It is no secret that the massive adoption of bitcoins and cryptocurrencies in general is primarily due to their rising prices. Although it is accelerated by the fact that fees for transferring funds in cryptocurrencies are lower than those of traditional services such as Western Union or Paypal, the first hypothesis still remains true. However, apart from the speculative debate about the price of bitcoin that seems to stir up many users in the community, the cryptocurrency has a completely different purpose. As conceived by its inventor, bitcoin was created as an alternative to the traditional centralized financial system. Thus, far from the financial speculation forced upon it by the power of the market economy, bitcoin pursues above all the struggle for democracy and financial freedom. For those not in the know, here’s why.
Origin of Cryptocurrencies
Talk about the origin of cryptocurrencies and bitcoins inevitably leads to talk about the origin of money itself in all its forms. Of course, you know that in the old days, the exchange was carried out only by barter. That is, our ancestors exchanged goods for others. This posed the problem of the subjective value of the object. While a goat could be exchanged for a sack of rice in the market, that same sack of rice could be exchanged for one chicken in the same market. Thus, the cost of goods was subjective and depended only on the negotiators.
A Brief History of Money Based on the Gold Standard
As mentioned above, barter posed the real problem of the objective value of goods. To overcome this problem and facilitate trading, we switched to gold. Indeed, gold is rare, durable, interchangeable (i.e., interchangeable), and easily identifiable by its color, density, malleability, and acoustic properties. These characteristics were enough to make it the money standard.
However, gold is heavy. Therefore, it was difficult to walk with a certain amount. This is where the idea of safes came from (some consider them to be the ancestors of banks). In practice, when a person invested gold, what at the time could be called a banker would give him a sheet of paper, a “bond”, which represented the value of the deposited gold and which could be used in the market. This is a primitive representation of banknotes.
The beginning of the collapse of the financial system
We know from recent history that prior to World War II, all currencies were pegged to gold. This is the “famous gold standard”. Theoretically, you can exchange the entire money supply for gold.
However, under American dominance, without going into too much detail, the Bretton Woods Accords of 1944 established the gold exchange rate standard to ensure exchange rate stability. At the same time, it was decided that only the US dollar would be convertible into gold.
A few years later, on August 15, 1971, President Richard Nixon reversed the international monetary system by ending the convertibility of the dollar into gold. By announcing this, the American president canceled the guarantee that the central banks of other countries should have their dollars converted into gold at a fixed rate of $35 per ounce of gold, as agreed at the time. This was the beginning of the current financial curse.
Bitcoin, an alternative to centralized banking systems
It should be remembered that the traditional banking system is essentially based on debt. Currently, bank credit remains the main mechanism for creating money. Indeed, money is created when a bank grants a loan to a customer. And since the currency is no longer pegged to gold, it is only worth our trust in it and our governments.
The danger here is that central banks can afford everything. They can launch a “printing press”, which often happens when our states find themselves in a budget deficit. To ensure the functioning of institutions, central banks sometimes allow themselves to print money without restrictions. This often leads to inflation or even hyperinflation. This is why cryptocurrencies like bitcoin are forcing us to rethink the role that money should play in the global market for the benefit of all.
What is bitcoin?
In short, bitcoin is a digital currency based on a cryptographic algorithm that allows you to securely make payments from anywhere and at any time. Unlike fiat money (bank money), bitcoin is decentralized. That is, it is not controlled by any central bank that can decide everything about it.
The innovative part that Bitcoin brings to the financial system is that it is based on open source decentralized software. All participants are responsible for the security and issuance of the currency. The activity of issuing new bitcoins is called mining. Unlike currencies such as the dollar or the euro, the number of bitcoins is limited. There will only be 21 million bitcoins and no more. Real inflation protection.
It is exclusively a digital currency. Bitcoin is based on a true digital revolution that allows value to be exchanged at a lower cost while solving the problem of double spending thanks to blockchain technology.
Indeed, when user A wants to transfer 0.6 bitcoin to user B, all A has to do is sign a specific message with his private key, giving B’s public address, and send that message to the Bitcoin network. After a few clicks, both will be notified of the deal. Thus, account B will be credited with 0.6 bitcoins deducted from account A. Without a trusted intermediary and without the intervention of any third party.
Bitcoin is, above all, the conquest of personal freedom.
Many people seem to have forgotten the original purpose of bitcoin. Although it appeared in October 2008, it is the fruit of over 30 years of work. In the community, it is believed that bitcoin comes from the ideology of cypherpunks. This is a group of geeks and ardent defenders of anonymity and freedom. Celebrity anonymous Satoshi Nakamoto managed to create this ideal digital currency after numerous attempts by crypto enthusiasts like Hal Finney.
Freed from the central bank model, bitcoin relies on true democracy and transparency. It is said to be distributed and decentralized. Indeed, the rules dictating the issuance of new bitcoins are coded in software and known to all. They can only be changed with the consent of the majority of the participants. Against the rules of our central banks, which are very often misunderstood.
Bitcoin resists censorship and sanctions
Bitcoin is resistant to censorship. That is, no power can control him, let alone stop him. Even for the most authoritarian regimes, bitcoin can serve as both a means to fight economic sanctions and support for all those who fight for the values you believe in and who are excluded from the banking system. The cryptocurrency donation campaign to support whistleblower Julian Assange and the recent fundraiser to support Ukrainians suffering from the devastating effects of the Russian military operation are clear examples of the unstoppable power of bitcoin and cryptocurrencies in general.
All in all, bitcoin is an ideal digital currency designed to provide anonymity and freedom. Many people believe that central banks are infringing on individual freedoms. The fiduciary currency itself derives its value only from the legal and binding nature given to it by states, in particular for the payment of taxes and duties. Otherwise, it is based on nothing. On the other hand, since bitcoin is free, its value rises in line with our collective trust in it and the interest it generates. Away from any speculation, the price of a bitcoin fluctuates depending on its ability to serve as a means of payment, as well as its reliability as a store of value. Does the collapse of the traditional financial system contribute to hyperbitcoinization?
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Trained as an internationalist and environmental activist, I entered the crypto universe because I was drawn to its intriguing and exciting side. Since the end of 2020, I have been investing in it every day because I remain convinced that cryptocurrencies and their blockchain technology represent a monetary alternative for the future and an important technology in this world threatened by multiple crises.