Bitcoin was the first and is the most well-known crypto currency. It was created in 2009 by an anonymous person or group of people under the name Satoshi Nakamoto. Bitcoin is different to other crypto currencies because it is a decentralised digital currency. This means that it is not subject to government or financial institution control. Bitcoin can be used to buy goods and services online, or can be held as an investment. Transactions are made without middlemen, so there are no transaction fees and no need for a bank account.
The Case For Bitcoin:
1. What is Bitcoin and How Does It Work ?
Bitcoin is a decentralised digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.
Satoshi Nakamoto, Bitcoin’s enigmatic founder, arrived at that number by assuming people would discover, or “mine,” a set number of blocks of transactions daily. Every four years, the number of bitcoins released relative to the previous cycle gets cut in half, as does the reward to miners for discovering new blocks. As a result, the number of bitcoins in circulation will hit 21 million in the year 2140.
This means bitcoin never experiences inflation. Unlike US Dollars (or other crypto currencies), whose buying power the Fed(founders) can dilute by printing more greenbacks, there simply won’t be more bitcoin available in the future.
2. Immaculate Conception
Bitcoin’s conception is truly astonishing when one takes the time to contemplate it. The currency was launched anonymously by a pseudonymous individual/s called Satoshi Nakamoto, who has apparently never monetised any of their billions of dollars in lucrative gains. Satoshi didn’t give themselves any special privileges when it comes to accessing Bitcoin as they had to mine the currency when it launched, just like any other market actor.
This was done in an environment where cryptocurrencies didn’t exist, so there was no mass rush to buy up bitcoin. The currency circulated without a value for almost 1.5 years giving it wide distribution amongst those that didn’t seek monetary gains.
This differs from other cryptocurrencies which had a pre-mine (the process of mining or creating a quantity of blockchain-based tokens or coins before a cryptocurrency is launched to the public), which is widely seen as a point of centralisation and generally unfair to the wider market.
3. Proof of Work
Proof-of-work is a system where computers compete against each other to be the first to solve complex puzzles. This process is commonly referred to as mining because the energy and resources required to complete the puzzle are often considered the digital equivalent to the real-world process of mining precious metals from the earth.
The proof-of-work system is what makes Bitcoin’s blockchain secure and virtually impossible to counterfeit. In order for a bad actor to successfully counterfeit a Bitcoin, they would need to control more than 50% of both the hash rate (the cumulative computing power of all miners) and the nodes in the network. This would enable them to broadcast a bad block to the network and have their nodes accept the block onto the chain. However, given how large Bitcoin’s network has grown and how much energy miners contribute to the proof-of-work system, such an attack would be close to impossible today.
This vastly differs from the proof of stake system which is used by Ethereum and many other crypto-currencies. Proof of stake is a much more centralised system as it doesn’t require energy to be expended in order for validators to stake their coins. This means that those with the most capital can easily become the biggest validators and have disproportionate power over the network.
4. Decentralisation
Bitcoin is a decentralised monetary system that is governed by rules instead of rulers. This means that there is no central authority that controls the supply or price of Bitcoin. Instead, Bitcoin is controlled by a network of computers that run the Bitcoin software. This network verifies and records all Bitcoin transactions. The rules of the Bitcoin network are determined by consensus among the computers that run the software. Because there is no central authority, Bitcoin is often described as a “peer-to-peer” system. There are several advantages to using a decentralised monetary system. First, it makes it very difficult for anyone to manipulate the supply or price of Bitcoin. Second, it allows users to remain anonymous if they choose to do so. Finally, it reduces the costs of running a payment system.
While Bitcoin and the wider crypto market share many similarities, they have diverged in terms of centralisation. Bitcoin has always been decentralised, with no one entity having control over the network. Other crypto currencies, on the other hand, have shown themselves to be more centralised. This centralisation has manifested itself in network downtime and arbitrary changes to the protocols. While this centralisation may have made other crypto currencies more flexible in the short-term, it has also made them less reliable in the long-term.
5. Fixed Supply
The supply of bitcoin is limited to 21 million BTC. This programmed scarcity was put in place from the very beginning and cannot be altered without all nodes on the network agreeing to the change. The Bitcoin protocol is decentralised and immutable, which ensures that the 21 million BTC scarcity remains intact. This predictability is possible due to the decentralisation and immutable nature of the Bitcoin protocol. As a result, bitcoin’s fixed supply provides users with a stable and predictable monetary policy.
When it comes to digital scarcity, there can only be one first. And that’s Bitcoin. The cost of creating imitations with slightly different variations in the code is zero, given Bitcoin’s open-source nature. But what no single one of them can recreate is being first. Bitcoin’s organic adoption and the grassroots growth of its mining ecosystem cannot be replicated in this world where digital scarcity already exists. So while there may be a lot of alt-coins out there trying to recreate their own version of Bitcoin, none of them can ever hope to achieve the same level of success.
6. The future of Bitcoin vs Other Cryptocurrencies
The next decade is shaping up to be a pivotal one for Bitcoin. While the digital currency has come a long way since its inception, it is still very much in a period of transition. Currently, Bitcoin is caught between being a store of value and a medium for daily transactions. On the one hand, institutional investors are eager to get in on the action and profit from the volatility in its prices. On the other hand, governments around the world are beginning to recognise Bitcoin as a valid form of payment for goods and services. This dichotomy is likely to continue to play out over the next decade, and how it ultimately resolves itself will have a big impact on Bitcoin’s future.
Other crypto-currencies are on slightly shakier ground. The main short-term battle that is shaping up is whether they will be classed as a security, which the SEC has recently suggested. This has the implication of sending an already volatile market, into a spin.
Bitcoin – The Main Foundation Piece of Any Portfolio
We can now, hopefully see why Bitcoin leads the way in the crypto currency space and is vastly different and arguably superior to other crypto currencies in the space. This is not a knock on other crypto currencies such as Ethereum or Algorand – they each have their place in a crypto portfolio and are pushing innovation in the space. However, as it stands, Bitcoin should make up the bulk of anyone’s portfolio in this sector.
