The promise of Bitcoin is to provide us with a better, fairer money. Bitcoin was released amidst the Great Financial Crisis, when the chasm between the Top 1% and Bottom 99% grew rapidly and the fragility of our financial system was revealed yet again. Bitcoin promises to help stabilize our economy, reverse decades of neglect of the lower- and middle-economic classes, and provide everyone with a means to save their life’s work in a secure currency.
Our current monetary system has major problems:
- Inflation (policy set by central banks, i.e., “money printing”). Since the U.S. Federal Reserve was founded in 1913, the purchasing power+ of the US dollar has declined over 95%.+ The Fed’s own mandate is for 2% annual inflation rate, but that means the purchasing power of the dollar is programmed to cut in half at least every 35 years. This incentivizes spending and disincentivizes saving.
- Manipulation by people in power. As our current system is based on trust, we must trust those in power. However, that trust has been broken again and again, as evidenced lately by the Federal Reserve’s recent bout of insider trading+ and decades of pork-barrel spending.+
- Inequality is exacerbated by inflation because it increases the values of assets (houses, fine art, etc) which are predominantly owned by the rich and increases the expenses of living (rent, food, etc) which is felt more acutely by the poor and middle-class. Said another way, inflation makes the rich richer and the poor poorer.+
Decades of poor decisions have culminated into what we see around us today: a state of high inflation, inequality, and forever wars.+ The system needs fixing. Enter Bitcoin.
The Bitcoin protocol (its rules, code, or software) places the highest importance on the preservation of its initial parameters (namely its issuance rate and maximum supply). By fixing these parameters and ensuring they are followed by ingeniously connecting it to energy, Bitcoin ensures that we have a fair monetary system, one that cannot be controlled or manipulated by any single member or party, and one that allows truly free and open markets to materialize.
Aside from fixing the financial system we have now, Bitcoin is one of the greatest technological shifts in the entire history of money.+ With Bitcoin, we now have a truly digitally-native currency, one that provides final settlement and programmability. For example, when you send or receive bitcoin you are making a final settlement peer-to-peer without the need of an intermediary.+ It is like being able to send physical bars of gold through the internet. Bitcoin is digital gold.
If everyone in the world were honest, if every nation were to never start a war, if every person was given a fair and equitable chance, Bitcoin wouldn’t be necessary. But history shows us that Bitcoin is necessary; it converts energy into an honest, safe, and equitable money. That’s something worth investing in.
references & Further reading
Why Bitcoin Uses Energy, by Pete Rizzo
Bitcoin Fixes This, by Parker Lewis
Uncovering the Hidden Costs of the Petrodollar, by Alex Gladstein
The Bitcoin Standard, by Saifedean Ammous