Bitcoin: The Idea
This article is a short, non-technical introduction to the idea of Bitcoin for people who are more or less completely unaware of the crypto revolution. I want to clear a couple things right off the bat- a) cryptocurrencies are not just easy money making schemes and b) no, the whole thing is not a scam. Bitcoin is first and foremost, an idea. An idea to protect your sovereignty. An idea, that the state should not have absolute control over your money.
Let’s start with the basics. What is money? A simple definition would be, a locally accepted medium of exchange. Earlier exchanges were based on the barter system, which simply means a direct exchange of goods and services. A shoemaker would exchange shoes for a bag of apples from a gardener, and so forth. It’s apparent how this can quickly lead to problems. Let’s say the shoemaker is in need of apples, but the gardener is in need of labor. The labourer, however, is in need of clothes. Even this simple case in the barter system leads to disaster. Furthermore, without a locally accepted reference scale, the prices of services are highly contextual and thus highly volatile and prone to unfair trades for the involved parties. This need for a reference scale was recognized, and thus was the origin of money. The concept of money is simple, in exchange for your services, you get not any specific service, but the power to buy services. Throughout history, various monetary forms have been used including silk, copper and later gold. For anything to qualify as money, it needs to possess these five properties-
- Durability
- Divisibility
- Recognizability
- Portability
- Scarcity
Money as we know it best satisfied these conditions. But state sanctioned money is far from the perfect monetary technology. The core issue with state sanctioned money is precisely that it is state sanctioned, and the government has complete monopoly over it as they control the inflation(which is just legalized counterfeiting) rates, inefficient tax laws etc. In recent years India has seen the government abusing its monopoly with financial disaster-strokes such as demonetization and GST. It has become more clear than ever that such a financial system is inefficient and in need of serious reforms, or even complete discardment.
Enter Bitcoin. Bitcoin was envisioned as a decentralized monetary system outside the purview of the state, which permits unfettered commerce, renders capital controls obsolete, safeguards money from inflation and eventually takes away the state’s monopoly on money. The vision has since then come to fruition as the asset went from 0 to $200 billion in a decade, and has gained popular support from public intellectuals, and scrutiny from the ignorant and from those whom it is hostile to.
Bitcoin outcompetes the traditional monetary system in every one of the above five aspects. It is more durable due to its decentralized nature, has high divisibility(can be soft-forked into further divisions, should it become necessary), is catching on fast and is recognized all over the globe, travels at the speed of light essentially, and is the first monetary technology with absolute scarcity(only 21 million Bitcoins can ever be mined). And no, Bitcoin can not be “hacked” just because it is a digital asset. It is time and battle-tested. It has faced numerous attacks, and has come out victorious everytime. Bitcoin is therefore, clearly the superior form of monetary technology. So Bitcoin vs traditional money boils down to “legitimacy by performance” vs “legitimacy by continuity”. But it’s more than that. It’s also an issue of sovereignty. Bitcoin reduces the state’s clutches on your finances, and is a large step in the direction of maximising individual liberty. Wake up and smell the coffee, Bitcoin is the future.
The technology behind Bitcoin is fascinating, and I encourage you to read about it and do your own research. After all, it is good to know the technology which you’d want to store your hard-earned money in, for your own security and mental peace. Or you can take the lazy way out, and simply trust its high profile supporters such as Elon Musk and Naval Ravikant. I don’t recommend it, but it’s not a wholly bad idea either.
What does it mean for you? It means that while the price of Bitcoin is volatile (compared to the currencies which it aims to replace), you need not worry about the market going down now and then. You can think of it as a locker which keeps your money safe. Keep stacking it gradually, and it is sure to give you great return on investments in the long term. Don’t panic sell when the prices go down, just relax, and keep holding on for dear life. This is of course, not *financial advice*, and any losses that you may incur are your own responsibility.
