Bitcoin offers financial freedom and independence.
By Thomas Levene
If Bitcoin, is such a groundbreaking technology, why has it received such negative press? Bitcoin has been labelled ‘rat poison squared’ by Warren Buffett. It has been declared dead a whopping 401 times and counting. Well, one thing is for sure, Bitcoin isn’t dead and Warren Buffett missed out on Google and Amazon, so he may not be the best person to ask about tech based businesses.
Recently, social justice movements have had successes in fighting for equal rights for people of different genders, races and sexual orientations. But there is no equality in our current monetary system. The big banks and national governments are in control. Can Bitcoin offer financial freedom and independence?
One thing is for sure, Bitcoin isn’t dead.
In 2008, immediately after witnessing the financial crisis, Satoshi Nakamoto, the visionary behind Bitcoin dreamed up Bitcoin. Bitcoin started out as a white paper called: Bitcoin: A Peer-to-Peer Electronic Cash System.
A small group of idealistic and dedicated, IT visionaries read his white paper and collaborated in order to bring Satoshi’s dream into a reality. Satoshi’s breakthrough was that, masterfully, he had discovered a way to solve the ‘double spend problem’. In other words, a way to cut out the middlemen from financial transactions, organisations like banks. His ideas made transactions more ‘streamlined’.
Bitcoin started out as a white paper called: Bitcoin: A Peer-to-Peer Electronic Cash System.
Satoshi cut out the banks by creating a ‘time stamped sequential database’ that cannot be tampered with and is forever kept or ‘hashed’ into an ever-expanding online database as proof of payments between parties.
This database stores all past and present transactions that have ever been made in ‘blocks’ across computers spread out throughout the world. These computers and the people behind them, the Bitcoin ‘miners’, are given an incentive to verify and facilitate payments between people by charging fees and solving complex math problems. If they do this they are rewarded with a Bitcoin. This is what we now call the ‘Bitcoin blockchain’ ecosystem.
This database stores all past and present transactions that have ever been made in ‘blocks’ across computers spread out throughout the world.
For the first time in history money can be transferred across the internet without 3rd party approval from a government or any other organisation. This is a ‘permissionless’ way for 2 parties to exchange currency. Essentially, anyone can now send and receive value through the Bitcoin network. This, for me, is a true breakthrough in equality of finance.
A claim, that is constantly made against Bitcoin, is that it’s primarily used for illegal activities by criminals. While this may have been true in its early days it is not true today. Fidelity investments data show that most transactions are legal on the blockchain these days. After all, law enforcement can track activity on the blockchain easier than someone who uses cash, as you leave a large digital trail that is forever kept online, called the blockchain. In short, cash is better for illegal activities.
For the first time in history money can be transferred across the internet without 3rd party approval from a government or any other organisation.
Others say Bitcoin can be hacked into and is unsafe. In fact, Bitcoin has never been hacked. It’s the largest, most secure computer system in the world without any downtime since its inception, 12 years ago. No other computer system has achieved anything close to this.
Bitcoin has never been hacked. It’s the largest, most secure computer system in the world
When you own Bitcoin, you do become your own bank, and there lies the issue: How secure are you? Securing Bitcoin is as simple as writing a 12-24 backup phrase offline on a piece of paper or secure USB. Technically, you could store your entire net worth on one piece of paper. That piece of paper can cross any border, Then once you are across the border you reinstall your wallet and access your wealth again. Try doing that with gold.
Yes, exchanges get hacked, people get hacked, but never the Bitcoin network itself. So, the Bitcoin mantra goes ‘Not your private keys, not your Bitcoin’.
But do governments ban Bitcoin, or make it hard for Bitcoin customers? Well, yes. Some do. But will that put Bitcoin out of operation? That’s unlikely? After all, the countries who have banned Bitcoin aren’t exactly socially progressive: China, Nigeria and India. And when these countries do ban Bitcoin, what happens? Bitcoin is just sold at a premium.
when these countries do ban Bitcoin, what happens? Bitcoin is just sold at a premium
Banning Bitcoin is like holding a sign saying: ‘Do not Enter!’ at the front gate. But all you do is go round the back gate, which is open.
Bitcoin doesn’t have a CEO a government might go after, nor employees. It doesn’t have a Head office to raid. If you shut down mining in one country, another operation will open up somewhere else to take its place. All you need is for one bank or country to accept Bitcoin.
Game theory suggests that it’s up to banks and governments to either get on board the Bitcoin train, or run the risk of being left behind by this new emerging financial system – by Bitcoin and the blockchain.
Nowhere in the world is the power of Bitcoin more evident than in Africa, where the poor unbanked can now store cryptocurrencies on their smart phones and transact globally with others, needing only an internet connection.
the poor unbanked can now store cryptocurrencies on their smart phones and transact globally
In my view, this is the beginning of economic financial freedom and prosperity. Cryptocurrency offers the poor who have been refused a bank account the chance to store wealth and transact with others without needing a bank, or relying on a failing national currency.
It seems to me, the really unjust system is the money system we are all included in today. Excessive money printing creates the biggest, most unfair tax of all: inflation. So, to understand the value of Bitcoin you need to understand how inflation works.
I would argue that inflation is actually a stealth tax that reduces your spending power. If a central bank injects more money into the system, eventually, your spending power will reduce in proportion with the amount of money injected into the economy.
to understand the value of Bitcoin you need to understand how inflation works
Enter Bitcoin: Why is Bitcoin priced at just under $50,000 at the time of writing? Well Bitcoin is deflationary with a capped supply of 21 Million. No more Bitcoins will be created. Furthermore, every 4 years, the supply of Bitcoin is halved. In May 2020, the number of Bitcoin created was cut from around 12 to 6.
Like clockwork, the price increased shortly afterwards. This is simple supply and demand mechanics at play. No one can create new Bitcoin and reduce your spending power, unlike ordinary money. Bitcoin is designed to go up in value, never down.
This is why Elon Musk has invested 8% of his cash at Tesla into Bitcoin. Regarding Bitcoin Elon Musk tweeted ‘I guess it was inevitable’. Michael Saylor from Micro Strategy, the CEO of NASDAQ listed company has also invested heavily. He goes as far to say that Bitcoin is a ‘The purest most pristine, scarce asset on the planet’. This is echoed by the Winklevoss twins, who were there at the inception of Facebook.
Elon Musk has invested 8% of his cash at Tesla into Bitcoin.
Bitcoin is an alternative. Anyone can take part, but no one can ever control Bitcoin. It is decentralised. This is a step towards integrating people into a fairer, global financial system. Bitcoin was designed with financial incentives for both holders and miners in mind. So, Bitcoin is a libertarian monetary system rather than a socialist one. That, I would argue is a very good thing.
Bitcoin is a libertarian monetary system rather than a socialist one.
Historically, purely socialist models, no matter how altruistic they are when they start out, often end badly, slipping into creating centralised, corrupt, impoverished societies. Take the example of Venezuela or Angola. We humans need a financial incentive to get us up in the morning.
People need more equality and personal control over the money they use and the financial system they participate in. Bitcoin provides hope as an alternative to the standard, flawed model. With Bitcoin you may not control the supply of money, but no one else can either. There is no ‘quantitive easing’ in Bitcoin.
With Bitcoin you may not control the supply of money, but no one else can either.
Long live the Blockchain! You can’t stop technology. In my view, the good news is that Bitcoin will grow exponentially, sooner rather than later.
Thomas Levene, has been a long-time teacher, and in the last few years, been a passionate expert and investor in Bitcoin and Blockchain technology. He has completed, a ‘Blockchain Applications’ course with distinction, from Oxford University Said School of Business in 2018.
Thomas has given presentations on Bitcoin and Blockchain, internationally to young entrepreneurs on the digital Nomad Cruise in Greece and the DNX Digital Nomad Festival in Lisbon. He currently lives in Taiwan.