Why Bitcoin?

When the still-unidentified Satoshi Nakamoto published his solution to peer-to-peer electronic cash which underpins the Bitcoin network, I doubt he was thinking about what the daily trading price of bitcoin will be. Instead, he built a network that allowed any two people to exchange value without a third party like a bank.

This exchange is facilitated using a digital token - digital money or bitcoin - created on the Bitcoin network in a distributed consensus system termed mining. Only 21 million bitcoins will ever be mined on the network. Every four years, the number of bitcoins that can be mined halves until all 21 million are mined by the year 2140. Well over 3/4  of this number have been mined to date.

As systems of exchange and store of value evolved over centuries from the barter system to rare physical collectibles, the need to agree on a common store of value arose. This led to the adoption of gold as a single store of value. Then governments started intervening and monopolizing the space leading to the creation of government-issued money or fiat money. This fiat money is backed by the government in power and is therefore subject to its whims.

Unlike fiat money, Bitcoin is not centrally controlled by any government or private entity. Bitcoins are created and transferred on a decentralized network of users based on mathematical protocols. The more users the better.

As a store of value, Bitcoin is arguably far better than fiat money. Given that there is a fixed number of bitcoins - 21 million - that will ever be in circulation, Bitcoin is almost immune to the problems that plague fiat money due to reckless government monetary policies. And in terms of actual storage, bitcoin can easily be stored in various portable formats - paper, software, hardware, online.

It is common for critics to focus on the medium of exchange use case of bitcoin. But it is fair to point out that bitcoin is still "beta money." The Bitcoin network and its surrounding projects like the lightning network are still in beta stage of development.

Censorship resistance and scarcity makes Bitcoin the ultimate money.

Many attributes make Bitcoin a more appealing alternative to fiat money. Here we focus on just two - scarcity and censorship resistance.

Scarcity

Through human civilizations the accumulation of that which is rare has been a theme in social and economic activities. Generally the more scarce a good is, the higher the value attached to it. And the higher the value attached to the good, the more appealing it is as a store of value. This is why gold was used as a store of value.

Bitcoin's 21 million cap makes it appealing as a store of value. Only that number of bitcoins will ever be mined and over 17 million has already been mined. Unlike gold the supply of which can be increased by new mining technologies, and fiat currency which the government can print at will, has an in-built predetermined scarcity. This makes bitcoin less susceptible to reckless government monetary policies that lead to inflation.

The scarcity attribute of bitcoin's use as a store of value is also boosted bitcoin's authenticability. Unlike gold and fiat currency which creative criminals have found ways to counterfeit, bitcoin can be mathematically authenticated with high level of certainty.

Censorship Resistance

The trending political and tech news headlines especially in the past 5 years are filled with charges of censorship and bias leveled against big tech. And almost no sector is exempt, from big social media platforms to app stores, payment processors to banks, the accusations are similar - censorship and bias against one ideological group or another. Users or content creators suddenly find they lost access to one or platforms. Two widely covered examples come to mind the deplatforming of talk show host Alex Jones and the Gab social network.

Banks, payment processors like Stripe and credit card providers like Mastercard have also engaged in censoring their customers.

This is where bitcoin comes in. At the network level, bitoin is peer-to-peer and permissionless - this means that when a transaction is transmitted over the bitcoin network, no third party makes the decision whether or not to allow it. Unlike the transmission of fiat currency which governments, banks and other authorities can intervene to block and exclude individuals and groups, bitcoin network is deliberately designed to be censorship-resistant.

Due to it's physical nature, gold cannot be transferred between domiciles without being subjected to government regulation or criminal attacks. It would be easier for example, to transfer bitcoin into or out of an oppressive regime. Many opposition protesters in Venezuela and humanitarian organizations in conflict-ridden locations worldwide already use bitcoins this way. In fact, all you have to do in some cases is to memorize a series of 12 words and you have access to your money wherever you can access the internet.

Developers at btcpayserver.org and lightning.network are already building solutions that enhances the use of bitcoin. Many online vendors like Dissenter shop are already taking advantage of these solutions with bitcoin payment options offered to customers.

With all the positive attributes of the bitcoin network, there are also risks. As mentioned earlier, there are significant problems with fiat currencies and gold. And for now with potential improvements and positive changes, bitcoin is looking good.