Bitcoin may be the most significant technological invention of the twenty-first century. While I won’t go into excessive detail about what it is and how it works here, I will summarize its key characteristics, recent revelations, and attempt to explain why they have proven to be so revolutionary. Crypto currency has tremendous implications for the meaning of freedom.
Bitcoin is a new form of digital currency known as crypto currency. A computer programmer using the pseudo name “Satoshi Nakamoto” invented it around 2009. This form of digital money can be divided up and sent anywhere in the world in the absence of a third-party (such as a bank or PayPal). It cannot be created by fiat means (central banks create traditional currency out of thin air to no end), and must be “mined” using sophisticated computer hardware to solve complex algorithms. The difficulty of mining a coin rises exponentially as time goes on. The currency payment system works using a decentralized peer-to-peer network with which “miners” are incentivized to facilitate transactions by being awarded with new coins.
This means that no central hub or server needs to exist. A fully distributed, efficiently functioning, decentralized financial network has been created for the first time in history. For more on the mathematics and hard science of bitcoin, see the Satoshi Nakamoto white paper here.
The following 5-minute YouTube video also provides brief analysis by such titans of business as Richard Branson and Bill gates, among others.
While one ought to ignore the extravagant price projections, listening to what the experts in this video have to say may be enlightening. They provide a good summary of key points for those unfamiliar with this development.
While many people may still be unaware of the technical aspects of crypto currency, it has begun to work its way into the mainstream. With each passing day, it becomes more and more recognized as a legitimate store of value and convenient medium of exchange. So, you may be wondering, how does one acquire bitcoin, and what can it be used for? The answers to such questions are legion.
Uses and Acquisition
Bitcoin ATMs have already sprung up in many places. In fact, there are a total of 552 BTC ATMs in America, a full index of which can be seen here. Large merchants such as Expedia.com and Overstock.com accept Bitcoin as a form of payment. Many online precious metals dealers also accept Bitcoin in exchange for copper, silver, gold, and platinum. The number of businesses accepting bitcoin and other alternative crypto currencies as payment continues to grow.
Upon gaining more widespread acceptance and legitimacy, Bitcoin has begun to boom. A year ago (January 2016), its market cap was under $7 billion. Today (January 2017), it has risen to over $12 billion, at some points reaching as high as $16 billion. While some financial commentators note that this overall market cap pales in comparison to most traditional financial markets, they tend to overlook the pace at which it has risen. If this pace were to continue, it would place bitcoin in contention with many other financial assets in short order. Some say this has already begun.
This rapid increase in value can be attributed in large part to the ongoing instability of geopolitical events over the last year. It began with Brexit (Great Britain choosing to leave the European Union), accelerated with the election of Donald Trump, and really took off into the stratosphere with the devaluation of the Chinese Yuan.
Indeed, the Chinese are responsible for the bulk of bitcoin investing and trading. Chinese trading accounts for somewhere around 90% of all the bitcoin traded in the world. The Chinese are the biggest investors in the crypto currency sector. So often, when there are big moves, it can be attributed to something they are doing.
Seeing their native currency depreciate rapidly, Chinese buyers may be the largest factor in finally pushing bitcoin prices beyond the psychologically important $1,000 mark.
Of course, crypto currency being notoriously volatile, the price quickly retreated back to the $900 range. This kind of steep correction often follows a quick spike upwards. Still, bitcoin continues to become more stable with time. At the time of publishing, the price stands at about $810 per bitcoin.
For some historical perspective, it’s worth noting that over the past year, bitcoin has still risen over 100% percent relative to the US dollar, and almost 15% over the past month, even after the sharp decline from its recent peak. Going back even further, again looking at values in USD, the value has risen over 350% in the past two years, and over 1,200% in the past four years! Astonishingly, bitcoin has soared approximately 7,500% since its inception back in 2009.
During the year of 2015, bitcoin became the best-performing asset in the entire world. And while it’s not certain yet, it looks as if it may enjoy that same status for the year of 2016 as well.
In short, crypto currency allows people to become their own banks, as it requires no third-party for transactions. This amounts to a huge advancement for individual liberty and brings the meaning of freedom into new realms for personal finance. The value of a digital commodity that cannot be created by fiat cannot be overstated.
As mining coins becomes more difficult, they become more and more scarce as a digital commodity. The most noteworthy aspects of this whole thing involve the following: 1) for the first time, a real digital commodity has been created – something that cannot be created by fiat, and 2) an online medium of exchange not requiring a third party now exists. Entire books could be written on the magnificence and significance of this.
If you’re interesting in getting into the crypto currency sector, engage in your own meticulous research before doing so. The legendary investor Warren Buffet has been known for stating that one of his biggest keys to success has been never investing in something he doesn’t understand.
Should you decide crypto currency might be for you, the best options include US-based exchange Coinbase and local bitcoin ATMs. Look into a BTC ATM in your area, or learn more about Coinbase, the largest exchange and online-hosted wallet for digital currency.
What do you think? Does the idea of owning your own money (rather than entrusting it to a bank) appeal to you? Does the ability to conduct secure financial transactions, without a third party and with almost zero fees, sound intriguing? How do you see this impacting the meaning of freedom, from a financial perspective? Leave your thoughts in a comment below.