In the 14 years since the Genesis Block, the first set of 50 BTC, was mined in January 2009, Bitcoin’s profile and impact on the global economy has grown exponentially.
The once unknown topic of cryptocurrency has now entered the mainstream, be it casual speculators or people who depend on cryptocurrency as a financial lifeline.
Hundreds of millions of people around the world began to recognize the advantages of the truly revolutionary concept of decentralized peer-to-peer currency.
The Bitcoin network was born when open source code was released, allowing anyone to run software, mine Bitcoin, and take steps toward greater economic freedom.
Why was Bitcoin created?
Bitcoin was created by Satoshi Nakamoto, whose identity remains unknown.
Shortly before Bitcoin was launched, Nakamoto posted a link to a cryptography mailing list. The link was to a white paper titled Bitcoin: A Peer-to-Peer Electronic Money SystemNakamoto stated that he is working on creating a new electronic cash system.
This system will enable digital payments that will be anonymous and truly peer-to-peer without any third party involvement.
The birth of Bitcoin coincided with the recession of 2008, when governments massively increased the supply of fiat money through quantitative easing.
When there is a massive increase in the money supply, it inevitably results in inflation: a hidden tax on the savings of individuals. Sound familiar?
As people saw the value of their savings eroded by inflation, governments handed out massive bailouts to banks deemed too big to fail despite their role in creating the financial crisis; a surefire way to destroy people’s faith in a currency.
So it should come as no surprise to find a January 3, 2009 headline on the Genesis block about this bank bailout.
As it turns out, Nakomoto had a clear goal in mind with this project: a way to circumvent the unfairness of the financial system. By creating Bitcoin, he expressed his desire to promote broad access to digital property rights, empowering individuals to protect themselves from the consequences of government actions.
Simply put, how does Bitcoin work?
The most unique feature of Bitcoin is that nobody controls it – it is decentralized in the truest sense of the word. Bitcoin enables peer-to-peer transactions without the need to go through an intermediary. Moreover, these transactions are instant when using the lightning network (built on Bitcoin) and are limited by political borders.
Transactions are recorded on the Bitcoin blockchain, an irreversible public ledger. Groups of transactions form new blocks, which are then added to the blockchain and transmitted to a network of nodes. All these nodes maintain their own copy of the blockchain, thus allowing for verification of the chain of ownership.
Each unit of 1 BTC, currently worth about $16,700 as of January 2023, is infinitely divisible. Importantly, unlike fiat currency, Bitcoin has a supply limit set at 21 million BTC.
Initially, for the first year of its existence, Bitcoin did not yet have a price. That was until May 2010, when a bitcoiner named Laszlo made the first purchase using Bitcoin – two pizzas for 10,000 BTC, which would eventually be worth more than $400 million.
Bitcoin is “mined” by special computers called ASICs, which receive rewards for verifying transactions by users on the network. About every four years, the reward for these Bitcoin miners is cut in half, making sure that the supply does not flood the market.
Bitcoin has something for everyone
No knowledge of cryptocurrency mining is required to use Bitcoin. It is estimated that there are more than 300 million cryptocurrency users worldwide, the vast majority of whom are not engaged in mining.
Bitcoin is hard money in cyberspace. As mentioned earlier, it can be transmitted anytime, anywhere, instantly, peer-to-peer. This means avoiding the delays and fees usually associated with international money transfers. In addition, the number of businesses that accept payments with Bitcoin continues to grow every year. Many companies have also started adding Bitcoin to their balance sheets to hedge against inflation.
Since its inception, Bitcoin’s most popular use has been as a speculative asset. Volatility and overall long-term price appreciation have made it particularly attractive to investors looking for quick returns.
However, as one of the best-valued assets of the past decade, Bitcoin’s long-term unique selling point, outperforming traditional assets such as gold, is as a store of value. It has a unique advantage over both fiat currencies and commodities because it has a demonstrably finite and fixed supply. This is especially true for those concerned about rising inflation, as Bitcoin can play an important role in protecting individuals’ liquid assets.
The reason many governments are frantically trying to discourage people from Bitcoin is that it fundamentally undermines their authority. In the past, it was almost impossible for the common man who used law and power to escape the influence of bad government policies.
Personal innovation and technology have allowed the common man to gain more autonomy over his personal finances. This time, it cannot be taken from them.
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A version of this article was previously published on Liberty for Students in January 2022.
This piece represents the opinion of the author only and not of the organization as a whole. Students for Freedom is committed to facilitating a broad dialogue for freedom, representing diverse viewpoints.