What is Bitcoin?
To simply put it, Bitcoin is a new form of money invented in January, 2009.
Who created it?
That we don't know, but the creator operates under a pseudonymous identity of Satoshi Nakamoto. We don't know if Satoshi is him/her or a team of individuals.
What purpose does Bitcoin solve?
It was created in January 2009, just after the United States housing bubble (and the Great Recession of 2008).
To understand its purpose, let's first go through the series of events that led to the Great Recession.
- The housing industry in the United States was booming in the period: early to mid 2000s.
- To make the most of this opportunity, banks and other financial institutions started giving loans to all sorts of borrowers, even to those who have low credit scores.
- Some of those loans were not recovered and the banks eventually had to file for bankruptcy.
Now, the US government had to step in to revive the economy. They did 2 things:
- Lowered the interest rates
- Printed more money
As more money got pumped into the economy, the actual value of the existing money reduced.
To understand this better, let's use an example.
Imagine the country's economy has $100 in total, and out of that you own $10. This way you own 10% of the total money in the economy. Now, what will your ownership percentage be if another $100 get pumped into the economy? It'll be reduced to half, right? You'll now own 5% of the total.
What happened exactly?
All of your lifetime savings got reduced even though you spent nothing. It resulted purely out of government's decision to pump more money.
No one would want that. Right? But that continues to happen.
Estimates say that in 2020 alone, the U.S. has created 22% of all the USD issued since the birth of the nation.
As a matter of fact, there is no limit to how much a government can print money. In order to address this issue, Bitcoin was created.
You may ask, how do I know this?
Well, Satoshi Nakamoto left a message in the genesis block (the very first block in the bitcoin's blockchain).
The message reads:
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
Here is a link to the article.
Also, if you hold a copy of that newspaper, this website can make you rich. Crazy isn't it?
So how does Bitcoin solve this problem?
- Bitcoin is limited in supply. The total number of bitcoins can never exceed 21 million.
- Bitcoin removes the need of banks / financial institutions to facilitate transactions.
And that is why Bitcoin is so good!
It is actual sound money, money that is independent of governments and political parties.
I'll end this article with a tweet that truly describes the enormous potential of Bitcoin.
"It lives and breathes on the internet. It lives because it can pay people to keep it alive. It lives because it performs a useful service that people will pay it to perform. It lives because anyone, anywhere, can run a copy of its code. It lives because all the running copies are constantly talking to each other. It lives because it is radically transparent: anyone can see its code and see exactly what it does. It can't be changed. It can't be argued with. It can't be tampered with. It can't be corrupted. It can't be stopped. It can't even be interrupted. If nuclear war destroyed half of our planet, it would continue to live, uncorrupted." - Ralph Merkle