What To Answer When Someone Says Bitcoin Is Made Out Of Thin Air
By Didier Borel on ALTCOIN MAGAZINE
People often say Bitcoin is backed by nothing, that it is made out of thin air. I answer, yes it is, it is called “proof of work” and that is a lot better than every fiat currency which is backed by absolutely nothing, only thin air.
Let me explain; every bitcoin that exists was created by a process called proof of work. That means to “mine” or create a bitcoin, a “miner” had to spend a lot of electricity, to run a process or to solve a random and difficult mathematical problem. Once he has solved this problem, bitcoin gets created. Equally as important, every “node” running on the bitcoin blockchain, checks that the problem was solved correctly and gives its approval to the creation of the bitcoin. Every single bitcoin can be traced back to its creation by mining, and this forever and this is verifiable by anybody in the world.
Now let’s compare this to currency emitted by central banks (fiat currency). There is no money in the world where someone can take your bill (say dollar or euro) go to a central bank and get gold. No central bank can justify to you that every time they print money, they “mined” some gold. Let me remind you that in 1933 President Roosevelt banned the hoarding of gold by Executive Order 6102 and required citizens to convert gold to dollars. Convertibility of dollar to gold ended in 1971 when Nixon ended the Bretton Woods system. Since then, central banks have increased the money supply. Today outstanding loans in the economy are about 40 times greater than reserves in banks. So what are fiat currencies backed by? My answer, absolutely nothing, they are backed by thin air! Can you show me the gold backing the 10 dollar bill in your pocket, and can you trace that gold back to when it was mined? You can with bitcoin.
Let me remind you, nobody has ever produced a “fake” bitcoin. That is to say, no one has ever been able to introduce onto the bitcoin blockchain a bitcoin that didn’t come from a provable “proof of work.” This is certainly not the case for any fiat currency. Counterfeits in fiat money continue to exist, even today. Bitcoin capitalization is currently about 143 billion dollars. You cannot show me a startup that has never taken 1 cent from a venture capital fund, has no Ceo, no offices, has never been hacked and has reached a market capitalization of 143 billion dollars. This is the validation of the concept and the technology.
I completely understand that people are suspicious of bitcoin because they don’t understand it. That is completely normal. Furthermore, it is difficult to understand for someone who is not a computer scientist. But fiat currency is based only on trust, and in fact, everyone thinks that negative rates are a by-product of a system that no longer deserves trust. These are some of the reasons why I think bitcoin is the most asymmetric bet you can make today.
