Why You’ll Regret Not Owning Bitcoin Sooner
By Peter Riverwind on ALTCOIN MAGAZINE
Regardless of whether you’re a Baby Boomer, Gen X, Millenial, financially or tech-savvy or not, it is my hope that by the end of this article, you’ll have a sound understanding of:
- The evolution of money and how we got to where we are now
- Why our current monetary system, the USD and all other fiat currencies have major flaws and are ticking time bombs, on the brink of inevitable collapse (the US is currently $22.5 TRILLION dollars in debt and growing)
- What Bitcoin is, why it’s the best form of money that’s ever been available to humanity and why you’re shooting yourself in the foot if you’re not getting involved now and being misguided by those who don’t have a clue
Let’s begin :)
On its own, money has no actual value. It can be a shell, a rock, a leaf, a metal coin, a piece of paper with a historical persons face on it or whatever else you can imagine.
Money derives its value when everyone agrees that it has value and knows that everyone else will accept it as a medium of exchange for goods or services.
Part 1. The Evolution Of Money
Thousands of years ago before money existed, humans would exchange goods for other goods — this was called a barter system.
Clothes were traded for food, livestock would be traded for wood, sticks would be traded for rocks, etc.
Eventually, we ran into an issue known as ‘coincidence of wants’.
Here’s an example of what a coincidence of wants looks like: let’s say that you make t-shirts, but you want some corn.
If you happened to find someone who needs t-shirts and they have corn to sell then you could both make the trade happily.
The problem begins when the other person doesn’t want/need what you have to trade.
In this example, you may want some corn, but the other person may not want or need your t-shirts and this creates a big issue in an economy when trade can’t happen.
You could try and find a third party who’d be willing to trade you something for your t-shirts that you can then use to trade for the corn, however, this process is time-consuming and it isn’t guaranteed that you’ll even be able to find someone who has what the corn trader wants, and even if you did, they may not want to trade for your t-shirts.
The problem runs even deeper when certain items come seasonally such as crops.
If a fisherman wanted to trade his fish for corn, he wouldn’t be able to wait until the crops were ready in several months because the fish would’ve gone off by then.
The Solution? Enter Money.
People had to find a universal good that everybody agreed had value and wanted to trade for so there wouldn’t need to be a long chain of bartering every time someone wanted to trade.
Money became a unit of exchange and throughout history, money has taken on many different shapes and forms.
Cattle were once an agreed form of money.
When the Europeans first arrived in the Americas, alcohol served as money.
Cigarettes and even postage stamps were used as money in prisons.
Can you guess which form of money has been used the longest and has been used across the widest expanse of the globe?
Nope, it’s NOT gold!
It’s actually cowry shells. They were seen as rare and beautiful and were also used as jewelry.
Gold and silver eventually became a universal form of money and have been used for centuries.
Unfortunately, issues would arise when people needed to make large transaction purchases — it was heavy to carry around and often dangerous because it posed the risk of being robbed.
Other problems would arise when some people would melt down the gold and reforge it with a bit less gold so that nobody would notice.
The Gold Standard
A new solution for transacting with gold came in the 1800s when people began to deposit their gold into treasury vaults and they would be issued with banknotes that would represent a certain value in precious metals such as gold and silver.
The banknotes represented the right to collect the gold and silver from the banks. If you handed in $10 worth of gold, you’d receive banknotes worth $10.
These papers were much more convenient to take to a post office to pay the mortgage rather than taking a wheelbarrow full of gold.
The Gold Exchange Standard
In 1944, another system was introduced called the Gold Exchange Standard — this meant that many countries fixed their national currencies exchange rate to the USD, which was, in turn, convertible to gold at a fixed rate.
With this new legislation, however, being able to convert USD into gold was a privilege only reserved now for central banks — individuals and companies were no longer able to do this.
Bye Bye Gold Standard
In 1971, the US government terminated the Gold Standard and un-pegged the Dollar from Gold in order for them to be able to print more money than they actually had in reserves for several reasons:
1. To pump money into the economy and lower interest rates in hopes of stimulating the economy further
2. Allowing them to use funds that weren’t yet available for large expenses such as war (World War I and World War II)
This was a terrible mistake and we’ll discuss why in Part 2 below.
The paper money that we use today is referred to as ‘fiat’ currency and are essentially pieces of paper backed by nothing other than our faith and trust in the government (which has been breached time and time again) or “thin air” as some people might say.
Part 2. The Major Flaws of Fiat Currency and Why They’re on The Brink of Inevitable Collapse
Fractional Reserve Banking
Whenever you deposit money into your bank, your bank is legally allowed to loan out your money to other people and reserve only 10% of what you deposited — this is called Fractional Reserve Banking.
In the example above, Bob deposits $10 into his local bank. His local bank can then loan that $10 out to ten other people while charging them interest on the loan.
This artificially creates money in the economy and creates debt that is impossible to pay off within our economy.
If all the people that deposited the money with their bank decided to withdraw at the same time, the bank wouldn’t have the funds to pay everyone.
Historically, every single fiat currency has always gone back down to its intrinsic value of zero.
If you go to this website: https://www.usdebtclock.org you can see the live debt currently being accrued by the US.
When a nation’s debt exceeds its ability to repay even the accrued interest, the currency will collapse. The greater the level of debt, the more dramatic the inflation becomes.
Hyperinflation & Quantitative Easing (the simplified version)
When a country racks up so much debt and at a rate, they cannot repay, as an emergency measure, they begin printing more money, essentially out of thin air to help repay down the debt and this is known as quantitative easing.
The problem is, the more bills that are printed and circulated into an economy, the less value each bill is worth due to supply and demand (more money supply and more demand for material goods).
An example would be if there was a car dealership who only sold 2–3 Lamborghini’s a day, then all of a sudden a lot of money was injected into an economy and suddenly people who were in the middle class were now supposedly in the upper class of wealth.
The car dealership would now be selling 20+ Lamborghini’s a day.
The demand is so high with so many new people being able to afford it, the car dealership naturally increases the prices of their cars to keep up with demand since their supplies are running low.
The same thing happens for groceries, clothing, electronics to even water and electricity.
This creates a spiral of people spending more while suppliers and retailers increase prices to keep up with demand and then hyperinflation spirals out of control and create economic turmoil.
A cup of Starbucks coffee costs around $3.25. Now imagine that same cup of Starbucks coffee would now cost you $32,500.
That’s exactly the scenario that’s happening right now in Venezuela due to hyperinflation.
In the image above, it requires more paper to buy a toilet roll than in the actual toilet roll itself.
In countries that suffer from hyperinflation, the fiat money that people previously held and their life savings that are in the bank are rapidly losing value by the day and becoming worthless due to the mass printing of money by their governments.
In Zimbabwe, hyperinflation got so bad that they began printing $100 Trillion Dollar bills just so that people wouldn’t need to carry around wheelbarrows of cash just to pay for small goods but eventually their economy also collapsed.
Countries such as Argentina and Turkey are also beginning to suffer from the effects of inflation and many other countries in the world are starting to feel it also.
Unfortunately, most people don’t realize that the USD and every other fiat currency is gradually on it’s way to following the same cycle that all fiat currencies eventually go through.
Even though some of the smartest financial and economists work with these nations, there has so far not been a reliable model to work with, hence why they continue to fail after a period of time raking up debt.
Remember that our current model of fiat currency has ONLY been around since 1971 (that’s less than 50 years!), so it’s still a very new experiment (and one that has unfortunately already failed before it even began).
Part 3. What is Bitcoin, Why is it the Best Form of Money That’s Ever Existed and Why it’s Irresponsible to NOT Own Any Bitcoin Right Now?
What is Bitcoin? A Bitcoin 101
To put it simply, Bitcoin is a digital currency — a new and emerging form of money that is secured by mathematics and cryptography.
The term cryptocurrency is derived from it being a currency that’s secured by cryptography and some people refer to it as crypto for short.
Bitcoin and the blockchain were invented by an individual or group of people behind the pseudonym “Satoshi Nakamoto” in 2008 after the Great Financial Recession of 2008.
To this day nobody has ever discovered the true identity of Satoshi Nakamoto.
The blockchain is a whole other rabbit hole of its own so I won’t go into detail about it in this article.
Each Bitcoin can be split up into 100,000,000 units so you don’t need to own or spend a full Bitcoin. Each unit is called a satoshi or sat for short. Think of it like cents, pennies, nickels, dimes, etc.
There are 8 decimals and here’s how to understand it:
1 satoshi = 0.00000001
38 satoshi = 0.00000038
153 satoshi = 0.00000153
4970 satoshi = 0.00004970
156,020 satoshi = 0.00156020
1,200,476 satoshi = 0.01200476
100,000,000 satoshi = 1.00000000 (1 Bitcoin)
Bitcoin has no CEO or employees, it has no marketing team, no owners, instead Bitcoin has thousands of global volunteers and millions of computers from individuals and companies alike co-operating together all over the globe to ensure the security of the network and that there is no single point of failure.
Why Bitcoin is the Best Form Of Money That’s Ever Existed
There are only 21 Million Bitcoins that can ever exist in the world and this was made by design — nobody can ever create or print more.
Remember how we discussed earlier the problem with our current financial system where governments can continually print more money and create artificial debt that eventually spirals out of control? This solves that problem.
Bitcoin also appreciates in value, meaning that it gains value over time rather than losing value like fiat currencies.
Some people argue that Bitcoin is backed by nothing but it’s actually backed by the laws of mathematics.
It has been programmed and secured in a certain way to take into account inflation, deflation, it has a set supply, it’s monetary policy cannot be changed by anybody, and transactions are all publicly verifiable — something which you cannot say about banks.
This makes Bitcoin the most transparent form of money that’s ever existed.
In 2017, Japan passed a law to recognize bitcoin as a legal method of payment:
Japan's Bitcoin Law Goes Into Effect Tomorrow - CoinDesk
Japan is set to begin recognizing bitcoin as a legal method of payment starting tomorrow. The country's legislature…
Starting September 1st, 2019, New Zealand will legally allow companies to pay salaries in Bitcoin and other cryptocurrencies (legally allowing Bitcoin to replace New Zealand dollars on workers pay checks):
New Zealand just became the first country to legalize salary payments in cryptocurrencies (BTC) |…
New Zealand will legally allow companies to pay salaries in cryptocurrency starting September 1, becoming the first…
Bitcoin fees are also extremely cheap for transacting:
$194 Million was Moved Using Bitcoin With $0.1 Fee, True Potential of Crypto
On October 16, a Bitcoin user moved 29,999 BTC worth $194 million with a $0.1 fee, a transaction which with banks would…
Here's how much Binance paid to move $1.26 billion worth of Bitcoin
Cryptocurrency exchange Binance moved a gut-wrenching $1.26 billion worth of Bitcoin BTC today - and it paid just…
Can you imagine the world not wanting to adopt this technology when it makes sending money across the world so cheap and convenient compared to the traditional banking system?
It costed $0.1 to send $194 Million while being settled within minutes. The same transaction with the traditional banking system would cost in the five figures and take several days to settle.
Bitcoin Holds the Five Main Characteristics of What Makes Good Money:
1. Legitimized — In countries like Venezuela and Zimbabwe where their economy has collapsed, there’s a huge increase in Bitcoin adoption and not because they understand the technology or speculate on getting rich out of it, but because they have no other choice.
Their fiat currencies are devaluing by the minute so they need to find an alternative to storing their wealth.
Some turn to gold however when fleeing their country, the gold is difficult to carry and can be confiscated by corrupt officials.
Nobody can confiscate their bitcoin and it’s simple to access globally. They also know that where ever they are in the world, the value of Bitcoin is the same.
With the economic turmoil happening in Venezuela and Zimbabwe, Bitcoin is the answer for their family members overseas who want to get money to them without having to go through central authorities, awaiting approvals or waiting for days before their families receive much needed funds.
Adoption is rapidly growing in these countries as more and more people realize the potential of Bitcoin and that it’s a much better alternative to fiat.
Venezuela Sets New Bitcoin Volume Record Thanks to 10,000,000% Inflation
More bolivar traffic appeared on P2P exchange Localbitcoins than any time in history last week.
What we’re seeing happen in Venezuela and Zimbabwe are the first glimpses of what the rest of the world has in store for once further economic instability spreads throughout other nations.
You can see in the image below how the adoption of Bitcoin is rapidly growing, especially in countries that are experiencing economic difficulties:
Some of the major companies that are involved with Bitcoin and Blockchain technology: Samsung, Walmart, Harvard University, Microsoft, BMW, Expedia, Overstock, Subway, Virgin Galactic, Namecheap, AT&T, Norwegian Air, Daimler (the mother company of Mercedes-Benz), Benfica sports club and much more.
With some of the most successful corporations and brightest minds in the world involved in this space, don’t fall under the illusion that Bitcoin and the blockchain is still some kind of magic internet money that will one day vanish.
We’re still in the very early days of development so adoption will take time such as when the internet was brand new and people were skeptical of email, or when we still used tedious data storage devices such as floppy drives and cassette tapes or dial-up internet.
Here’s a list of just some of the major retailers already accepting Bitcoin and other digital currencies as payment right now which further legitimizes the gradual acceptance of digital currencies around the world:
Bitcoin is also being discussed at the highest levels of congress in the US with those who understand the power of this revolution supporting its adoption:
2. Hard to Forge — Bitcoin is secured by millions of computers worldwide owned by individuals and companies participating in verifying and securing the network to earn fees and this is known as ‘mining’.
In order to hack the Bitcoin network, one would need several billion dollars worth of mining equipment, infrastructure, and electricity to control more than 51% of the network and create their own transactions.
They wouldn’t be able to create new coins and only be able to edit and add transactions on the network to take Bitcoins from other wallets and put into their own.
In the unlikely event that a private entity does amass the resources to hack the network, it’d be a waste of effort as they’d be hurting themselves…
Since all transactions are publicly verifiable by everyone, people would lose trust in Bitcoin from a hack of this magnitude and the entire network would lose value and become worthless so the private entity would be in a loss of several billion dollars.
As Bitcoin continues to grow, mining becomes more difficult and hence the network becomes more secure and more expensive to hack.
Bitcoin has survived for more than 10 years with many bad actors trying to harm the network but it has remained resilient and proven itself throughout this time.
What About the Regular Bitcoin Hacks in the News?
There are regular news about Bitcoin being stolen and this happens when people leave their Bitcoin on exchanges (which are regular websites and are the same as banks which have a single point of failure), very different from the actual Bitcoin network.
Hackers can breach those websites and send Bitcoin to their own digital wallets.
It is highly recommended for people to store their Bitcoin on a cold storage device where it’s most secure and best to avoid storing Bitcoin on exchange websites.
There are also debates about the energy consumption of Bitcoin, however a recent report in June 2019 shows that 74% of Bitcoin mining actually uses renewable energy:
Bitcoin Mining Update: June 2019 - CoinShares
BITCOIN MINING NETWORK UPDATE: There's a lot of misconceptions around Bitcoin mining and energy consumption, so we…
3. Durable — Bitcoin is as durable as the internet. The only way to shut down Bitcoin is to shut down the internet.
Even government regulations and bans have been unsuccessful in censoring and stopping the adoption of Bitcoin, proving how censorship-resistant it is and showcasing the power of the people:
India's Crypto Ban Predictably Triggers Massive Bitcoin Price Premiums
By CCN Markets: The bitcoin price has reached $11,200 at its peak earlier this month on major exchanges including…
Massive Bitcoin Premium Develops in South Africa, Bitcoin For Sale at $50,000 in Zimbabwe |…
Bitcoin is extremely rare in Zimbabwe after the government banned it last year, with the sole crypto exchange in the…
Bitcoin Price Hits Insane 1000% Premium in Hyper-Inflated Zimbabwe
Zimbabwe's worsening economic conditions have seen the citizens of the Southern Africa republic turn to Bitcoin leading…
4. Portable — the image below shows $1.6 billion worth of gold vs $1.6 billion worth of Bitcoin:
Since Bitcoin is digital, it can be stored on secure devices and be carried anywhere.
5. Divisible — As we discussed earlier, Bitcoin can be divided up into 100,000,000 units called satoshis or sats for short.
You don’t need to own or spend a full Bitcoin and can spend fractions of a Bitcoin for smaller transactions just like how there are pennies, nickels, dimes, cents, etc.
Enabling the Un-Banked to Bank
There are approximately 1.7 billion people in the world right now that are un-banked. With Bitcoin, as long as you have access to the internet, you have access to your own bank account (Bitcoin).
Bitcoin enables billions of people in the world who previously could not participate in the world economy to now be able to participate.
While banks have opening and closing hours, don’t work on weekends and public holidays, Bitcoin is always open and in operation.
Bitcoin is border-less so regardless of where you are in the world you can transact to anybody else in the world and it currently takes only minutes to transact and receive funds (in the future, this will be reduced down to seconds or even milliseconds with the Lightning Network update).
But Bitcoin is Used for Drugs, Illegal Activity, and Money Laundering! 😲
So is fiat…
This is a common argument about the resistance to Bitcoin adoption and in fact, fiat money outpaces Bitcoin for money laundering 800:1
Pablo Escobar and his cartel brought in $22 Billion Dollars a year from drug money and illegal activities.
Below is a list of resources on the corruption in governments and banks using fiat:
- Australia’s Largest Bank Fined $700mm to Settle Money Laundering Lawsuit:
Australia's biggest bank hit with record fine for money-laundering scandal
The record punishment for Australia's largest bank is the latest blow to the country's financial sector,which has been…
- Deutsche Bank faces action over $20bn Russian money-laundering scheme:
Deutsche Bank faces action over $20bn Russian money-laundering scheme
Germany's troubled Deutsche Bank faces fines, legal action and the possible prosecution of "senior management" because…
- Goldman Sachs is implicated in history’s largest financial con — but will it be held accountable?
'Goldman Sachs is implicated in history's largest financial con - but will it be held accountable?'
Even by Wall Street standards of gouging customers this was one hell of a skim. In 2012 and 2013, the Malaysian…
How a big US bank laundered billions from Mexico’s murderous drug gangs
How a big US bank laundered billions from Mexico's murderous drug gangs
On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del Carmen, on the Gulf of Mexico, as the sun was…
Time and time again these large corporations, banks, governments, etc breach the trust that we put in them and the punishment for corruption is a simple slap on the wrist with a fine that they can afford and then operations continue as usual.
Unfortunately, regardless of any form of money we that we adopt, money laundering and illegal activities will continue to exist — Bitcoin is currently not exempt from this fact.
Bitcoin prices since inception:
2009: Basically nothing
2010: $0.003 — $1
2011: $1 — $31
2012: $5 — $13
2013: $100 — $1,242
2014: $340 — $1,000
2015: $200 — $504
2016: $450 — $780
2017: $750 — $19,783
2018: $3,236 — $17,527
2019: $3,399 — ???
Bitcoin has actually been declared dead 350+ times by the media and governments whenever the price drops, however it continues to thrive year after year and has been the best performing asset for the past 10 years, outperforming the S&P, DOW and NASDAQ
Why You’ll Regret Not Owning Bitcoin Sooner
Now the above statement does come with a word of caution that Bitcoin currently is still slightly complex to use for the average person and before getting involved you should research and learn about the following topics:
- How to safely buy and store Bitcoin (if you have more than a few hundred dollars worth of Bitcoin then it’s highly recommended to store them in a cold storage wallet such as the Ledger Nano S — ONLY buy cold storage wallets directly from the manufacturers and avoid eBay/Amazon, etc where there are many scams)
- How to safely send Bitcoin (public addresses)
- What your private key is (it’s like the keys to your private vault that you should NEVER give out to anybody)
As with any emerging technology, it starts out cumbersome and not so user-friendly. Think of the internet, computers, telephones, data storage, and media devices.
As technology progresses, new developments unfold and it becomes easier to use.
You Lose with Fiat
With every day that passes right now, your fiat currency is losing value.
Those in first world countries may not notice it affects as evidently since it happens more slowly (until it doesn’t).
Do you ever notice how year after year all your groceries, public transport, everyday expenses, etc continue to rise? Your fiat money is losing its value and inflation pushes prices of goods up.
The economy isn’t stable:
1) The US just recently cut interest rates for the first time since the 2008 recession
2) Treasury Secretary Steven Mnuchin warned that the US could run out of cash by September if they don’t raise their US borrowing authority.
The reason for lowering interest rates is to encourage more people to take out loans to spend more and stimulate the economy and historically, every time interest rates are cut, a recession follows shortly after.
Historically, approximately every 100 years there becomes a new global reserve currency that takes over:
It’s only a matter of time before the entire fiat monetary system needs a complete reset and collapses because we’re in such a deep hole of debt due to a broken system that it’s impossible to get out of anymore.
Accruing debt forever just isn’t a sustainable model for any government or economy.
You Win with Bitcoin
Bitcoin is the best form of money that’s ever been available to humanity.
It’s completely transparent, it’s efficient, border-less, and is scarce while being backed by the laws of mathematics making it invulnerable to human emotions, flaws, and manipulation (which got us to this economic mess in the first place).
Because it’s such a scarce asset, as more and more people begin to realize its use case and try to secure some for themselves, the price continues to rise as the supply diminishes.
Can Bitcoin reach $100,000, $1,000,000 or even $10,000,000?
There was a time when a $100 Bitcoin seemed ridiculous.
There were also times when a $1000 Bitcoin seemed absurd and then a $10,000 Bitcoin seemed impossible.
With the adoption rate of Bitcoin, an understanding of the economy and scarcity, monetary history, Stock-to-Flow ratio (I won’t go into detail about this here) and more, there are strong indicators suggesting that we could very likely see Bitcoin at several hundred thousand to even several million dollars per Bitcoin in the not so distant future as we enter into mass adoption phases.
The money that you put into Bitcoin appreciates in value over time, rather than lose value like with fiat — regardless of whether that’s $5, $100 or $20,000.
Right now we are still so early in the adoption phase that it makes right now the greatest opportunity of this generation to participate in this global wealth redistribution.
If you decide not to get involved now, in the future years you may very well be kicking yourself when the price is much higher, just like those who got in at $10,000 per Bitcoin wishing they could’ve gotten in at $1,000, and those before them who got in at $1,000 wishing they got in at $100, and those before them who got in at $100, wishing they got in at $10.
In the future, Bitcoin will no longer be about getting involved just for wealth gains, but it’ll be out of necessity as the current economic system collapses.
When this inevitably happens, you’ll be paying a premium and getting much less Bitcoin/satoshis for your dollar's value.
Where to buy Bitcoin
The easiest way for most people to get started with Bitcoin is through Coinbase.
You simply make a purchase for Bitcoin with a credit card, although the fees are slightly higher than buying from local exchanges.
PSA: whatever you do, don’t EVER try to buy “Bitcoin” when the symbol is BCH, this is an alternative to Bitcoin known as Bitcoin Cash and sometimes they falsely advertise it as the real Bitcoin. The only Bitcoin you’ll want to secure is BTC
I hope this article has helped opened your eyes to what Bitcoin is, to clear up any misguidance's around Bitcoin that you may have previously received and nudges you towards being part of this economic revolution.