Bryan - Singapore
What is Bitcoin?May 2017
What is Bitcoin? It may seem like a strange question to ask in a website that's exclusively about Bitcoin, but when your subject is as complex, as multi-faceted and as dynamic as Bitcoin, it's always good to review what we know and what we don't yet know. Besides, despite exponentially increased buzz around this cryptocurrency, it's still a recent enough development that most people have yet to understand what Bitcoin actually is, how it works and what purpose it serves.
This article will give you the skinny on Bitcoin. Best of all, rather than using a lot of technical jargon, it will be in regular everyday language.
Probably the one most overriding trait that distinguishes Bitcoin from any other currency is that it's decentralized. This is a major deal, because the world's economies seem to be slipping and sliding to a time when banks and governments world-wide display ever-more cavalier attitudes towards the rules and regulations that govern our money.
Banks and other financial institutions have shown no qualms about relentlessly overcharging their customers, leading to absurd management bonuses and multi-billion dollar profits year after year.
Governments in the US and Europe, meanwhile, frantically keep their money-printers running overtime, in an attempt to keep interest rates in what they have determined is the sweet spot. If this means that nest eggs, life savings, future home sales of the regular people dilute to the tune of up to 5% per year every year, then that's considered collateral damage.
Another way unhelpful governments undermine their population's spending power is by declaring certain denominations illegal, either by wholesale withdrawal or by making them obsolete by producing new bills. In the end, the result is the same: that money is no longer in the hands of the people. And lest we think that this pas de deux between banks and these wicked governments couldn't possibly get any more brazen, in Europe, legislation is being formulated currently that will enable governments to freeze citizens' bank accounts during bank crises the likes of Iceland, Greece and Portugal. People will effectively be locked out of their own money, because of oversights, missteps and screw-ups by banks that know they can always fall back on "too big too fail".
That said, it's becoming clear that more and more people are starting to realize that this abuse of power has to end. And Bitcoin, being totally decentralized, is the way to end it. In fact, in the case of Bitcoin, abuse of power is completely impossible, simply because no one party is calling the shots.
But if that's the case, then how can we be sure that transactions are carried out securely and without any cheating going on? Who runs Bitcoin? In a word: "Blockchain".
The blockchain is essentially a public ledger that's distributed amongst a network of thousands of computers worldwide, so-called nodes. Every time a transaction takes place, it's checked by solving blockchain-driven mathematical formulas, simultaneously validating all legitimate transactions whilst blocking fraudulent ones. Bitcoin's blockchain is so immutable, so secure, that it's considered practically un-hackable.
Bitcoin is powered by this blockchain alone, i.e. no bank, government, or any other third party entity is required. Hence, Bitcoin is immune to greed, corruption or abuse of power.
Once Bitcoin is established widely, travelers will be able to go to any country and just bring Bitcoin. There will be no more need to convert different currencies and as a result, there will be no more bank fees, conversion fees and commission to pay.
Online purchases? Bitcoin is ideal, because it's peer-to-peer. This means that middlemen like PayPal, Visa, Master Card and American Express, etc, are no longer required, resulting in savings for customer and merchant.
This disintermediation also applies to the remittance industry. Typically, banks and services like Western Union take a disproportionate cut from overseas money transfers. Oftentimes, a flat fee as well as a percentage is charged. To add injury to insult, they also apply unfavorable exchange rates, which effectively is a yet another hidden cost. These companies do this simply because they can. After all, there are no alternatives.
But arguably most interestingly of all, Bitcoin has proven to be a very solid store of value, particularly in the past several years. Let's face it, Bitcoin isn't called "digital gold" by investors for nothing.
Bottom line: Bitcoin is the only investment class in the world that is 100% finite; the number of Bitcoin in circulation is, by design, capped at 21 million pieces. And this ceiling will only be reached in the year 2140. Currently, there are just 16 million Bitcoin in use.
Clearly, given its scarcity, its immense utility, along with its nascency, Bitcoin's market capitalization growth has only just begun.
Now, as with almost all new developments, Bitcoin will take time to become mainstream. Television sets, cars, airplanes, the internet, mobile phones, all new inventions and developments, go through a period of rapid improvements before they reach critical mass and are fully accepted by the world at large. This applies to everything, but probably especially when it concerns such a critical aspect in our lives - our money. So, it will take time for Bitcoin to attain full acceptance.
That being said, it's evident that - as we speak - Bitcoin has recently taken its initial steps into the mainstream. This is reflected, amongst other things, by its rapidly burgeoning value, in particular of late.
When even established financial institutions advocate taking a closer look at Bitcoin, the time has come to take action.
I wrote the above article myself and it expresses my own personal opinions and views on Bitcoin. I am unable to guarantee that the information and/or results will be correct. Furthermore, whilst I own some cryptocurrencies, I do not receive compensation for my writing and I have no business relationship with any of the companies mentioned in above article. In addition, I am not an investment advisor and above article is for purely informational purposes. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.
Bryan, a Singapore PR, has spent two separate stints in Singapore, spanning close to two decades. As is the case for most non-techies, although Bryan's first exposure to Bitcoin was around 2010, it wasn't love at first sight. However, Bitcoin's impressive resilience, meteoric rise and world-changing potential have converted Bryan, to the extent that he has now pivoted to fully commit to Bitcoin.
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