Bitcoin is a decentralized digital asset. It is a new type of asset that joins the ranks of traditional assets such as cash, gold, and real estate.
Bitcoin spans many traditional assets, such as cash and gold. For example, you can use it like money or as a store of value.Another key to what makes Bitcoin different is its decentralized and “trustless" model. This means that trusted third parties (middlemen such as banks) aren’t necessary with Bitcoin. These third parties act as go-betweens, and are often called intermediaries.
In traditional finance there is always a business (usually more than one) in between your transactions.What may seem like one go-between is often many more. Take a stock trading app for example. There can be up to a dozen intermediaries between you and a seller, each extracting a fee for their services!
Additionally, unlike almost all modern financial transactions which are electronic, physical cash and Bitcoin are similar in that they can be transacted directly, without third parties, and without asking for permission to create an account.
Exchanging cash directly doesn’t require intermediaries, but the creation of cash is solely dependent on a trusted third party, such as a central bank. The creation of new Bitcoin, by contrast, occurs programmatically and is limited to 21 million units. More on this later.What may seem like one go-between is often many more. Take a stock trading app for example. There can be up to a dozen intermediaries between you and a seller, each extracting a fee for their services!
Additionally, unlike almost all modern financial transactions which are electronic, physical cash and Bitcoin are similar in that they can be transacted directly, without third parties, and without asking for permission to create an account.
Exchanging cash directly doesn’t require intermediaries, but the creation of cash is solely dependent on a trusted third party, such as a central bank. The creation of new Bitcoin, by contrast, occurs programmatically and is limited to 21 million units. More on this later.The value of Bitcoin comes from two connected aspects that support and reinforce each other:
Its features,Its network effects
People settled on gold thanks to three key features: rarity, durability, and divisibility. These features made gold useful as a method for storing and exchanging value. Thanks to gold’s utility in this regard, the gold 'network' grew over time until gold became almost universally accepted as having value. For hundreds of years, gold was the primary unit of account and reserve currency in much of the world. Recently, the US dollar has largely replaced gold, although gold does continue to have value.Bitcoin is often compared to gold because it has similar characteristics. Namely:
It has a limited supply,its easily divisible,durable,more portable etc.Bitcoin is perfectly legal to hold in most countries, including all Western democracies, where freedom of speech is enshrined (Bitcoin is, after all, nothing more than open-source code). Some countries have attempted to ban the use of Bitcoin, but due to Bitcoin’s decentralized nature, it’s virtually impossible to enforce total bans.