Books have been written about why Bitcoin is valuable, and I can certainly write many blog posts about this topic.
But I’d like to boil this down to a few primary reasons why Bitcoin is important to me, and why it may be important to you as well.
If you haven’t read my blog post that provides an overview of how blockchain technology works, here’s the link. It gives a pseudo-technical overview of how blockchain, the technology behind Bitcoin, functions.
Anyway, let’s move on to why Bitcoin is important.
Most of the benefits of Bitcoin is derived from the fact that there is no central party – whether it be a bank or government – that controls how it works. Rather, the network is maintained by a network of nodes that help verify transactions and manage the distributed ledger. Because Bitcoin is an open, permissionless network, you or I can run nodes to help maintain the network.
Because of this decentralization, no one can censor how we use our Bitcoin.
Take a look at the debacle that is happening in Argentina right now. The country is limiting US dollar purchases by its citizens to just $200 per month in order to maintain their international reserves. Basically, no one wants to hold on to their Argentinian pesos, but the government is forcing them to do so.
Uncoincidentally, Bitcoin is huge in Argentina, and the government is trying to control citizens’ purchasing of Bitcoin as well.
We don’t truly feel this kind of pain in America. But can you imagine if the US government told us how we can and can’t spend our money? You’d be pissed, I’m sure. Bitcoin solves this.
21 Million Supply Cap
The US Federal Reserve has massive printing presses, and they’ve recently printed over $200 billion dollars to inject into the economy.
Do you know what happens to the value of the dollar when the Fed does this? It goes down. This is simple supply and demand – the more of something you have, the less valuable it is.
Here’s an interesting article of how the worth of the US Dollar has decreased. In 1913, the supply of dollars was only $13 billion, and $100 was worth $100. Now, with the money supply at $13,000 billion (a trillion, with a “t”!), $100 is worth only $3.87!
And who is to stop the Fed from continuing to print more money and devaluing our currency?
Bitcoin’s monetary policy states that only 21 million bitcoins will be created, EVER. And this policy is written in code and cannot be changed unless the community agrees to do so (which is highly unlikely). Because the supply is set, the demand for Bitcoin is likely to go up, which will increase its value in the long run.
This makes Bitcoin a great store of value, similar to gold or Amazon stock.
Because Bitcoin is decentralized, you can have full control over the Bitcoins that you own.
You don’t need banks to hold your money. And it’s not like banks actually hold your money for you. If you have $1000 in your bank account, that money isn’t actually there; your bank is using your money to make money for themselves, and that “$1000” printed on your statement is basically an IOU.
When you own Bitcoin, you have the ability to store it yourself using non-custodial hardware wallets like Trezor or Ledger. This means you are in full control of your Bitcoin (or any other cryptocurrency that you own). Sure, you’ll have to trust yourself to not lose this hardware wallet, because if you do, your Bitcoin is gone. But you control your money, not some bank. And that’s powerful.
There are many other reasons why Bitcoin is important. There are drawbacks to Bitcoin as well.
Regardless of what you think of it, Bitcoin might be one of the most important social, economic, and technological developments we’ll ever see in our lifetimes, and I recommend at least learning more about it!
If you’re interested, here are some great resources to get you started:
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