Bitcoin is the currency of the future

August 12, 2017   Bitcoin , Currency , Finance , Future

Bitcoin is developing and spreading faster than one can imagine. Even though some people don't think a lot about this invention, it is extremely important to learn as much as possible about this new currency, because there is more than just a very high chance that it will be the currency of the future: it has a few very serious advantages over the current currencies. In this article, I will try to explain briefly what Bitcoin is, why it has future, and what advantages it has over the currency we know right now.

History

The history of Bitcoin started in November 2008 when it was the peak of the economic crisis when everyone was thinking how to save money that they had in banks. It was the best time for a mysterious person (or even a group of people) with a pseudonym Satoshi Nakamoto to post a paper to a cryptography mailing list titled Bitcoin: A Peer-to-Peer Electronic Cash System because it was the time when people were ready for new financial ideas. This paper detailed methods of using a peer-to-peer network to generate what was described as a system for electronic transactions without relying on trust. 
The bitcoin network started to work in January 2009 with the release of the first Bitcoin client and the issuance of the first bitcoins. After that, a long a difficult process of approving the new digital currency began. It hasn't been approved that much yet, only Japan accepted Bitcoin as an official currency, but it is impossible to stop bitcoins due to its advantages over ordinary currencies. 

Advantages

Bitcoins have some major advantages over international currencies like dollar and euro. The major reason for creating Bitcoin was the centralization of currencies: the dollar is the "world's reserve currency" but still there are a lot of countries where you will not be able to use dollars to buy anything so this money that you have would be useless since you can't spend it. A decentralized currency is the first truly international money since gold. As a result, it could potentially become larger than national currencies.

Some people can say that this digital currency has no material value and therefore is unreliable. It is a very strange statement, because if people think about the gold standard, where each monetary unit of currency is based on a fixed quantity of gold, then those people don't really understand what happens in reality. If it had been true, then central banks would not have been able to print additional money, which they pretty regularly do.

Gold Standard nowadays

The money supply in the US is basically guaranteed by the government's ability to keep the value of money relatively stable and nothing more. After August 15, 1971, President Nixon stopped the previously agreed conversion of the dollar into gold at a fixed exchange rate of $35 per ounce. From that time not only doesn't the US monetary authorities simply guarantee the exchange of paper money for gold but also they don't even promise that their gold reserve will cover, for example, 20% of the paper dollars emitted by them. Even Switzerland does not guarantee anything like that -- a constitutional norm of a hundred years ago, which required a 40% coverage of the emitted francs with gold, has already gone down almost twenty years into history.

The money that is now in circulation, is not fundamentally backed up with anything. So, it makes sense to talk about the "strength" and "reliability" of a particular currency only by implying the actions of the monetary authorities of the countries concerned. The purchasing power of currencies and their rates relative to each other depend not on the amount of gold at the disposal of governments and central banks, but on the actions they do and decisions they make.

Bitcoin "Standard"

For those people, who don't believe governments and banks, Bitcoin is a great alternative. There are only 21 million bitcoins that can ever be mined (what it is and how it works I will explain in my next article), regardless of the Earth’s population and its corresponding demand for Bitcoins. Once all 21 million have been mined, there will never be any new Bitcoins (unless a change to the protocol is made to increase the supply), which can be called a digital Gold Standard.

Peer-to-peer payments

When a person buys anything with a plastic bank card, s/he doesn't send money straight to another person: fits, the bank takes the money and "promises" that it will be delivered to the bank account of the other person. For each operation, the bank takes some fee, which is usually about $.3. Moreover, it takes a bank a little while to send money to another bank's account, not mentioning huge fees for transferring, which can reach dozens of dollars. 

On the other hand, Bitcoins allow a person to send money straight to another person's wallet without any trusted 3rd parties at any given time. There is no central authority in the world that can possibly control anyone's money flow.

Security

Bitcoin wallets and transactions are extremely safe. Nobody can charge any fees without you knowing it. If you do everything in the right way, nobody will be able to access and use your wallet, especially if you use a personal hardware for your digital signature. Moreover, Bitcoin wallet can be backed up and securely encrypted for even more protection.

But Bitcoin secures not only your finances and transactions but also your identity. The only information which is needed for any transaction is the id of your wallet and your private digital signature, which allows you to be absolutely anonymous.

Transparency

The whole system is very transparent: everyone can see all approved transactions (without any personal information) and have their own copy of it so everyone can verify that the transaction has occurred. Because there are so many people who keep the information about transactions and the fact that Bitcoin is cryptographically secure, Bitcoin protocol cannot be manipulated by any person, organization, or government.

Conclusion

So, at the end, we have a very interesting and perspective new currency which eliminates a lot of problems and disadvantages of national currencies. It definitely has its future and nobody will be able to stop its development. In my opinion, Bitcoin will grow and develop, so it is a very interesting project to invest in, or at least to keep a close look at.

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