The traditional money that you use has a fixed value that is connected to and determined by other things of value. Bitcoin, however, is some digital value that exists in thin air and is unbacked by anything else of value. Right? Wrong! All of these common beliefs are completely wrong. The thing is, it’s completely the opposite — traditional money exists in thin air, and bitcoin has backed-up value. Let’s explain.
When bitcoin appeared, many were afraid to invest in it. If you relate cryptocurrency to something unstable, something “imaginary,” you couldn’t be more wrong. The only “imaginary” currency is the U.S. dollar as created by Richard Nixon. That’s right. President Richard Nixon is the person that made all currencies in the world inconvertible to gold or other valuables. So what is dollar, or any other currency, backed up by then? They depend on governments’ decisions and the decisions of a few people in the whole world. Bitcoin doesn’t sound so scary anymore, right?
As a response to this unfair monetary situation in the world, bitcoin appeared. Bitcoin is a currency that has a value backed up and determined by a code that can’t be manipulated. Also, bitcoin is not just a currency; it’s a payment system too. So this cryptocurrency liberates people from two things — from “imaginary” value of currencies and from the middleman. As a currency, bitcoin is defined by an algorithm and a code and can be mined. This principle of mining secures one important thing — when you get your virtual coin, you can be sure that you indeed got that coin; bitcoin can’t be falsified as regular money can. So math takes care of the authenticity and safety of this currency.
We explained that bitcoin is protected by math, just as the regular dollar was protected by gold until president Nixon brought that historical decision that changed everything. Many see bitcoin as some revolutionary, new thing. In reality, bitcoin actually returns to “old” methods and improves them. We can say it’s similar to the ancient gold system of monetary communication that can’t be manipulated. But why does this system work so well? It’s because bitcoin is not just a currency; it’s a payment method at the same time! Let’s explain!
When you go to the bank and wish to put some money into your bank account, what actually happens? Well, you take your money and give it to the bank; the bank takes it and uses it to operate its business, promising to give it back to you when you demand it. However, when you want it back, you have to pay a fee to the bank for keeping your money. Also, you need to pay this fee each time you perform any kind of transaction in the bank — payments, sending money, investing, literary everything. Well, bitcoin changes all of that!
With bitcoin payment system, you don’t pay any fees to anybody — you communicate directly to a party that you wish to give money to or receive money from. There is no one in between, no third parties, no steps, no fees. Also, nobody tracks your bitcoin financial activities. You don’t have to explain any transaction to anybody. And yes, did we forget to mention that, with bitcoin, your funds can’t be lost, frozen, or seized? But how can bitcoin provide such a level of liberty?
Bitcoin cannot be attacked, hacked, frozen, monitored, or destroyed because there is no headquarters of bitcoin, there is no center, no heart, no epicenter — Bitcoin exists in a realm of thousands and thousands of connected servers. There is no central server, no central hosting; everything that is bitcoin resides in a system that rests on blockchain technology. The whole idea is quite similar to how torrents work — millions of computers share the data, and there is no central storage of that data. If you want to picture why an app or a currency that is based on blockchain can’t fall, think about that ancient saying — to kill a snake, cut off its head. Well, bitcoin doesn’t have a head.
So if bitcoin is based on blockchain, who has the power? If the government doesn’t have the power, and there is no center, who has it? Well, the power here belongs to a single user — that’s the beauty of it. This payment system works as a global network of users with the same level of authority that communicate directly with each other. Bitcoin offers you an opportunity to send your funds directly to a person anywhere in the world without any additional costs.
Trust and Security
We mentioned before the importance of stability when it comes to currency. Bitcoin differs from traditional money because it’s stable, and it’s limited — no one can just start producing bitcoins as much as they like, it doesn’t work that way. Traditional money, however, can be printed endlessly. Governments decide how much money they are going to provide and when. This insecurity when it comes to real money is one of the things that made bitcoin as loved and as popular as it is today.
However, there is one more aspect of security that is very important when we talk about bitcoin as a payment system. Since it’s based on blockchain, it offers its users a sense of trust. Blockchain technology secures one-on-one communication that can’t be interrupted, thus building a feeling of mutual trust between the parties. It is much easier to have a feeling of trust when there is no third party involved at all.
This amazing potential of blockchain was quickly recognized. The beautiful thing about the code and the idea behind bitcoin is that it can be applied to anything of value. Let’s talk about the potential of bitcoin technology.
Importance of Bitcoin Revolution
Bitcoin as a payment system opened the doors for one whole new realm — the realm of DApps, blockchain platforms, and open source apps. Apart from this, it showed to the world how anything of value could be translated into “coins” and freed of the influence of third parties. When we said “anything of value,” we didn’t just mean gold, diamonds, or funds — we meant votes too. Imagine if voting during elections was operated through blockchain technology. Anonymity, trust, reliability — all these would be guaranteed. If all of this happens, if all things of value, including votes, end up in the blockchain realm, it will all be thanks to bitcoin. Also, platforms that are based on cryptos allow the development of decentralized apps, which is a revolutionary approach to hosting.
One of the important things about bitcoin is that it can offer some financial independence to people from third-world countries. Many people from certain Asian, African, and South American countries don’t even have bank accounts, and if they do, their funds often suffer a lot due to the financial crisis in their countries. For these people, bitcoin can be an answer that they were waiting for — safe, reliable, and stable currency that is completely independent of their government’s decisions. Many experts believe that bitcoin can save many people from third-world countries from poverty and even give them an opportunity to own property.
It’s time to conclude our small introduction to the world of bitcoin. So what is bitcoin finally? Bitcoin is both a currency and a payment system that allows an uninterrupted, direct contact between two users anywhere in the world. As a currency, bitcoin offers security and controlled value. As a payment system, it allows communication that is completely liberated of fees and additional, hidden expenses. Is bitcoin a way to complete financial freedom of people? Well, that remains to be answered; it depends on us, users, and our online behavior. Eventually, users will decide what is going to happen with this crypto. However, bitcoin’s potential is indisputable. It’s only left to see whether people will use this potential.