Most people who have heard of Bitcoin think Bitcoin is Magic Internet Money.
In layman’s terms Bitcoin is a series of entries in a distributed ledger called the Blockchain. The entries in the ledger are secured through cryptography. Cryptography is also used to protect your online banking website. At a high level Bitcoin and your banking website security are similar. The only way to spend a bitcoin is to possess the secret key which matches a public entry on the Blockchain. Unlike a bank, the Blockchain is publicly accessible and censorship resistant.
No one person or entity controls Bitcoin or the Blockchain so no one can manipulate Bitcoin to serve their own purpose. Due to this distributed and decentralized ledger it’s impossible to counterfeit bitcoins and impossible to shut down Bitcoin. Bitcoin is a protocol running on thousands of computers across the globe. Since bitcoins are digital they are easily transferable and easily divisible (all advantages over gold).
Here is a randomly selected transaction from Blockchain.info This transaction shows 20BTC (~$11,000) was moved for a .00027BTC ($.11) fee. The transaction should be 100% confirmed, complete and irreversible within 30 minutes. No third parties required and the transaction is practically anonymous. Those bitcoins could be destined for anyone in the world. That’s not a problem for Bitcoin. Try that with gold or fiat currency. Moving $10k via a US bank requires a special form so the nice government men can keep an eye on you.
How do you send bitcoins?
(I won’t go into setting up an account to acquire bitcoins, there are plenty of tutorials. Here is a referral link for Coinbase.com if you want to shorcut that.)
Here is an example of a bitcoin address: 1EnhQvrtYDpKqMrDBM9C2UiNFdt3Jr9fAG and the corresponding QR code below. From the smartphone bitcoin app of your choice you scan the code, choose the amount and press send. The bitcoins arrive within minutes. Here’s a record of every transaction on that address (currently 0, feel free to send a small amount to see it on the blockchain). This may sound complicated but it’s not. Much easier than moving money from a bank account.
BTW, Bitcoin’s market cap is now over $9 billion. If you still think Bitcoin is a joke here’s a list of the top 100 richest addresses. Many people store millions of USD in Bitcoins.
If anyone has heard of Bitcoin they’ve likely heard how Bitcoin was hacked (again) and how Bitcoin has been declared dead a dozen times by mainstream media. Casual observers may have heard that the Winklevoss twins opened a Bitcoin Exchange or they may have heard Mike Tyson lent his name to a Bitcoin ATM in Vegas.
You could say Bitcoin credibility is lacking.
I don’t believe you could write a worse story for Bitcoin if you tried. The largest exchange for buying and selling Bitcoin up until a few years ago was Mt Gox. Mt Gox stood for Magic the Gathering Online Exchange. Mt Gox was originally a place for neckbeards to trade Magic the Gathering game cards. True fucking story. Eventually Mt Gox became a place for neckbeards to trade bitcoins. Mt Gox imploded along with $460 million in client bitcoins. Bitcoin was declared dead, but what is dead can never die (extra GoT).
You see, Bitcoin is the Sewer Rat of Currencies. The TLDR of that article is that despite what’s been in the media, Bitcoin has never been hacked. Only the exchanges that sold Bitcoin have been hacked. In fact, Bitcoin has been tested over and over and has come back stronger each time. Bitcoin is a sewer rat. It can’t be killed but people keep trying.
bitcoin isn’t living in a bubble. Bitcoin is a sewer rat. It’s missing a leg. Its snout was badly mangled in an accident in last year. It’s not allergic to anything. In fact, it’s probably got a couple of strains of bubonic plague on it which it treats like a common cold. You have a system that is antifragile and dynamic and robust.
Bitcoin doesn’t give a fuck.
So why Bitcoin? Bitcoin has the six characteristics of money:
Durability
Objects used as money must withstand physical wear and tear
Check, bitcoins are digital. Theoretically they will last forever.
Portability
People need to be able to take money with them as they go about their business
Unlimited funds can be stored on a piece of paper or you can memorize a 12 word phrase.
Divisibility
To be useful, money must be easily divided into smaller denominations , or units of value
Bitcoin can be easily divided down to .00000001 AKA a Satoshi.
Uniformity
Any two units of money must be uniform or the same in the terms of what they will buy
All bitcoins are created equal.
Limited Supply
Money must be available only in limited quantities
There will only ever be 21,000,000 bitcoins and we already know the predetermined rate of inflation.
Acceptability
Everyone must be able to exchange the money for goods and services
This one is gaining traction everyday. You can use purse.io to get substantial discounts at Amazon using bitcoins.
With Trillions in QE, the EU in negative interest rate territory, Japan going all in on Abenomics and China building ghost cities it’s no wonder a decentralized currency like Bitcoin is starting to gain traction.
Whatever your portfolio looks like today consider it’s missing something if there’s no Bitcoin. Bitcoin could fail, but if it doesn’t then it’s future is incredibly bright. Bitcoin is the Internet of Money. A small position today could be the hedge you need against central banks, crazy politicians and a world gone mad. Caveat emptor, Bitcoin is extremely volatile.
If you add Bitcoin to your portfolio I highly recommend a hardware wallet like KeepKey. While Bitcoin the protocol is secure your greatest risk is leaving your bitcoins vulnerable to loss via sloppy security. Whatever you do, do *not* store your bitcoins with an online exchange.
Thanks for the write-up!