust anyone else on the network or to reveal their identities to use it. Bitcoin is the internet of money.
Bitcoin’s value is derived from and even enhances attributes similar to gold. Like gold, scarcity and market supply and demand fuel Bitcoin’s monetary value. Gold is physically scarce (about 181,881 tons) and Bitcoin is digitally scarce (only 21,000,000 Bitcoins exist). Although they are both equally fungible, it’s easy to send any amount of Bitcoin anywhere in the world, while sending gold requires higher monetary and logistical costs.
Bitcoin enhances divisibility as well. Bitcoin is divisible to the millionth decimal and, as the monetary value increases, it can programmatically fractionalize even more if needed. By contrast, gold is divisible only as much as you can scrape off and measure. Both are used to measure value because you can’t create more than exists and the amount that does exist is finite.
The future of Bitcoin is where the faith in our speculative investments live. Protocol layers are being built to exist on top of the strong decentralized trust of Bitcoin. These layers will allow for decentralized autonomous organizations to exist. Imagine decentralized exchanges like Uber, eBay, and Airbnb. Anything where a third party takes a cut could be challenged. Tokens representing stocks, commodities, or government currencies could be created without a central bank.
The future of currency could be one in which every person has their own currency consisting of fractions of different assets. Sending your currency would initiate trades resolving in the decentralized exchange and arriving at the receiving party’s defined currency. How we use money could become more granular. Why pay for monthly car insurance when with programmable money you could pay micro-transactions by the minute based on when and how you use your vehicle? Why wait every two weeks for your paycheck when you could be paid in real time for each minute?
HOW IT WORKS
As Americans, it can be difficult to understand the need for such a technology outside of nefarious motives; but remember, despite our shortcomings, we are still one of the more privileged and wealthy countries on earth. Beyond speculation and investment, using Bitcoin isn’t for us…yet. There are 7.6 billion people on earth and 6 billion of us don’t have access to a bank account. Six billion people are unable to compete in the global economy and can’t purchase or sell online. This isn’t because of their own doing, but because they were born in a place where the bank, Visa, and Mastercard don’t exist. It’s not profitable or their governments won’t allow them. Bitcoin is for them.
In Afghanistan, the ingrained patriarchal society deplores the autonomy of women and families commonly subject to the education, employment, or anything that could lead to the independence of a woman. Through the Woman’s Annex Foundation, women learn to work online and accept payments in Bitcoin to liberate themselves without anyone knowing their gender. Bitcoin is for them.
In Greece, India, Zimbabwe, and Venezuela, third party trust in government insured currencies and banks failed them, stealing away retirements and life savings. Bitcoin is for them.
This technology is revolutionizing the world, but because we’re so privileged, we’ll continue investing and be the last to notice the revolution.