7 reasons why ‘evil’ Bitcoin is holier than Sterling
…and probably will continue to outperform it in value for the foreseeable future
Am I one of those pesky bitcoin ‘salespeople?’…
“The value of Bitcoin is over £2000… that’s up 25% since 2 months ago.”
“For God’s sake I’m not interested in your Bitcoin scam… you’re the 3rd person who’s tried to sell me Bitcoin this week!”
Well, that’s not quite verbatim, however, that was roughly my brother’s response when I dared to mention that he should invest a small portion of his income in Bitcoin. I thought I’d do the charitable thing and share a good portfolio option for his investments and I was shouted down like some purveyor of multilevel marketing. One can forgive him for his accusatory nature towards my intentions, after all, we’ve both had a bad experience from network marketing scam artists, so whilst I sympathise with his scepticism, I empathise with his reasoning.
The Dark Grey Area
The issue is, my brother’s response was not unique, people have a deep seeded mistrust for the cryptocurrency space, possibly a subconscious result of memories of the Bitcoin ‘black markets’ of Silk Road and not so black markets of Mt. Cox (and more recently BTCe) being viciously shut down by the US authorities. There is also the small matter of the ‘Dark Web’ which is alluded to be illicitly funded by the likes of Bitcoin.
It does seem that, in the case of Bitcoin, there is a relentless drive by mainstream media to effectively demonise it at every turn. This could be owing to the fact that lazy journalism will always settle for the excitement of scandal over the boredom of truth. But the collective mistrust is largely borne out of unwillful ignorance being imparted by those that should know better. Many, actually, dont know anything at all, but even the limited knowledge that is presented to audiences about Bitcoin tends to lean one towards FUD (that is, Fear, Uncertainty and Doubt to those in the Cryptocurrency community).
The fact of the matter is, my intentions are (at least mostly) altruistic when I tell my brother, friends, family and acquaintances, about Bitcoin. I do it because I genuinely believe in Bitcoin. I believe in it’s value. I believe in it’s adoption. I belive in it’s principles and I am certain of it’s continual growth. Furthermore, here are 7 reasons (in spite of the gargantuan efforts to convince you otherwise) why Bitcoin is actually a morally superior currency candidate to Sterling (and any other fiat currency):
1. It’s Decentralised
You may or may not know, but decentralisation is the single most ground-breaking and disruptively liberating feature of Bitcoin.
It basically means that there is no Bitcoin! Well, there is Bitcoin (the technology and coin), but there is no Bitcoin PLC, the company, the ‘profiteer’. Bitcoin exists in the network and exists for the network. Users (those who send and receive Bitcoin), and miners (those who provide the computational power for Bitcoin to work) each act as nodes within the network, and hold a share of the Bitcoin ledger, and its operating power. This means that as much as they might want to, no central authority has the ability to shut Bitcoin down. It has no centralised location or base where decisions are made.
Centralisation of currencies tends to be what drives inflation, quantitative easing and the continual reduction of value to most/all of the worlds bank backed currencies are executed without the input of the masses. Bitcoin, however, exists for and is improved on the basis of the community it serves. This approach suits all of those that contribute to the Bitcoin network, as opposed to controlling few and has seen year on year growth for the value of Bitcoin against fiat currenices.
2. It’s scalable (it gets better!)
Even though there is no central Bitcoin database, Bitcoin continues to get better. The original code written by the legendary Satoshi Nakamoto has actually been revised and improved, several times. Without being too technical, the way this is achieved is by a democratic system whereby changes to the network are agreed upon by miners signalling (opting in to) a change that has been recommended by the community (this is called a fork). No miner can be compelled to make a change that they don’t like. This can cause problems and ‘hard-forks’ in Bitcoin, but users and miners always remain in control as they can decide if the new change is something that they believe will benefit the network. Bitcoin doesn’t fork (change) often, but even the unexpected hard fork earlier this year didn’t really do any damage to Bitcoin’s value and all parties involved in Bitcoin seemed to benefit (even financially) from this democratic approach to distributing changes and improvements.
Because of this, Bitcoin gets better year on year, and each year the development community think of ways to make transactions faster, more secure and better suited for the growing utilisation of the Bitcoin network.
3. It’s scarce (has intrinsic value)
Bitcoin is limited, like gold. Oh but, you say, it has no intrinsic value… it’s just numbers on a screen. To which I answer, how many people who invest in Gold actually ever hold the product? Is it not just numbers on the screen to them? On top of that is not the value of Gold subjective? After all when was gold used as anything other than a pretty yellow metal adornment? The fact remains, every currency is nothing more than numbers on a screen and a network of people that agree on the trade value of those numbers. Besides, all of that is moot since no fiat currency has been based on the gold standard for nearly a century now. Gaddafi was attempting redress that in 2009 for the Libo-African Dinar and we all know how that ended for him!
Bitcoin, however, is much more than just a currency. I digress. But one of the benefits that Bitcoin has over normal currencies is it’s fixed scarcity. in terms of Bitcoin, this limit is hardcoded and unchangeable. According to blockchain.info, as of 29th August, there are currently under 16,531,537 Bitcoin in circulation and this figure is capped at 21 million. Once it reaches that point which is estimated to be in 2140 based on a 4 year halving policy established in the original code, no other Bitcoin will be mined. Ever. This means, as long as adoption grows, Bitcoin will continue to increase in value year on year. So if adoption doubles in the next year or 2, so too will the value of your Bitcoin holding. Obviously, none of this is guaranteed, in 2013 Bitcoin suffered a 75% collapse in value that lasted for 2 years, so any investment should be made with strict caution.
The simple principle is that scarcity determines value. If enough people want some thing and there’s a limited amount of that thing in circulation, market forces will drive the value of this ‘thing’ up. Bitcoins current total value (market cap) is a respectable $76 billion (according to coinmarketcap.com). If a small developing economy, like say ,Venezuela was to decide to make Bitcoin their national currency, Bitcoin’s market cap would increase from $76Billion to around $450Billion. That would be a 6x increase in the value of Bitcoin from $4400 to around $26400 per bitcoin. If you don’t believe that can happen, consider that the market cap of Bitcoin at the start of 2017 was a mere $16bn.
Nation state currencies are normally governed by Fed’s and Treasuries and Banking conglomerates and in the case of developing nations, the IMF, who will inevitably have their own interests set as priority when creating, controlling, manipulating and distributing traditional (fiat) currency. As a result we have currencies that increasingly lose value thanks to inflation on a yearly basis. Contrary to traditional currencies, Bitcoin has appreciated (considerably) since it’s inception, and this will only scale upwards, as adoption increases.
Now obviously, we won’t see that kind of rapid adoption in one go, but it gives you a good idea of the potential for Bitcoin to multiply in value due to its adoption and scarcity of it’s availability.
4. It’s border agnostic
Ever need to send money abroad? If you’ve had the experience of using pocket crippling services like Western Union, or using your banks own swift service for an international transfer, you’ll know how long it takes for the transaction and how utterly unaffordable it is. Let’s face it, using your bank to transfer money is like using one of those fee charging cash machines: you know you’re being robbed, but often don’t have an alternative! Being of Nigerian ethnicity, Western Union have a tyrannous monopoly over the money transfer business (as they do in most developing nations), so not only is the transfer relatively time consuming, but it can cost you around 10% of the actual amount that is being sent.
Bitcoin is fast, and it’s cheap. It’s not the fastest or the cheapest cryptocurrency, but with a transaction valued at hundreds of dollars only costing a few cents in transaction fees, and a transaction only taking an average of under 10 mins to be confirmed on the blockchain, we are talking an astronomical improvement on international money transfer. Personally, of the cryptocurrencies I’ve used for transaction, I think that one called Ripple produces the fastest transactions at the best fees, but that’s an aside. You may rightly ask, if the system is decentralised, why are their fees for transfers. Simple, the fee is distributed to the miners whose systems ‘host’ and verify the transaction, adding it to the blockchain.
The potential for developing nations to make this their ‘go to’ currency for cross border transfers is clear, and with that widespread adoption sans crippling fees and wasted time, so to will you the value of Bitcoin increase.
5. It’s fast
On average, a bitcoin transaction is confirmed on the blockchain in under 10 mins. This might not seem fast, but consider your bank that doesn’t actually confirm your visa/mastercard transactions on your bank balance, usually until the next working day, sometimes 2 days later. The difference is, your bank ‘trusts’ you not to overspend on your balance, this in essence is why overdraft exists.
There is no overdraft on Bitcoin, you can only spend what you have… money can’t be created from thin air, the Bitcoin has to have come from somewhere, otherwise the transaction will be rejected by the blockchain. When you consider this, you will understand that 10mins for a transaction to be verified and reflected at both ends is actually faster than any modern bank account is able to achieve. As far as cryptocurrencies are concerned, 10 minutes is still rather slow. Systems like Dash, Ripple, Litecoin and even Ethereum can produce near instant transactions. Bitcoin has been working to alleviate this using a system called Segregated Witness (or SegWit) to increase the number of transactions allowed within a block, thus improving the overall network performance and the speed of transactions. In the meantime, Cryptocurrency developments like TenX (which uses a token currency called PAY) and Monaco (whose token is MCO) have produced Bitcoin debit cards that can be pre-charged with Bitcoin and spent anywhere that accepts your normal debit/credit cards, without exception.
So with the ability to spend Bitcoin, instantly, just like your Sterling, in any store, the adoption of Bitcoin will rapidly increase, and with that it’s value will increase. I would like to see Bitcoin break through and totally remove the need for merchant intermediaries, and perhaps the PSD2 legislations will enable some savvy blockchain company with a true decentralised and virtually fee-less payment card. But the current solution is still faster and safer for consumers than what is being offered to fiat account holders in my opinion. A moral victory for Bitcoin I say.
6. It’s anonymous (yes, that’s a good thing)
Privacy is something that is increasingly under attack in our Orwellian society. This is culminating in the cooperation between government agencies and mobile application companies and device manufacturers that are increasingly being coersed to cooperate with the state. The ability to track your every move, interactions and transactions by government agencies has become an accepted intrusion of our personal life. Bitcoin contradicts this trend, as it is the only ‘currency’ for which you can set up an account in complete anonymity.
You can literally create a Bitcoin account in around 10 secs. Your account consists of 2 elements. 1) Your Address (which is comparable to your account number), and 2) your private key, which is essentially your password. That’s it. You now have the ability to send and receive Bitcoin without even entering your name. This anonymity is essential for Bitcoin, since, the Blockchain works on an open transparency basis. Anyone with your address can check your account balance and view all of your transactions, since the security and accuracy of the blockchain relies on this very transparency. So, anonymous accounts, auditable transactions. The perfect balance between transparency and social accountability, in my opinion.
7. It’s Secure
Let me make a bold and assertive, (somewhat controversial) statement.
Nothing is easier to hack than your bank account, and nothing is more secure than the blockchain.
The blockchain is a socially audited ledger. It’s impossible to hack because it exists everywhere rather than in one place. It also means that no one has the ability to devalue it using fractional reserve banking, or make changes to it’s nature without full consultation and adoption of the community. More important than anything, Bitcoin is quite possibly the most secure distributed application on the web.
Bitcoin is virtually unhackable (I say virtually, because according to good friend of mine ‘anything is possible’, and I will reluctantly accept this as an unsupportable statement of truth). The reason it is (virtually) unhackable, is because each node of the network (user or miner), are holders of the ledger, and they each verify each other. In other words, you can’t change, modify or ‘hack’ one illicitly, without unbalancing the entire ledger of transactions on the Bitcoin blockchain. This means, in order to ‘hack’ Bitcoin, you have to hack each individual on a majority of the entire network. It’s mathematically so close to impossible, it’s silly to call it anything else. That is secure.
Also, everyone has experienced some kind of petty fraud or currency insecurity in their lifetime. Ranging from counterfeit notes, to unauthorised transactions. Or even worse, how about state sponsored ‘redirection of funds’ direct from the bank accounts of Greek citizens to pay a debt that they did not create.
Bitcoin is approaching 9 years of existing, and no brute force attack has been successful hacking a single Bitcoin private key. That is an exceptional achievement in security. Obviously Bitcoin has not been without its fair share of successful hacks, but these have all been limited to usage centres, such as exchanges, and companies using it to raise funds, not a security weakness of the Bitcoin blockchain itself.
So, there you have it. In spite of the moral obfuscation of mainstream reporting, Bitcoin actually represents a laudable improvement to the way transactions and trade could be made in the future. Contrary to being the dark and seedy currency of hackers, drug dealers and reprobates, in actuality it could birth an era of transparency and be the unified, decentralised basis for transactions that this world has been crying out for.