In July 1999, Milton Friedman, Noble prize-winning economist said:
"The major forces reducing the role of government, the one thing missing is a reliable e cash where from the internet you can transfer funds from A to B without A knowing to B or B knowing to A."
What is Bitcoin?
You put your real money online and it turns into Bitcoin. I see you taking my real dollars and in return giving me virtual money.
My grand mother asked me What is this Bitcoin stuff?
I said do you remember when Visa cards first came out, you were used to paying with cash or cheque the Visa came out, a weird payment system which you do not understand. She said Yes. Then I said Bitcoin is the next evolution of payment system.
The wild fluctuation in its price has gained the attention of main stream financial media.
But Bitcoin is just more than your average investment. Beneath Bitcoin lies the most important technology of our life time.
What money is?
Money is a medium of exchange. 3000 years ago, Gold and Silver were chosen as primary currency. Around 600 BC they became money when Gold and Silver were melted into coins of equal weight. In modern history as world war 2 came to an end in 1945, a new financial system was drafted which would stabilize worlds new financial system. The USD was chosen to be worlds reserve currency. Under this new system the countries of the world tie their currency at a fixed rate to the USD and because most of the worlds gold was held in US vaults, the USD would be backed by gold at a fixed rate of $35 per ounce.
In August 15 1971 president of USA announced that foreign countries would no longer be able to convert there USD holdings into gold. With this one announcement out current monitory system was created, a system where no currency is backed by gold, this is what is known as Fiat Currency. Currencies round the world are now digits in a global banking database.
What is Bitcoin?
In a layman language it is a digital currency, much like the electronic currency we use today. But its also the payment network which facilitates the transfer of this new digital currency from one person to another. Its unique because it cannot be created out of snare. Mathematics and cryptography are used to regulate the creation of new Bitcoin. The Bitcoin network is decentralised.
Gold and Silver were considered money for last 3000 years, because it took work and effort to make that nice and beautiful gold coin. Dig it out of the ground the refine it then stamp into nice beautiful coin, that took work. And Bitcoin, proof of work is the same thing, you have to hash away and solve these Maths problems where chips and electricity is used to create a Bitcoin.
Bitcoin transactions are transmitted peer to peer without the need of third party which means the user is in complete control of there money. The only was to shut Bitcoin is to shut of the internet.
The past year has seen the price of Bitcoin rise and fall in dramatic fashion getting the attention of Wall Steet and investment community.
In the country like India there are 233 million individuals who are unbanked. They don’t have access to traditional infrastructure and they offer cash payment to cash payment. But Bitcoin could become a game changer. The development of lightning network will make Bitcoin fast, cheap and efficient payment system.
Asking a Bank if they like Bitcoin is like asking a king if he likes democracy. Within 5 to 10 years Banks will become less and less reliable just like landline telephones. We are going to wake up one day and going to be in charge of our own money.
Bitcoin and the blockchain behind it are incredibly powerful technology. As the future unfolds, these technologies can be used to restructure the financial system into equality for all, a system outside the control of banking elite.
Precious metals were once money. Then came the era of paper money. Could we now be entering a golden age of decentralised digital money? Only time will tell.