Since the beginnings of the Internet and the information age, writers and visionaries have visualized the disruptive changes that such technologies could possibly have in our lives; They have imagined futures where we spend more time online than offline, and where pervasive access to technology and connectivity would be a strong force of decentralization, putting power in the hands of the people.
One of the cornerstones of this vision is the need for a decentralized, distributed and pseudonymous currency to transmit the numerical value from one person to another. Power can not really be transferred to the hands of people without granting them economic sovereignty, and they can not have economic sovereignty while money and money are tied to the real world and controlled by central banks and governments. monopolistic governments.
Many different ideas have been tried over the years, such as RipplePay, eCache and ecash. For various reasons, none of these systems has taken off. Why did they fail? Some of them had flaws because they depended on a centralized model, and others had flaws because they only work if humans are completely reliable, which can not always be reliable.
WHAT IS BITCOIN?
Bitcoin is a decentralized and pseudonymous electronic money, and has been designed in such a way that it works in the same way as money from physical goods, such as gold. This implementation solves both the problem of centralization and the problem of trust. To see how, we must first look at the properties of money, and why the physical currencies of commodities, such as gold, were spontaneously chosen as money by the people, and why they preserved their value for so long. long time.
What are some of the properties of good money?
Money must be easily divisible into arbitrary units of value to handle all sizes of transactions, large or small.
To be a reliable stock store, money has to stand the test of time. Anything that breaks down or rots would not be a good choice.
Good money is fungible. This means that each unit is identical to any other unit. One dollar equals another dollar, and one kilo of gold is the same as another kilo of gold. Money can act as a cash or a measure of value, just as a meter is a measure of distance.
The ideal money is one that maintains its value and does not steal value by arbitrary inflation and deflation. As far as fiduciary currencies are concerned, central banks are supposed to fulfill this function, and when it comes to physical products such as gold, the laws of the universe impose this standard. It is physically impossible for someone to evoke a cubic meter of gold from scratch, so that he can preserve his value so well.
For something to start life as money, you need to add value to sow your own growth. Gold adds value through its beauty and artistic uses, and Bitcoin has the potential to add value through the properties of decentralization, openness and the pseudonym. I mention openness, since the project itself is open source, and the code, protocol, and implementation are open to review and analysis.
I consider these are some of the most important properties that something must be accepted as money. This is ideal if the properties of money are inherent in the medium itself, as in gold. Gold has all these properties and more, and that’s why not only has it been chosen spontaneously by people from different continents and cultures, but it’s also why it has held its value for thousands of years. Fiat coins have value by force and legal agreement; Gold is valuable because of the physical properties of the universe. The legal force increases and decreases, and the conventions may change, but the laws of the universe remain constant.
SO HOW DOES IT WORK?
So far, I’ve explained what money is, but I have not yet said how it applies to Bitcoin. How is it possible that a digital currency is rare? After all, digital storage and processing power are extremely cheap and cheaper every day. What prevents someone from making a simple copy and sticking and inflating the room to nothing?