A 537-word article that could be used as a blog post
What we have used as money has changed several times in history. People used to use salt, shells, copper, silver, and gold in various forms. For a society to accept something to be used as money it should be scarce, easily divisible, durable, and portable.
One of the problems with the money we use today is that it’s not scarce. Governments around the world have been lowering interest rates for the past decade, thereby reducing interest rates. As a result, a huge amount of money enters the economy…this reduces the purchasing power of our money over time and this is called inflation. While cash is divisible, you often need a lot of it to be practical. Cash is durable but since it’s tangible you need to carry around a fair bit to meet a typical person’s needs. Cash is portable but you either keep it in a wallet or in a bank, and a bank is a third-party intermediary that you must trust to hold your funds safely on an on-going basis.
Bitcoins were invented as a peer-to-peer based system where there’s no single entity in control of anything to do with Bitcoins. The advantage of this is apparent when two people trade with one another. If A and B exchange money through some intermediary, then the intermediary is aware of the transaction between A and B. The intermediary can interfere with the transaction, report it to the authorities, impose fees, or even outright stop the transaction from happening. Bitcoin, on the other hand, is distributed and relies on a basic set of rules that all participants use that ensure no single entity is in control of Bitcoin.
Unlike national currencies which aren’t scarce anymore, Bitcoins are limited: only 21 million bitcoins will ever be created, thereby ensuring that Bitcoin remains scarce.
Bitcoin is divisible – you can subdivide a Bitcoin to eight decimal places – that means you can spend as little as 0.00000001 Bitcoins…or one 100 millionth of a Bitcoin!
Bitcoin is durable: there’s a lot of math that ensures transactions are secure and that the creation of Bitcoins is limited to a certain rate to ensure the stability of Bitcoin.
Lastly, Bitcoin is portable. Unlike cash or gold, which are tangible assets, you store Bitcoin in a digital wallet using any computer or mobile device. For extra security, you could even store all of your Bitcoin using a piece of paper, known as a paper wallet. With this portability, you can transfer money anywhere in the world without having to worry about banks or forex agents, instantly and with minimal charges.
Some of the world’s biggest companies have started accepting Bitcoins: Microsoft, WordPress, Overstock, and Expedia. The Bitcoin peer-to-peer network is more powerful than all 500 of the world’s supercomputers combined. With Bitcoin companies established in most countries, it’s already a global currency.
Bitcoin’s price keeps changing just like other commodities, however, the price has been rising spectacularly during the past several years. Bitcoin has the potential to become the best store of value.
In this article, you learned the basics of Bitcoin and how Bitcoin relates to currencies you use every day. You also learned about how Bitcoin works in a distributed manner and its advantages.