Bitcoin, the granddaddy of them all. When it comes to cryptocurrencies, the one that started it all was Bitcoin. Bitcoin was created by the legend Satoshi Nakamoto. I say legend because nobody who seems to really know is telling who Satoshi Nakamoto is. There have been some false accusations and some false claims, but nothing concrete. There is speculation that Satoshi Nakamoto may be a group of people. But in the end, it doesn’t really matter. Do you know who invented the internet? I mean, besides Al Gore?
Bitcoin is a decentralized payment system. It works without a need to trust a third party like a bank, the Federal Reserve, or whoever runs PayPal. As long as you have an internet connection, a willing buyer, and a willing seller, Bitcoin can be spent.
Strength and Dependability
Bitcoin was launched in 2009. Since then it’s been attacked, tested, buffeted, scandalized, and declared dead on numerous occasions. The price has unpredictably risen, fallen, and traded sideways. There are people who claim Bitcoin will save us all, people who claim Bitcoin will destroy us all, and various shades of gray in between. As I write this in 2017, Bitcoin has established itself beyond a doubt in my mind. I’ve been looking at it since 2014, I finally bought some in early 2017, and I certainly haven’t regretted that decision! Bitcoin may eventually be unseated by another cryptocurrency, but it’s certain that no government and no hacker can destroy it.
The Gold Standard
There are several other cryptocurrencies now, over a thousand! Of those, only a few are going to still be viable years from now. I’m convinced that several of the altcoins are in fact scams, but there are some that bring valuable functionality to the table that Bitcoin doesn’t possess. That being said, Bitcoin is the one that started all this action, and Bitcoin reigns supreme over all cryptocurrencies.
Mr. Nakamoto intended Bitcoin to be a sort of digital gold. To that end he wrote his code to cap the creation of Bitcoin at approximately 21 Million coins. The coins are created by “mining” which steadily brings more coins into the network while simultaneously incentivizing people to expand and maintain the network. In the beginning, you could mine with a normal home computer. These days it takes some serious hardware to mine Bitcoin.
Bitcoin is designed to not be inflationary. Like gold or silver, if you store value in Bitcoin, years from now you should be able to pull out as much or more value. This is a black and white contrast to fiat currencies issued by nation states. Store your value in the dollar and wait 30 years. Do you think you’ll get as much value out of your saved dollars 30 years from now as they possess at this minute? I don’t.
But I Just Don’t Understand How Bitcoin Works!
If you’re reading this, you certainly use the internet. Do you know how the internet works? You may have a vague idea, but unless you belong to a fairly small demographic, you can’t expound on the details of TCP/IP. Admit it, you don’t even know what TCP/IP stands for. Yet here you are successfully using the internet. The same principle applies to Bitcoin. Obviously the more you know the better, but you don’t need to completely understand every detail to use Bitcoin effectively
Isn’t Bitcoin Due For a Major Correction?
I think the short answer is yes. However, Bitcoin prices have increased dramatically. Bitcoin was approximately $1,000 a coin at the start of 2017, it’s approximately $14,000 a coin today. It might drop to $6,000 tomorrow, Bitcoin is extremely volatile, but I don’t care. People I trust are making conservative predictions that Bitcoin will reach $25,000 at some point in 2018. You do whatever you want with your own money, I’m buying some Bitcoin.
There is a lot of big money moving into the Bitcoin space now. Our overlords in New York City are paying attention. Bitcoin Futures trading is going to be a reality in the near future. I personally don’t know a thing about futures trading. From what I read, some say it will make Bitcoin less volatile, which will make it more attractive as a currency. Some say futures trading will crush the Bitcoin price because it will make it easy for traders to short Bitcoin. We’ll just have to wait and see. Today, I trust Bitcoin a lot more than I trust the Petrodollar.
Bitcoin Is Already Saving Lives
In some ways Bitcoin hasn’t lived up to its promises. In the early days it was promoted as a great way for the unbanked to get bank like services and for remittances to be sent from the first to the third world without Western Union getting its extravagant cut of the action. Those things haven’t become a reality, but there are people in Venezuela who are getting food with Bitcoin who would otherwise probably starve to death. People in Zimbabwe rely on Bitcoin because their government mandated currency is a disaster. When socialism fails, Bitcoin can keep people alive.
The Bitcoin world changes incredibly fast. There are two websites I check almost daily to keep on top of it. CoinDesk has a lot of useful information. Bitcoin.com also has very valuable news stories and is updated constantly. If you want to go straight to the source, check out bitcoin.org. Bitcoin.org is the official site of Bitcoin Core. There have been several hard forks of Bitcoin the past few months with more planned soon. A hard fork is computer dude speak for creating an entirely new coin by splitting the code from the old coin. I don’t want to go far down this rabbit hole, but Bitcoin Cash and Bitcoin Gold have recently spun off from the core of Bitcoin. Bitcoin Cash is seeing some success, but Bitcoin Gold is struggling.
If you like podcasts, I would recommend the Let’s Talk Bitcoin Network. They have a wide variety of shows and there is certainly at least one you will like.
Bitcoin White Paper
The original Bitcoin White Paper is a short read. I would read it if I were you. It gets a little technical, but you don’t have to understand every sentence. I certainly don’t understand terms like hash, merkle root, or nonce. Download it here: Bitcoin White Paper
One of my heroes, Bob Murphy has co-written an eBook with Silas Barta. The title is Understanding Bitcoin. It is a great book that will give you a wonderful start in learning how Bitcoin works. Since Bob Murphy is one of the greatest economists of our time, the book also delves into the economics of Bitcoin and money in general. The book addresses common objections to Bitcoin and in my opinion, blows them up fantastically! It’s a little longer than the Bitcoin White Paper, but if you’re a moderate reader you can finish it in 45 minutes. Download it here: 2017.11-Understanding-Bitcoin-v1.11
Bitcoin is very exciting. It could possible be as consequential as the mainstream adoption of the internet in the 1990’s.