MONEY & BITCOIN
Money is information. In the past, in the analog world, physical items represented money (shells, coins, banknotes). Today, in the digital world, all information is stored digitally. It’s effectively a database that records who has how much.
There is a problem, though. This database is stored somewhere, and people with access can edit it. The money database the world uses today is created and maintained by bankers who can manipulate it at will, without transparent oversight. They create new money from nothing just by editing the database, and each time they do, everyone holding that money loses some of its value. It’s a system where those who control the database win, and everyone else loses.
Bitcoin was created to fix this problem. A new digital system was developed with a set of rules that addressed the issues of the current financial system. The code is open source, allowing anyone to verify it. The database (the ledger) is duplicated across thousands of independent locations (nodes), and the software ensures no errors or interventions occur.
To secure the system and tie it to the real world, the creation of new entries in the database requires real-world physical energy (mining). Competing entities expend energy to solve an encryption task, and whoever solves it first gets the right to enter the information into the Bitcoin database (blockchain) and earn a reward for their work. Bitcoin effectively creates the most efficient form of money ever — money backed by energy.
All participants use open-source software and are free to accept or reject any proposed changes. Even if some individuals wish to alter the rules for personal gain, they can’t convince the entire network to upgrade. The code is rarely changed, as participants understand that altering the protocol can reduce security and efficiency. Changes are only made in rare cases, after extensive checks and voting.
The code guarantees there will never be more than 21 million bitcoins. As more people understand the value of this technology, demand increases, and they are willing to pay more to acquire it. With a limited supply of bitcoins and an unlimited supply of traditional currency, Bitcoin’s price will continue rising as it becomes more widespread.
Each bitcoin can be divided into 100 million units called satoshis. Participants can freely transact any amount of satoshis or bitcoins with each other, without needing permission.
Bitcoin enables anyone with a simple network connection to acquire and transfer value freely, anytime, anywhere, in any amount. No one can stop them.
Participants generate a key that grants access to their stored value, making them the true owners of their assets. In fact, Bitcoin is the only asset in the world you can truly own.
This is a broad topic, and I’ve simplified it here. To fully understand, you’ll need to invest 10–100 hours, depending on your desired depth of knowledge.
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