The Bitcoin Phenomenon
The short definition of bitcoin is: cash for the Internet. Basically it’s a new kind of currency and a payment network. It was invented by Satoshi Nakamoto, whom ironically, nobody has ever met. It’s obvious that Nakamoto had some academic training because when he first introduced the concept he wrote a whitepaper in the style of a peer-reviewed academic journal article. He not only came up with the idea but also wrote the code that made it work.
Satoshi started working on bitcoin about a decade ago to solve the problem of creating money that would not involve any government. He wanted to find a solution to ‘double spending’ in which a digital asset can easily be copied. Solving this problem made bitcoin possible.
Nakamoto brilliantly designed the incentives so that you don’t have to pay anybody to verify that all transactions are valid, the system itself pays them for that.
The Bitcoin network made fundamental promises about supply. Only 21 million bitcoins have been created and by 2040 no more bitcoins will be issued.
Bitcoin puzzles a lot of economists who would not have predicted that you’d be able to start from something that has no intrinsic value and become the world’s most valuable currency. Many are attracted to bitcoin because of the fact that it’s democratized, decentralized, anonymous, and a fixed money supply with zero transaction costs.
Others are attracted to the fact that its anonymity allows an individual to spend his or her money however she or she may please and not necessarily doing illegal things.
Bitcoin needs to be seen as a tool. And a tool can be used by anyone who finds it useful. The same way that bad people can use a cellphone to harm others, bad people will inevitably use bitcoin. This is not a reason to be afraid or to condemn or reject bitcoin.
The average online business that is accepting Paypal or credit cards is paying roughly 2.7% in fees and processing costs to be able to offer that payment alternative to their clients. This is not a problem with Bitcoin, plus it offers the opportunity to do microtransactions without processing fees because there is no minimum.
However, some of the advantages that originally attracted people to bitcoin are going to fade as it goes mainstream. But that might not be a bad thing. Watch more now.
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