Bitcoin — A Revolutionary Concept
I’ve recently been engrossed in a fascinating book called Digital Gold, written about the cryptocurrency Bitcoin. Bitcoin, thereorized and created by the mysterious person Satoshi Nakamoto (who no one knows the real identity of to this day), has captivated the world since it began to be “mined” in 2009. The concept of Bitcoin, a fully digital asset, interests me in a couple of different ways as brought out in the book. It is clearly trusted and held by many individuals and institutions around the world, as the price of a single Bitcoin is above $25,000 as of this morning — Merry Christmas indeed!
Bitcoin was created as a digital currency meant to replace the inefficiency and slow movement of the monetary system today. It is designed to be a decentralized, global system that is completely efficienct, secure, and transparent. The system that creates and controls Bitcoin is all of the computers that are hooked up to the network and run the software to “mine” Bitcoin, which is the incentive for verifying transactions that occur. It transcends control of the world’s governments and any group of individuals (as long as there is not a 51% attack on the ecosystem, which is highly unlikely at this point due to the sheer number of different users on the network).
The main argument against Bitcoin is that its price is not stable enough for it to be used in transactions and take the place of traditional money. I agree with this, and so does the author of Digital Gold. Perhaps sometime in the future Bitcoins can be trusted as a currency, if the price stabilizes more or god forbid our world’s monetary systems collapse. For now, though, Bitcoin should be best viewed as a reserve asset akin to gold, and one that could easily replace gold as the reserve asset in the world due to its scarcity and transferability. There will only be 21 million Bitcoins ever created and they can be transferred at the click of a button — gold does not have a fized supply and cannot change hands or be transported as easily. Even if you believe Bitcoin is just a replacement for gold and will never be a viable currency, that means it should be worth multiples of what it is worth today, sometime in the near future.
