Welcome to Bitcoin
The World’s Financial Commodity
Better than Gold & Bigger than Banks; but why?!
At the highest level: Bitcoin is a Store-of-Value that exists in the form of a resilient, reliable, distributed ledger technology.
It is – Digital Gold
It is – Digital Financial Real Estate
It is the worlds first – Decentralized Financial Commodity
If you can fully conceptualize & understand the highest level explanation, then kudos to you, it is a pleasure to be serving alongside you in this absolute revolution. If you still do not fully grasp Bitcoin, no worries, after going through this passage, you will have a clear understanding of Bitcoin.
Since its inception, some 12 years ago, “What is Bitcoin?” has become one of, if not the, most notorious questions in the financial world. Retail investors & financiers alike have been drawn to the nascent technology, plowing enormous amounts of money & time into Bitcoin. But why?
The most popular is easily understandable layman’s explanation is the narrative of Bitcoin is Gold 2.0. Gold has historically been associated with the storing of value. Since Bitcoin’s greatest purpose is the storage of value, equating it to gold makes the most sense (especially to the older generations). Bitcoin gets the 2.0 in that narrative because it is more portable, divisible, & arguably secure than gold. This narrative may be easier to understand but it is also not exciting enough to spark the same financial interest in the younger generations.
Sure Bitcoin being Gold 2.0 does some justice, but it does not capture the entirety of it. Gold has a supply that is constantly expanding & we now know exists in abundance throughout space. Bitcoin, on the other hand, we definitively know its supply at any given moment & that there will only ever be a total maximum of 21,000,000 Bitcoin units. This limited availability is where another narrative begins to take over; Digital Financial Real Estate.
Imagine the Bitcoin network as a web that covers the earth. If we were to plot the amount of land-acre/total amount of bitcoin, then we see that for 1BTC=~6,000 acres of land. There can only be 21,000,000 people that own 6,000 acres of land. Wouldn’t it seem like a powerful position to be in? Once everybody owns the land/BTC, then the only way to get that land/BTC is by hoping somebody will sell theirs. Typically this means at a huge premium that makes the investment of the previous owner worthwhile. ***Important to note here, Bitcoin does not replace the existing real-estate industry, it just reflects similar value propositions to those in real estate.
But there is still something much larger at play.
To entirely understand Bitcoin & its impact on the world, it is important to understand what Bitcoin does.
With Bitcoin, it is possible to do the 3 quintessential functions necessary in any monetary ecosystem:
– Store value
– Send value
– Receive value
No revolution here, bank accounts have been doing this for as long as memory serves.
The revolution begins to take place when we understand that those 3 functions are now capable of being conducted without the banks, this is where the magical buzzword “decentralization” comes into play.
This is a concept that is not always intuitive and is better understood through an example:
– If Sally has $100,000 in a Wells Fargo Account, then Wells Fargo essentially owns the money. When she goes to send money, she needs Wells Fargo to give her the OK; when she goes to receive money, then Wells Fargo would take them on her behalf & updates its Balance sheet. This is so because Wells Fargo is the single entity that owns the monetary infrastructure (servers) that hosts Sally’s money.
– If Sally has $100,000 in Bitcoin, then she, in fact, owns the money. When she sends money, she does not need an OK from anyone but her own funds; when she receives Bitcoin, then her liquid hard net worth increases directly. This is so because Bitcoin’s infrastructure is not located in any single location; rather, Bitcoin’s infrastructure exists across a large number of separate servers owned by separate entities.
Bitcoin is not just a digital asset. Bitcoin is a digital asset that exists in a distributed bitcoin network. The network uses Bitcoins as the unit of account within itself & acts as a record for all the activity (ledger). The Asset & the network work in tandem; if & when you want to participate, you would, in fact, utilize both paradigms of Bitcoin.
This still does not explain all the hopium & hype that surrounds Bitcoin.
So far, we know that it is some abstract technology that works like money & The amount of that money is limited. We also know that it is decentralized & have a slight idea that decentralization means no banks/single points of failure.
Fantastic, but who cares if it does the same thing?
Decentralization is not typically how nations chose where to store money.
Now its time to unravel Bitcoin from the Top Down; the piece the resistance; on what Bitcoin means to the world.
Bitcoin’s ultimate mission purpose is to become the world’s Reserve asset.
Right now, the world generally denominates global commercial activity in terms of dollars. Dollars are classified as the reserve asset because they mu$t be used to conduct certain transactions (namely, the trade of Oil). Since oil is such an important part of human life, the reserve asset (dollars) are “secured” in that notion.
As the world stands today, different participants in the world economy (primarily China & Russia) have moved off of the dollarized standard & begun using alternative assets to conduct global commerce. Given that these are separate sovereign entities, this creates social segmentation and, in turn, immeasurable financial friction.
Bitcoin becoming a reserve asset means that all the world’s superpowers denominate their economic activity & resolve settlements between one another in Bitcoin. Since nobody owns the entirety of Bitcoin, the superpowers that utilize it do not have to worry (as much) about counterparty risk or seeming submissive to their people.
Bitcoin is a miracle in many ways, but its miracle is most powerfully expressed as that it is the world’s first decentralized financial commodity. It is owned by no-one & belongs to everyone equally.
This leads to the perfect close, to answer people about when to sell their holdings; that can be best expressed by a meme from the Matrix that so succinctly & so accurately captures it:
“One simply does not own enough Bitcoin”
If you have any comments or thoughts, all feedback would be greatly appreciated! If you think there is another good narrative to use for framing Bitcoin, then please let me know!
Welcome to Bitcoin: The World’s Financial Commodity was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.