Explained through tales of ‘Tinytopia’
The country ‘Tinytopia’ as the name suggests is tiny, it has just 40 families on a tiny island, even though Tinytopia is tiny, the residents are pretty happy.
The president of Tinytopia ‘Mr. Tiny’ decided to create money so the citizens of this country could trade more efficiently instead of inefficient barter ( this is how currency was originally formed). The president issued 400 ‘tiny tokens’ and gave them off to 40 families with each family getting 10 tokens.
Post the token issuance citizens of Tinytopia were happier as they no longer had to rely on inefficient barter, instead, items could have prices attached to them listed in ‘Tiny tokens’.
As a result of this new change, houses in Tinytopia also had prices listed on them for the first time with each house costing roughly 5 Tinies.
Since the both supply of houses ( 40 houses ) and money ( 400 Tinies) were fixed the price of houses rarely moved beyond 5 Tinies.
This frustrated Mr. Tiny as citizens were not considering real estate as an investment compared to countries like US, the UK, India, China etc where govts could collect a no of taxes based on ones value of ‘Real estate holdings’
After long and hard thinking the President Mr. Tiny realised that the easiest way to increase the price of Real Estate and get people to treat it as an investment instead of a utility is to increase the money supply. So he started issuing 10% more Tinies annually and hired a bunch of economists and asked them to promote the idea that printing new money is good for the economy as it creates more jobs.
This plan worked, with an increased money supply, prices of everyday goods started raising, and eventually even the prices of houses started raising.
As the prices of houses started going up, people started considering ‘Real estate’ as an investment and store of value this resulted in prices went even further, and banks started giving loans to people to buy houses with 40-year mortgages which increased prices even further.
Some young entrepreneurs saw this as an incredible opportunity( the huge mismatch between the costs to build houses vs actual prices they are sold) and started building houses and this made them incredibly wealthy. Of course, the President / local govt and Real estate developers were smart enough not to create more houses than the new money supply so that prices of houses don't fall with increasing supply and thus perpetuating the illusion of ‘Real estate as an investment’.
This story of Tinytopia is not just fiction, it is the story of every country in the modern world. All the world’s currencies have annual inflation ( aka money printing ) in the range of 5–500%, which means with time prices of everyday goods and services keep increasing over time like clock-work, this is the unfortunate reality of the modern world.
without new money being printed the average cost of houses over time will simply fall as more and more new houses are being built constantly.
60–80% of the world’s wealth is currently stored in Real-estate across various countries and so every time the prices of houses course correct due to constant new supply, Central bankers panic and start printing new money which perpetuates the myth of ‘Real estate as investment’.
The Post-Corona World and the Rise of Remote Work
The increase in ‘Remote working’ is a huge threat to ‘Real estate prices over as workers don't need to stay physically in the over-crowded, polluted, and costly city centers. Over the long term this has the effect of pulling down real-estate prices. As you can imagine, this is a threat to average house prices in a country and central bankers are losing sleep as a result. Central bankers are printing more and more money which has resulted in record inflation we are witnessing in the world today.
I know what you are thinking why doesn't the world use a more scarce asset as a store-of-value compared to Real-estate ( which doesn't have any limit on supply and gets outdated every 20–30 years ), there is a slightly outdated answer to this in the form of Gold.
For 1000s of years humanity used Gold as the ultimate store-of-value, Gold used and found near roman-sites still has value.
Gold has a few incredible properties that enabled it to achieve this hallowed status in the minds of people.
Gold is scarce — increasing only 2–3% annually, found only after incredible hard work by mining companies
Gold is divisible — Gold can be melted into coins that have instant recognition worldwide.
Gold is portable — Gold coins can be carried across the world, unlike Real-estate or soybeans.
Gold is non-perishable / nearly indestructible ( unlike say oil or meat ) which helps keeps its value for long.
But Gold has a few flaws before being considered perfect money and store-of-value.
It’s difficult to use gold coins for everyday transactions coz merchants cannot validate its purity easily.
Gold also cannot be transported across borders without incurring huge legal and security costs.
As a result of these short comings, paper money backed by gold helped fill that gap to large extent.
This however has one fatal flaw — Trusting a third-party like Banks or governments
Bitcoin is the first decentralized system that is able to achieve both “information scarcity” & “ledger sanctity” without a central point of control. In this sense, bitcoin actually serves the job of Both gold & modern payment networks and
That is arguably the biggest revolution in human history.
Bitcoin is an ideal tool for facilitating trade as it fixes the TRUST issue, obviating the need for a third party.
SWIFT — The first victim of Bitcoin’s growth
SWIFT is the messaging protocol that’s runs the International Trade. Trillions of dollars change hands every day with the help of SWIFT protocol.
There are few downsides to swift currently though.
Cross-border transfer through SWIFT take any where between 2 days to 7 days ( varies from countries ) and costs quite a bit of money.
Big banks can charge $50–10,000 depending on the ticket size as they are obliged by various laws and regulations
Not to mention , countries like US sanction other countries like Iran from using their currency which creates huge bottlenecks for countries on the sanction list.
The third and more long-term problem is dollar devaluation. Dollar is constantly depreciating and every business holding dollars feels this pinch yet finds no alternative currently.
Even with a small liquidity with daily volumes of $50–100 billion, Bitcoin can easily serve 80% of merchant transactions that are currently handled by swift at a fraction of the cost and in few hours instead of weeks.
Many Businesses will soon prefer the Bitcoin payment network over SWIFT for international trade !
The combined value of being a better Digital Gold and better payment network puts the value of Bitcoin in the range of mind-boggling $100–150 Trillion over next 20 years.
Bitcoin obviates the need for trusting a third-party, which changes the power dynamic of business, banking, and governments forever!
Why learn about Bitcoin ?
The short answer is “Bitcoin is a Digital Monetary asset with absolute scarcity which is perfect solution to endless inflation we suffer today” in other words “Bitcoin is the Noah’s ark that will save us from the monetary hyper-inflation flood that will be coming soon”
the long answer is below :)
Generally speaking we are all used to the fact that Digital things as usually better than physical things. Email, Blogs, Whatsapp, Video calling, Phone calls all these technologies have made our life much better than using their physical counter parts like snail mail, news paper, Cafe gossip etc
However one main issue with digital things is the lack of scarcity i.e you can create infinite copies of pics you post on Facebook, hence we believe digital things are inherently not valuable or cannot be used as assets.
Bitcoin changes this narrative, Bitcoin is the first break-though innovation of Digital Scracity (without a central party in control). Using some very clever ideas around encryption ( sha-26 ) and the concept of blockchain, Bitcoin has invented the idea of decentralised digital scarcity. By achieving this incredible feat, Bitcoin will be recognised as the one of greatest invention of human history.
The reason why Bitcoin appears so complicated/mysterious ( yet so simple in reality ) is because it is aiming to re-wire our understanding of money (which we humans have never had to do consciously in our entire human history).
For this reason, many believe Bitcoin Offers of the one of the greatest wealth generation opportunities in the human history
The great banking mystery
Before you get into Bitcoin , i want you solve this simple banking problem.
For the last 20 years , indian bank depositors roughly earned 7% interest on their deposits👍
Over last 20 years almost 99.9% depositers didn’t lose their money by depositing in a bank, so Indian banks are very safe 😄
Now the big question is this.
If every one made 7% return over last 20 years and no one lost money , where is the new money coming from ??
7% compounding growth at 20 years increases money by almost 4 times. so 20 years ago the total money in circulation was say 1 Lakh crores , now its atleast 4 lakh Crores
So the big question is, where is this new money coming from ??? 🧐🧐🧐
Now don’t break your head on this, the answer is simple ( yet shocking), its a result of govt printing new money, govt has been printing atleast 7% more money every year.
Now the next most important question is, what happens to money when govt prints more money, hint its value goes down :(
So the sad reality is when govt prints 10% new money, you some how need to earn 10% return on your assets or else you are getting poorer every year.
As you know, the constant money printing of government creates more money supply and more money supply means prices of every day goods and services keep going up , this is also know as inflation.
Now this terrible inflation forces people to earn return by putting money in either banks or real-estate or stocks as they cant simply hold fiat currency like INR , Dollar etc.
This is the terrible fate of fiat money economy.
You need to run full speed just to stand still
Is Real-estate really an Investment ?
Even though your house price keeps going up every year, the reality is you haven’t made any real return if you remove the effect of money printing.
The sad reality is on average ( if you count all the real estate in the country ) house prices don’t go up more than 10% and new houses are constantly being built and cities are expanding consntantly so real-estate is not a great inflation hedge or investment.
Now you might be wondering, why are Indian Middle class going crazy about Real-estate ?
95% of real-estate Investors feel its a great investment coz they have never lost money ( thanks to inflation which no one understands ) and have made it as a life goal to own as many properties as possible by taking on insane debt from banks ( which are super happy to lend you and earn those juicy commissions )
Not to mention, real-estate is a physical asset and hence also acts a status-symbol.
Govts take huge advantage of this by imposing huge property taxes / stamp duties ( compared to other investments like stocks) and govts treat properties as their golden-goose whenever economies turns bad.
Why Not Stocks ?
Stocks are fundametally complicated compared to simple inflation hedges like gold, Bitcoin ( and to some extent real-estate ). There are too many moving parts when you invest in a company.
with stocks, you need to pick the right stocks at right time i.e you need to be smart and lucky which is not easy obviously.
With stocks, things can go well or things can go wrong. Even the greatest stocks dont work beyond 20–30 years, companies have many many long terms risks like competition , innovation ,regulation etc. for this reason If you want to secure your money from inflation for say 20 or 30 years, stocks are not the recommended option.
How Inflation helps Governments when you pick Stocks??
As mentioned before, you cant stay married to a stock for 20 years, you need to keep flipping one stock to other, which means every time you sell , you need to pay capital gains tax on them.
You might be wondering what’s the issue, i mean you earned some decent profits here, the issue is most of the profits are simply coming from inflation driven by govt money printing. The gains are not adjusted for true inflation ( govts vastly underestimte inflation )
The same logic applies for real-estate as well, when you sell a house, most of the gains are simply the result of inflation in the economy. However you are forced to pay more tax as a side-effect of money-printing.
we need a good long-term Inflation hedge desperately !
Inflation is the biggest problem in the world today and is getting worse every year as govts keep printing record amounts of money just to pump GDP numbers up.
The world lacks a strong reliable ‘inflation hedge’ /‘store-of-value’ type investment which is immune from money printing/ economies of the world. A simple strong ‘inflation-hedge’ sounds like a pretty boring investment idea, but the world needs it desperately, lack of which is creating all types of asset bubbles in the world today.
You might be wondering, hey Gold is a strong store-of-value/ inflation hedge, its physical ,its scarce, divisible, its portable and its widely adopted. You are partially right on this one, but there are few big issues with gold that had resulted in it being out-of-fashion with Investors today.
The proof is in the pudding, in the corona crisis of 2020 when world govts printed record amounts of money, the price of Gold actually fell by 7% primarily because now there is an emerging store-of-value on the block ‘Bitcoin’ which went up by 900% in the same period, which shows the shift of investor interest from ‘Physical Gold’ to ‘Digital Gold’.
‘we need a good long-term inflation that we never have to sell, ideally’
The curse on Gold
Gold has been thoroughly corrupted by Govts of the world, gold faces all type of issues in the modern world and is currently in its death bed.
In the total investment universe of Stocks ,Bonds, realestate , currencies, bank deposits and so on of around $500 Trillion, gold currently occupies a tiny $10 Trillion value at 2% . Historically this Ratio used to much higher at say 50%.
This incredible destruction of ‘store-of-value’/inflation hedge as investment option and resulting propping up of ‘real estate’ is arguably one of the biggest scams in human history.
The Secret War on Gold
In many countries you cant hold more than few kilos of it without legal hassles, not to mention Gold is physical and is difficult to move around the world from the prying eyes and most world governemnts sieze gold at a drop-of-hat. In most countries, if govts find someone holding more than 100 Kgs of Gold they confiscate it pretty much immediately which forces most wealthy investors to shy away from gold. As a result of this, most big investors of the world have ditched gold as the store-of-value/inflation and are now forced to invest in ‘Risky’ assets like Real-estate or stocks or loss making bonds ( compared to real inflation).
Bitcoin Fixes Gold’s Flaws !
Bitcoin at its core very similar to Gold with all the good properties of gold which is scarcity, divisibility , durability, fungibility but bitcoin brings three additional features which gold lacked ( which led to its debasement , demonetization and ultimate deceased state ) which are verifiability , transportability and is confiscation-proof.
Because Bitcoin is fundamentally digital you can easily verify for yourself whether you received a real Bitcoin or piece of it ( unlike gold which requires assaying )
Bitcoin is also incredibly easy to transport unlike Gold since its digital. Gold requires trusted middle men ( like banks ) to move it around the world. As Gold requires trusted middle men like banks to store and move it around, gold inherently suffers from centralisation and banks become honey-pots for Invaders ( in the past ) and Governments ( today) alike.
Bitcoin is 100s of times difficult to confiscate compared to gold and can moved to self-custody easily incase of governmental overeach like what happened with gold ( read about history of gold confiscation). History of Gold is filled with seizures in the past and corruption in the present and for this reason gold ultimately fails when we need it the most.
Even in today’s so called ‘civilised’ world, governments across the world sieze gold at a drop of hat, don’t believe me ? try moving 10 kgs of ‘gold’ across any border today.
The Super Power of Encryption
Modern Encryption ( like sha-256 which is used in Bitcoin ) etc is nothing short of a super power in your hands.
Let’s say you wanted to secure a kilo of Gold personally, you will need to put super strong locks which cannot be broken by thieves, isin’t ?
Now imagine you want to secure 100 or even 1000 Kgs personally , no matter how strong of a lock / locker you buy, thieves will break into it eventually.
Switching to modern encryption like sha-256, creating the lock or encypting is super easy with a click on any modern PC /phone / broswer etc ,however breaking this encryption is simply impossible even if you use all the world’s computing power, infact you need millions of trillion times more computing power than all the world’s computer power.
This is precisely why modern encryption is far more secure than good-old locks.
of-course you still need to protect the keys yourself in a secure way or can trust a 3rd party like coinbase etc to custody your bitcoin ( There are various smart security strategies that make holding bitcoin incredibly secure which will discuss later ).
with its innovate design Bitcoin avoids the curse of ‘Centralization’.
By avoiding the curse of ‘centralization’ Bitcoin offers a simple yet unconfisctable and incorruptible investment. Now by holding a store-of-value asset like Bitcoin, you are making 10–20% at the minimum compared to investing in Govt bonds, for this reason The market size for a strong store-of-value type investment is predicted at mind-blowing $100–150 Trillion which represents a 100–150x upside potential for Bitcoin.
Bitcoin is the world’s first decentralised blockchain based currency / ledger that is run by millions of nodes & miners and is the most popular cryptocurrency today with a trillion dollar market-cap.
Unlike traditional banks accounts / cards which are maintained by trusted parties (like banks / payment processes) that maintain your accounts, in the world of Bitcoin your accounts are maintained by a decentralised eco-system of miners / nodes / wallets, this radically different architecture opens up a world of oppurtunties.
The beauty of bitcoin is for the first time in human history , you can transfer an asset of value without having to rely on a trusted third party for doing this transfer (technically you are relying on miners to process transactions but you don’t need to trust them as the system is fundamentally trust-less)
Now the most important word here is ‘Trust-less’, the main issue with trusting banks is that they abuse this trust over and over again in a smart but extremely smooth way.
Bitcoin obviates the need for any trusted third-party and empowers an individual with absolute freedom over their money, which is probably biggest real world super-power one could have in our life times.
Bitcoin final supply is fixed at 21 million coins , with each bitcoin divided into 100 million satoshis. The current supply is about 19 million coins with just 1% new bitcoin being minted every year which is halved every 4 years until new supply becomes zero at 2140.
Not just this, Bitcoin is the only asset that you can own for real, here’s why
Every other asset you own today, you simply have a legal right not a physical right, Because you just have a legal right, this right can be taken away / compromised in various ways.
Bitcoin on the other hand offers absolute property rights to its owner, which never happened in human history before bitcoin and this will change investment world forever.
What is the real need of Bitcoin , when we have fiat currencies like Dollar, Rupee etc ?
First things first, Bitcoin is not a currency ( not yet), its not legal tender in most countries except for the south american country el salvador. So for the rest of us , Bitcoin should be considered an Asset. Bitcoin is ‘Digital Gold / Property’.
Now, While the current fiat money system seems to be working on the top it suffers from major issues deep down.
As you know Fiat currencies like Dollar, Rupee etc are controlled by a single party a country’s central bank and retain the exclusive power to create more of the units of this currency.
Unfortunately as discussed before All fiat currencies in the world today suffer from mild ( 10% ) to extreme ( 1000–10,000 %) annual inflation which means, the money you hold in your bank literally loses value of at least 10% every year. By keeping your savings in a fiat currency instrument like bank deposit, you actually end-up losing money ie. say you are paid 5% in interest but when inflation is 10% you end up losing 5% of the value ( on top of this you are often forced to pay tax on the interest earned, on top of this you are also taking on bank failure risk)
Bitcoin on the other hand has mathematically provable low inflation ( 1% and going down) protecting your wealth from losing its value over long term
Apart from the Bitcoin the asset , Bitcoin the payment network offers permission less access unlike the traditional banking sector which suffers from serious red-tape of regulations which are ultimately passed down to customers in the form of higher fees.
Now lets address the common questions / concerns.
Bitcoin is a ponzi scheme as it doesn’t have any underlying cash flows
NewsFlash: All money/ Gold is a Ponzi scheme by this definition coz no Money by itself has underlying cash flows.
Just like traditional money, Bitcoin does has 4 most important qualities of money -scarcity, divisibility, portability ,fungibility.
Unlike gold however , bitcoin is easily transportable ( with just a click of button to your friend any where ) and verifiable ( coz its based on software unlike requring chemical assaying like gold )
Now , gold too doesn’t have any cash flows as you know , however gold is highly valuable and desirable as it is considered a store-of-value / money for last 3000 years.
The value of Bitcoin is primarily dependent on its holders and its belief on the integrity of its network and its above mentioned properties. This does sound a bit like Ponzi/hype ,however one needs to spend time with Bitcoin to really understand the idea of evolving consensus / store-of-value / global monetary network.
Bitcoin is too volatile for it to be a store-of-value
Bitcoin was invented just 11 years back in 2009 which started at price of few cents and went all the way to $65,000 in May 2021. As bitcoin is still being learned and understood by the wider public the price experiences wide swings ( pumps and dumps ) however this volatility has been coming down the market-cap of bitcoin keeps growing. As bitcoin matures into a larger asset of market-cap like say $20–50 trillion ( compared to its $1 trillion value today ) the volatility will surely come down and will match to that or more mature assets like gold.
Remember the price of any asset does not go up in a straight line, there will be pumps and dumps , however as Bitcoin hits bigger and bigger highs the long term holders have benefited massively over the last 10 year period.
Bitcoin can be hacked from my wallet and there is no recovery
This part is partially true , Bitcoin can be stolen from your wallet if you DO NOT take adequate protection i.e if you store your private keys on a online wallet or an app on phone , however if you keep in a hardware wallet like ledger / trezor, any digital theft is impossible.
Now the only way people can steal bitcoins from you is they physically need to come attack you and get the 24 word seed from you. This can be eliminated by keeping this seed in a secure location like bank locker or other safe places.
Alternatively, you can keep your bitcoin safe with a trusted third party exchange like Coinbase , Kraken , Binance or other licensed and regulated banks / exchanges ( which will be the most popular choice for most folks).
Bitcoin security space is fast evolving and options like multi-sig and shamir secret sharing scheme make securing bitcoin far simpler than say securing gold jewllery.
There are 6000 other cryptos now, why can’t Bitcoin be replaced ?
This is actually a pretty tough question, it took me almost 4–5 years and lot of losing money in alt-coins to realise why only Bitcoin is the Bitcoin’s killer.
You see Bitcoin started in 2009, so far there are over 9000 Coins/ clones have been created, of these 3000 have already died ( as a result of no buyers ), in the next 4 years 4000–5000 of the current coins will die too as most are created by scammers.
in this incredible 11 year journey of Bitcoin, Bitcoin has always retained its top position proving its market dominance.
So smart investors know only Bitcoin offers a much higher guarantee of lasting longer than any other crypto.
The biggest asset of a Monetary network is Security, Trust, Liquidity and a network effect created as a result of these. Bitcoin’s Security, Trust and liquidity are unmatched in the crypto world and with every passing day its value and network effect grows stronger and stronger.
In 20 years from now, it will become super clear to the world’s population that only Bitcoin is the monetary asset and others are probably stocks or utility tokens etc.
Only Bitcoin will prove to be the the true long term ‘store-of-value’, every thing else will die catching up to Bitcoin.
Bitcoin network can be attacked and destroyed
Since bitcoin is a decentralized and no one party is really in control a lot of people find it very difficult believe and trust the robustness of the network. Many people wonder how ‘a decentralised network can protect itself from all type of possible of attacks both from hackers and nation states’ ( countries like north Korea or even USA in future :P )
Now , this is where it gets really really interesting, Bitcoin is built on Game theory based incentives which enable non-trusted parties like miners & Nodes to act for the greater good of the network. Miners have to spend lot of money buying mining equipment and spend more money in buying electricity which is used for bitcoin mining. Since the rewards happens over long-term,miners have a huge interest in seeing Bitcoin remain successful. Bitcoin mining is highly competitive and quickly reaches profitability equilibrium and runs on razor thing margins ( as many miners don’t sell Bitcoin in hopes of price appreciation ), for this reason attacking bitcoin network technically is simply economic suicide.
Bitcoin is running in world for more than 11 years now, if this attack was indeed possible, this would have happened way back.
The other attack vectors are state level-attacks like USA army which can run without a profit motive, however this level of attack will take few years of preparation( Owing to the perptual short supply of bitcoin mining equipment ) and will quickly run into massive legal / political pushback from investors in Bitcoin. This will be political suicide for any politiican or a leader ( given that elsalvador has official accepted Bitcoin as legal tender attacking Bitcoin is equivalent to attacking their country )
Again, Bitcoin is already 11 years old, if this attack was possible for nation states, this would have happened long back. Govts wouldn’t wait for a network to become trillion dollar strong with 100 million+ people investing in it.
Bitcoin will be banned by governments sooner or later
Bitcoin is a highly decentralised network with no single point of failure or a company behind it, so there is no single party which govts can arrest and bring it down.
Bitcoin in its simplest form is text and banning bitcoin legally amounts to banning free speech.
The beauty of bitcoin is its digital , your bitcoin account is secured / accessed simply by sha-256 private key ( really long password which is impossible to guess ) , as long you secure this randomly generated password securly ( we discussed this before ), there is just no way anyway can get access to your bitcoin funds.
A Bitcoin ban not only doesn’t yield any real benefit for govt agencies ( like say drug busts where in govts make a ton of money through asset siezures etc ) but also has massive after effect i.e before ban say 2–3% of people would know about bitcoin but after the ban majority of the country would learn about bitcoin for the fear of breaking the law and start questioning the very ban itself ( its called steinsad effect)
This is exactly why No government ( including the chinese ) has arrested anyone for holding bitcoin/ cryptocurrency or will do in future.
Every one needs to adapt bitcoin for its to be valuable
Bitcoin is currently valued at about $30,000 ( with a market-cap of about $600 billion ) , so its already very valuable for those who invested in the last 10 years. Bitcoin’s value is not dependent on the majority of population accepting it. Bitcoin is valuable even if few million people buy it and hold it ( currently about 120 million people worldwide hold bitcoin ) , however the value of bitcoin goes higher as more and more people adopt.
Top 10% of the world’s population control 90% of world’s assets, so we don’t need all 100% of the world to believe or invest in bitcoin for it to be highly valuable ( 50x from here ), we just need the 5% of the top 10% to buy into the bitcoin story to reach 50x from here.
Bitcoin will be replaced by another cryptocurrency as its not scalable on main layer
Bitcoin network ( devs / nodes / miners ) has chosen to focus on security and decentralisation instead of top layer scalability. Blockchains which focus on scalability on layer one have to necessarily compromise on decentralisation, Bitcoin is the only network whose nodes can be hosted on a simple laptop which ensures decentralisation.
The most important point to note here is that ‘A top layer scaling solution no matter how big ( 10x -20x -50x -100x ) can never scale to billions of users anyway’ but even a simple 5x scaling will make it unfeasible for commerical laptops to run full nodes.
Bitcoin network has focused on layer two scaling using lighting network instead which offers scalability to billions of transactions per sec which ensures the layer one doesnt bulge and become big and centralized.
In terms of security, Bitcoin has an incredible amount of hash rate at 102.06M TH/s which is 1000 times more than the next largest computing network. This ensures that no hacker or attacker can attack the Bitcoin network.
Since Bitcoin is so incredibly secure compared to any other blockchain network and is also been running realiably for last 10 years, Bitcoin network has earned far more trust compared to any other network. As you know trust is the cornerstone for money ( which is highly abused by central bankers in the current state-of-affairs ).
This is exactly the reason why billionaires like Tim Draper, Michael saylor, Elon Musk and many other millionaires only invest in Bitcoin which pushes price further and encourages more mining and further improvement in its security model.
More security improves trust , more trust attracts more investors, higher price attracts more mining which improves security further, This forms an incredible network effect which is impossible to overcome.
Ethereum is better than bitcoin as it supports smart contracts
First thing first bitcoin does offer smart contracts however they are pretty hard to code as the coding style has been kept simple so its designed to eliminate any attack vectors, Ethereum has compromised on decentralisation and security to offer Turing complete smart contracts which cannot be relied for super strong sound money.
A money network doesnt need a lot of bells and whistles on top, all that it needs is super secure network that can work reliably day in day out.
To top this, Bitcoin network security (hash rate ) is at least 100000x higher than that of ethereum network which means its so much more easy to attack ethereum network compared to Bitcoin and doesn’t instil enough confidence in the eyes of investors.
The market size for global decentralised store-of-value blockchain is the order of $50–100 Trillion , the market size for all the smart contract dapps at the best is about $100–250 billion , not to mention there can never be a clear winner in smart contract blockchain world thanks to ‘Moving chain curse’ ( learn Why Even Ethereum is a shit coin ) .
Bitcoin model can be changed at will by developers destroying the stability it provides
Bitcoin is probably the only network in the blockchain world which is totally resistant to fundamental architecture level changes.
Bitcoin network is highly decentralised and any change more or less needs absolute majority ( 95% +). This means any contentious changes to the code / network are simply impossible to implement.
‘Any significant change in Bitcoin’s core security model is simply not possible anymore’.
This gives a peace of mind for long term investors which is what Bitcoin network is mainly focused on.
Over time, Bitcoin resisted a huge number of code change attack vectors successfully , Bitcoin resisted the 2017 hard fork to allow large blocks.
Bitcoin consumes a lot of energy compared to other coins
Bitcoin aims to provide a financial life line to billions of world’s who live in regimes with inflation eroding their lifes’ wealth.
Bitcoin is designed to protect 8 billion of world’s population from losing their wealth to never ending inflation.
The energy consumed by massive mining network acts like a shield to protect the network from any attack vectors including state-level / US govt level attack vectors ( on the other hand Proof-of-stake network can be brought down by state-level actors in couple of hours ).
No serious person/investor will trust a less secure network to store their money on for long term. For this reason, we can safely assume that bitcoin creates the greatest utility for the energy consumed.
To top this, Bitcoin network is getting exponentially more efficient with passage of time as less and less coins are minted through mining over time. Not to mention over 71% of mining already run on renewable energy sources.
Bottom Line is “The hash power” is the shield that protects the money from attacks.
Bitcoin can be hacked by quantum computers
Bitcoin is currently secured by sha-256 encryption algorithm the same encryption that is used by governments, military and banks, breaking Bitcoin blockchain and stealing bitcoin from its wallets is practically impossible( it would take all the world’s computers together few million years of work to guess a private key)
So rest assured bitcoin blockchain is really robust and secure, however the wallet / private keys can be stolen / compromised if these keys are not secured properly.
Quantum computers in theory can break sha-256 encryption, however the current level of quantum computers is really basic and the most advanced computers take hours to even do basic calculations like adding two numbers, it is predicted that it would take atleast 20 more years for quantum computers to break sha-256 encryption, Remember breaking sha-256 encryption wreaks havoc on global economy coz every major institution of trust like banks, military etc currently use this, Having said that Bitcoin will simply upgrade to quantum-proof encryption in next few years which eliminates this risk completely.
Bitcoin sounds like a wonderful oppurtunity, why are the rich not jumping to Bitcoin en-masse
The weird irony is the people at the very top benefit massively from the currency fiat system as they can borrow cheaply (at the cost of long-term pension holders ), however thats not the full story. Facebook CEO doesn’t want any lime-light on Bitcoin, he wants the full lime-light only on Facebook coz if investors realise Bitcoin investment is far less risky than investing in FAANG stocks, huge corrections will happen. however, The rich ( not super rich) will eventually discover the power of Bitcoin when they see Bitcoin going up and becoming the best investment of next decade as well.
Bitcoin is undoubtedly the biggest revolution of 21st century as it attempts to rewire the global financial system.
The bitcoin system relies on total transparency which is simply impossible in today’s financial system.
If you have read this far , we thank you for your patience and request you to share this article with all your friends and family so we can kick-start this amazing once-in a life time wealth generation & technological shift.
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