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Why Some People Don’t Understand Bitcoin

Written by Veldt Gold
Apr 14, 2014
Veldt Gold
Apr 14, 2014

A lot of people don’t stop to think about what money really means. Money is not wealth. Money is a record-keeping system that makes the exchange of wealth somewhat easier.

Most people want to have a lot of money, but they’re not really interested in money per se – they’re more interested in what money can buy them. Imagine a scenario where you have a bag of cash, but you’re completely cut off from the world and unable to spend it on on your basic needs. Your money is worthless.

A lot of people are anxious about Bitcoin. They think Bitcoin is just data. But that is exactly what money is in the real world – just data! To be more precise, money is a means of relaying information, such as somebody giving away something valuable, but not receiving anything of equal value in return, or at least not receiving anything that can be used immediately. Money is symbolic. People keep it in their wallet as a symbol of value that they’ve given away.

Figuratively speaking, the money system is a huge accounting book. Its records indicate how much value each person can gain from other people. With official currencies, such as the dollar or the euro, the accounting book is always owned by the government. This gives the government power, which inevitably gets abused sooner or later. For example – they can adjust the records by printing more money therefore causing inflation; they can devalue currency, freeze your bank account, or “write off” half of your funds (Cyprus).

With Bitcoin things are different. It’s decentralized system allows every user to own a copy of the figurative accounting book. Also, the record-keeping rules are known in advance and fixed. This means that no one, be it a person or an organization can start producing new coins out of the blue, therefore creating inflation. Nobody can freeze or confiscate your Bitcoins or tell you who you can send the funds to. A similar system used to exist with gold. Nobody can start “printing” more gold. Gold has to be mined first. The main problem with gold, however, is the fact that it can’t easily be used in everyday life. You can’t just walk into a store and pay with gold.

This is where Bitcoin comes in. It’s the first currency in the world that is both decentralized and digital. Bitcoin is more deficient than gold, more effective than traditional online banking and allows better privacy protection when transactions are taking place. This is what makes Bitcoin better money in many respects, which means that it may well replace most other forms of money being used in the world today.