Bitcoin is gaining ground around the world. There are many beneficial properties to Bitcoin, some of the important being:
- Bitcoin is unconfiscatable
- Bitcoin is uncensorable
- Bitcoin is immutable
- Bitcoin is scarce
In this post, I’m going to explain what Bitcoin is and why it has these incredible properties.
What Is Bitcoin?
Bitcoin was released to the world on January 3, 2009 by someone or some organization under the pseudonym of Satoshi Nakamoto. After helping Bitcoin through it’s initial years of adoption, Satoshi disappeared – never to be seen again.
Bitcoin is a digital form of money. It’s intangible. You can think of Bitcoin as the successor to gold. It improves on many of gold’s properties.
A common misconception is that because Bitcoin is not tangible, it has no value. This is not the case. The value in Bitcoin lies in the rules of the protocol (which provides the special properties I outlined) and the network effect.
How Does Bitcoin Work?
Bitcoin is operated by a decentralized network of nodes and miners.
What Is a Node?
Nodes help validate transactions against the rules of the Bitcoin protocol. There are two types of nodes: full and lightweight. Full nodes download the entire blockchain, whereas lightweight nodes only download key data.
What Is a Miner?
The only way new bitcoins enter the system is through what’s known as mining. And no – you don’t physically go digging, after all Bitcoin is digital. Bitcoin miners can earn bitcoin from verifying transactions and adding them to a block.
How Does One Buy Bitcoin?
The most popular way to buy Bitcoin is through an exchange. An exchange is a place to trade cryptocurrencies (Bitcoin is one of over 6,000 in the wild).
How Does One Store Their Bitcoin?
People store Bitcoin in what’s known as a wallet. You can think of a wallet as the “key” to access your bitcoin. There are a few different types of wallets.
Bitcoin Is Unconfiscatable
Bitcoin is unconfiscatable. On a practical level, the protocol cannot be hacked. The only way someone could take your Bitcoin is if you fail to secure your private keys (usually in the form of a seed phrase).
Bitcoin Is Uncensorable
People cannot be debanked through Bitcoin as Bitcoin doesn’t require banks. Bitcoin requires no middleman.
Bitcoin Is Immutable
It is incredibly difficult to change Bitcoin. Changing the Bitcoin protocol requires a supermajority consensus. It’s optimized for security, not fancy bells and whistles. It is optimized to be a hard money. The decentralized nature of Bitcoin is what helps from being manipulated by a bad actor.
Bitcoin Is Scarce
One of the best properties of Bitcoin is that it’s scarce. There are only 21 million coins possible to be in existence.
Bitcoin is opening up so many possibilities. From individuals and businesses able to save money in a currency that isn’t debaced, to providing freedom to persecuted people in repressive regimes — Bitcoin provides many to many. In this series, I will be covering the more technical, but practical possibilites one can explore with Bitcoin.