Last Monday, Bitcoin turned 14.
Bitcoin was not the first attempt to create digital money. Like many other innovative technologies, Bitcoin stands on the shoulders of all those who came before it and attempted to create a digital currency using a ledger that was secured by encryption.
In 1983, David Chaum conceived an anonymous cryptographic electronic money, Ecash, believed to be the first real-world attempt to create digital private money. Several other attempts followed including hashcash, DigiCash, Bit-Gold, and B-Money, but Bitcoin succeeded where all the previous efforts failed.
Until Satoshi published Bitcoin’s whitepaper, no one could figure out a way to create money without relying on a centralized institution that was vulnerable to failure or government oversight.
Bitcoin has grown to become a global phenomenon without a marketing budget. The growth of Bitcoin has been viral and the reason for this is Bitcoin’s sound money principles. It is an awakening of sorts, which changes our concept of finance, upends our confidence in fiat currencies, and makes us question government and banks.
Everyone’s journey to Bitcoin is different and personal.
For me, this is my second bear market. I knew about Bitcoin for many years but I never really paid any attention to it —sometimes I wonder how I missed it. I got into Bitcoin in the summer/fall of 2016 when I was working at a fintech company and started to think about what to do in crypto. It took me a while before I jumped in. I spent several months researching and trying to understand the technology, the market dynamics, and why bitcoin has value.
Understanding Bitcoin is something difficult. Like most people, in the beginning, I was fixated on the price and its volatility. But I have come to understand that regardless of the cycles, whether it’s going from $20,000 to $3,000, and then from $3,000 to $70,000 and back down to $20,000 the value proposition of bitcoin is constant, and it doesn’t change.
To understand Bitcoin you need to ask some fundamental questions about what money is and question some of the assumptions we have about money.
In my view, the existing monetary system has broken our trust beyond repair. Inflation is rising, and central banks are using counter-productive measures to keep the economy afloat.
The collapse of the fiat currencies we use today is inevitable.
We are living in a world where inflation runs rampant. Central banks have been printing money forever and now they are trying to solve the problem of inflation. Food and gasoline prices are far more expensive than a year ago and will continue to rise, and it is not just because of the war in Ukraine. The real problem is that central banks printed trillions of dollars over the last three years.
To quantify the situation, today there is $90 trillion in dollar-denominated debt and about 9 trillion dollars in the banking system. This is a 9x increase in the number of dollars in the banking system since 2008 when we had the last financial meltdown.
Central banks can’t solve the problem of inflation because they are the source of inflation. To maintain the system, they need to keep on printing money, otherwise, it will collapse —when new debt is created, there is a future demand for dollars and to meet that future demand central banks have to print money. Money printing continues, in part to deal with the second-order effects of the previous round of money printing. It’s a vicious endless loop.
The existing fiat system is broken to the point that it cannot be repaired. Central banks have printed money to such an extent that they have opened pandora’s box and put themselves in a situation that has allowed this unsustainable debt to become a bubble.
Bitcoin is inevitable and it will be replacing a system that is irreparably broken. It’s only a matter of time.
I like to think of Bitcoin’s price as purchasing power. While it might not be used on a day-to-day basis like other currencies, Bitcoin is designed to be a better form of money that can’t be printed or controlled by a centralized authority. Bitcoin’s fundamental value is that there will only be 21 million bitcoins and no one can change that.
There are multiple currencies in the world, but only Bitcoin has removed the need for trust and has given people an option to voluntarily opt-in to a censorship-resistant form of money —anyone can send bitcoin to anyone else on the network.
Bitcoin is inevitable because of the intellectual capital flowing into it.
Bitcoin, crypto, and web3 are drawing graduates from all over the world who have the technical know-how and whose skills are readily applicable to blockchain development. These young crypto believers are often fully committed to working in the sector, attracted by the idea of decentralization and generational wealth opportunities of bitcoin. They are unfazed by the battered job market and volatile cryptocurrency prices.
How can you bet against a market that has the smartest and brightest minds out of universities going into crypto? You can’t.
The most impressive feature of Bitcoin is that it is still there. It has survived crash after crash and government hostility. It has truly been battle-tested in the harshest of conditions. Everyone uses Bitcoin for their own reasons, but Bitcoin has ushered in a truly new paradigm of money, one that is challenging existing definitions. The creator of bitcoin, Satoshi Nakamoto, wanted it to be a currency. I think we still have ways to go before we reach that point, but with each passing day, it becomes more plausible, and eventually, we will see a Bitcoin-based monetary system.
by Ilias Louis Hatzis is the founder and CEO of Kryptonio wallet.
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