In this brief summary I want to explain in easy to understand terms what bitcoin is and why it is a superior form of money than the government backed fiat currency we use today. This information is crucial for us to understand if we cant to escape the poverty trap built into fiat currency, particularly for the lower economic half of society. Once you understand this revolutionary concept and the true potential of bitcoin, you will be empowered to be a sovereign entity with true financial freedom. And without financial freedom, all the other types of freedom on the mundane level are merely empty words to fool the masses.
What is money?
Let’s begin by stating that bitcoin is digital money. To understand this we need to first describe just what money is. Basically money needs to have a few fundamental qualities, namely it is a store of value and a medium of exchange. This has been the case going back in history, for example even to the Roman Empire over 2000 years ago. Before that there may have been various items to act as literal money, like precious metals, assets and even sea shells.
In other words anything can be money because money is built around a belief system between two people who agree that the medium of exchange has a certain value. Money is story we tell to ourselves and which we all agree on, even if only for now. At some point that story may fall away and a new system replaces it, as we have seen several times in history. Today’s paper notes is only the current story we are agreeing upon that the paper notes are the equivalent of a store of value and means of exchange.
As far as the digital side of the explanation goes, we can look at the arrival of the internet. Before the internet we had business between people and when the internet arrived, business just went online. Similarly money has just gone online and is now digital as well as paper, just like any business today that may have migrated to the world wide web. It’s a normal evolution of technology. It was unknown to the masses at first and frowned upon like any new advancement, but it nevertheless became standardized in time.
How does bitcoin work?
An easy example to explain how bitcoin works is the game of Monopoly. When we play this game, all the money is dished out or sitting in the bank and all the players can see all the transactions throughout. That’s why you don’t have a separate player acting as the bank. There is no need. There is full transparency.
On the other hand, in the legacy system of money, there is a centralized third party called the bank. We can give our money to other players directly but sometimes we give it to the third party middle man to process the transactions. There is of course a huge need for trust in this kind of system. We have to trust our bank as well as the other person’s bank, lest they steal the money or intervene because they don’t like our profile for some reason. Basically we are forced to trust the third party in any big global transaction of money.
The beauty of the blockchain technology
Now with bitcoin nobody has to trust any third party when transacting. And nobody can stop you from transacting with anyone you choose anywhere in the world. The code upon which bitcoin is built is called the blockchain. Here every single transaction that has ever happened with bitcoin is recorded for all to see. All the transactions are kept in bundles or blocks built every ten minutes. And these blocks of transactions are linked to each other in a timeline, with a timestamp. So anyone can go to have a look at this open distributed ledger of transactions to verify them. And this ledger data base has been going since January 2009.
Don’t trust – verify
Nobody controls this ledger or blockchain and yet everyone can see all your trades and transactions. So you need trust no one. It is a “trustless” system. The transactions can be traced so no one can cheat you or lie about any payment. And yet you need no bank as the blockchain has replaced the bank entirely. You are now your own banker.
How bitcoin arises
The process of processing all these transactions and recording them on the blockchain ledger is done by sophisticated specialized computers. And it costs a lot of money to operate them, so the “miners” as the bitcoin computer operators are called, are paid in bitcoin for their efforts to run the computer network globally that keeps the blockchain up and running 24/7. They are incentivised to run their expensive computers by being paid.
The genius of halving the bitcoin output every 4 years
So the mining operations churn out bitcoin at a very specific rate. And the math and logic built into the system of bitcoin mining is ingenious and fail safe. Back in 2009 in the first year of operation each ten minute block of transactions resulted in 50 bitcoin being produced and shared among all the mining rigs globally in relative proportion to their work capacity in running the blockchain. However, the inventor of this first blockchain, who goes by the pseudonym Satoshi Nakamoto, engineered it so that every four years the bitcoin output would be cut in half.
So in 2009 we saw 50 bitcoin paid to the miners every ten minute block. Then in 2012 the output was halved to 25, in 2016 it was halved again to 12.5 and recently in May 2020 the bitcoin output was halved once more so that today miners only receive 6.25 bitcoin per ten minute block, which means around 900 bitcoin are now produced daily and shared among all the miners globally. And this mathematical equation is part of the magic design of bitcoin that makes it such a revolutionary form of money to change the world.
Inflationary fiat versus deflationary bitcoin
And this is at the heart of the matter and explains how bitcoin is better than fiat currency. Basically fiat money used to be backed by gold, but in 1971 USA could no longer keep up that system and actually went bankrupt. SO they rewrote the rules and simply took the dollar off the gold standard. This meant that you could no longer get any gold for your paper bank note. It was backed by nothing other than government decree. And since that government has a big military to enforce its dictates, the fiat dollar was born. Bit is it actually worthless.
The only thing making it worth something is an agreed to contract between the government and the people. And that can be changed at the whim of the government at any time. And sometimes it is changed when the government prints massive amounts of more paper note to send into circulation. This is exactly what they are doing now during this global financial collapse. They did it in 2008 also but today it is multiples of times worse as more paper notes than ever are printed. This inevitably devalues all the other paper note in circulation and thus devalues the dollar. Already the dollar has lost 95% of its purchasing power in the last 1000 years.
Bitcoin can’t be diluted by inflation
As a direct opposite to the mass printing of more deflationary paper currency, bitcoin is becoming scarcer all the time. The code only ever allows 21 million to be produced, and with every four years we have half as much entering circulation. Therefore supply drops yet demand stays the same. As a result the value goes up, not down like the dollar. As the dollar loses purchasing power, naturally good go up in price, yet with bitcoin, like gold, there will always be a scarcity. It is a finite item. And that is its real power.
Bitcoin empowers up as sovereign entities
No bank can tell you how to transact, or confiscate your money, or devalue it when you use bitcoin. At present we have a unique situation on the planet where two monetary systems are running simultaneously – the legacy centralized banking system and the decentralized digital bitcoin system. And they are direct opposites of each other. Paper fiat money run by the banks and government will continue to lose value and purchasing power over time, yet bitcoin will only ever become more valuable. Ultimately it’s up to you to decide whether you want to use a money that will be worth less every year, or whether you want to be your own boss and banker, while transacting in a currency that will only grow in value according to the laws of math and science.
Bitcoin is making us all kings or queens of our own sovereign financial world today, beyond national control or borders. This is the beauty of bitcoin and this is the reason I will always use it and promote it because I want to liberate all living entities form the imprisonment of these criminal banking and fiat currency systems that are holding you hostage. Bitcoin is yours so pick up your gift and take back your power from the financial elites. Today you are free and bitcoin is the reason. The people’s money has spoken.