The Magic that is Bitcoin

In 2008 the world experienced the world's first great global financial catastrophe. People lost their homes, their jobs, their life savings, their retirements. The whole world fell like dominoes to a deflationary death spiral.

Central Banks and governments stepped in and decided who was ‘too big to fail’. Those who made the cut were given free money, fresh off the printing press of the U.S. Treasury. The same banks that, by excessive greed and corruption, got us into the mess in the first place.

They did their job, they saved the global economy from fallout. But the printing presses never stopped humming along.

Assets Held at the Federal Reserve

In 2008, the Federal Reserve held just under a trillion dollars worth in assets. As of 2021, it has added an additional ~7 trillion on it’s balance sheet. Effectively, this represents collateral for money it has injected into the financial system via its Prime Brokers. The money is then used as collateral that big Banks use to extend loans to businesses and families, which further multiplies the money in circulation by levering up the reserves.

M2 Money Supply, total Money in Circulation.

The M2 Money Supply, total money in circulation, has increased by an average rate of ~15% a year. Think of this as the denominator by which your savings is the numerator.

If you have 4 out of 8 pieces of pizza, you own half of that pie. But if you suddenly have only 4 pieces out of 64 pieces, you now only own 6% of the total pizza in circulation.

The increase in the M2 Money supply cuts like a hot knife through butter through your economic value over time. It erodes your cash savings and destroys its purchasing power.

It also drives up asset prices. Basically anything that is fundamentally rooted to and priced in said currency. This pushes up the cost of living for an individual and increases the value of portfolios of people that own assets. This creates income inequality and a wealth divide that gets exponentially larger over time.

Twelve years since the crisis the powers that be show no sign in slowing down. We are involved with constant Quantitative Easing as the Fed continuously purchases upwards of 100 Billion in assets every month, and are awash with government stimulus spending spewing an over supply of money into the system for the Fed to try to lop up with a soaked mop.

If anyone has spent just a little time learning about the inner workings of the Monetary system and what money really is, they are likely to come to a similar conclusion. Money is broken.

We have entrusted a selected few to rise to the every occasion, to protect our freedoms and our values, and they have failed.

Luckily there was someone out there, or a group of people, that were doing something about it. In 2008, an anonymous online avatar published the Bitcoin White Paper.

The Original Bitcoin White Paper

Out of the ashes, a phoenix is risen. A free and completely decentralized, open-network of Cryptographic data transfer, designed to transfer the safety and storage of value. An asset defined with a rule set and future that is methodically mapped out in mathematics and code. A software that operates in tandem with consensus among all of its constituents, so that no one person will ever be able to control or manipulate it. It’s main component, is that of scarcity. There will only ever be 21 Million Bitcoin in existence.

Here I will attempt to summarize, for anyone new, an intensely complicated series of operations that acts as the Bitcoin Network, so bare with me.

Bitcoin Miners validate transactions and create the Blockchain. They are rewarded in Bitcoin for each block they are able to verify, which incentivizes them to power the network and brings newly minted Bitcoin into circulation.

Participants that run Nodes use their hardware to acts as hosts on the peer to peer network, and carry all the data of the blockchain in memory and on their hard drive.

These actions are the lifeblood of the network and achieve Bitcoins ‘Proof of Work’ and ‘Consensus’ mechanisms.

The finite supply of Bitcoin lives here. The amount of Bitcoin that the miners get for each block adheres to a strict schedule of halving every 4 years.

https://twitter.com/100trillionUSD

In the above model, constructed by a Data Analyst by the alias Plan B, we can see the effect that the 4 year halving schedule has on the price of the underlying Bitcoin Asset.

All of these attributes are the very technical details of a very complicated and broad process that all boils down to one element, Trust.

The network achieves something that has never been done before, creates a singularity of trust among participants on an infinitely large scale, without any need of a Central Entity or Intermediary.

The same people that are using the network, are the ones that control it. This is achieved globally, and creates a level playing field for all who plug into it. Mankind has collective-consciously constructed, using the hive mind of the internet, a solution to one of humanity's oldest problems. The slavery of people through currency manipulation. The solidity and purification of a global store of value. The hardest money imaginable.

Bitcoin is..

Transferable.
Verifiable.
Exchangeable.
Secure.
Unable to be modified or tampered with.
The Protocol of Value Transfer.

There are 100 Million Bitcoin Users.
There are about 4.66 Billion Internet Users.
The wave of mass adoption has only begun to surface.

https://ourworldindata.org/internet

Investor ~ Blockchain enthusiast ~ Python Programmer ~ Web Developer