What is Bitcoin and why you should learn about it!
What are the Functions of Money?
Store of Value: It can be saved, retrieved, and exchanged in the future without deteriorating in value. In other words, the item acquired should, over time, either be worth the same or more.
Gold and other metals are stores of value, as their shelf lives are essentially perpetual. Milk, on the other hand, is a poor store of value because it will decay and become worthless.
Unit of Account: Something that can be used to value goods and services, record debts, and make calculations. In other words, it's a measurement of value. A unit of account has three important characteristics relevant to money, which we will cover in the next section. Money should be: Divisible, Fungible, and Countable
Medium of Exchange: It enables anyone who possesses it to participate as an equal market player. Consumers who use the money to purchase an item or service, are effectively setting a price for that item. This interaction creates order and predictability in the marketplace. Producers know what to produce and how much to charge, while consumers can reliably plan their budgets around predictable and stable pricing models. If a currency is no longer viable as a medium of exchange, or if its monetary units can no longer be accurately valued, consumers lose their ability to plan budgets.
What are the Characteristics of Money?
Durability: A cow is fairly durable, but a long trip to the market runs the risk of sickness or death for the cow and can severely reduce its value. Twenty-dollar bills are fairly durable and can be easily replaced if they become worn. Even better, a long trip to the market does not threaten the health or value of the bill.
Portability: The cow is difficult to transport to the store. The currency can be easily transported.
Divisibility: A 20-dollar bill can be exchanged for other denominations, say a $10, a $5, or four $1s. A cow, on the other hand, is not very divisible.
Uniformity (Fungibility): Cows come in many sizes and shapes and each has a different value; cows are not a very uniform form of money. Twenty-dollar bills are all the same size and shape and value; they are very uniform.
Limited Supply: In order to maintain its value, money must have a limited supply. While the supply of cows is fairly limited, if they were used as money, you can bet ranchers would do their best to increase the supply of cows, which would decrease their value. The supply, and therefore the value, of 20-dollar bills—and money in general—are regulated by the Federal Reserve so that the money retains its value over time (In reality, we all know that isn’t the case with our current USD or CAD)
Acceptability: Even though cows have intrinsic value, some people may not accept cattle as money. In contrast, people are more than willing to accept 20-dollar bills. In fact, the U.S. government protects your right to use U.S. currency to pay your bills.
What is Bitcoin?
Bitcoin is a digital currency, also known as cryptocurrency, that operates on a decentralized network called the blockchain. It was created in 2009 by an unknown person or group using the pseudonym Satoshi Nakamoto. Unlike traditional currencies, Bitcoin is not controlled by a central authority such as a government or financial institution. Transactions are recorded on the blockchain, which is a decentralized ledger that keeps track of all Bitcoin transactions. The blockchain is maintained by a network of nodes, which are computers around the world that validate and process Bitcoin transactions. Because the blockchain is decentralized, there is no single point of failure and no one entity can control the network.
Bitcoin is created through a process called mining, where computers compete to solve complex mathematical problems and verify transactions on the blockchain. Miners are rewarded with newly-created Bitcoins for their work. There is a finite supply of Bitcoin, with a maximum limit of 21 million Bitcoins that can ever be created.
Bitcoin can be used to purchase goods and services, or traded for other currencies or assets on online exchanges (like BitBuy). Transactions are processed quickly and anonymously, and fees for transactions are typically lower than those charged by traditional financial institutions.
However, Bitcoin's decentralized nature also means that it is not backed by a government or central authority, and its value can be highly volatile. The value of Bitcoin can fluctuate rapidly based on market demand and other factors, which can make it a risky investment for some people.
Overall, Bitcoin is a new and innovative technology that has the potential to change the way we think about money and financial transactions. However, it is important for people to do their own research and fully understand the risks and benefits before investing in Bitcoin or any other cryptocurrency.
Why I Consider Bitcoin a Superior Form of Money:
It has very unique features and characteristics. Here are a few reasons why I believe Bitcoin is a superior form of money/savings:
It’s decentralized: Bitcoin operates on a decentralized network, meaning it is not controlled by a single entity or institution, orthogonal to our current monetary system. This decentralization allows for greater transparency, security, and resistance to censorship or manipulation. I have learned not to rely solely on large regulatory bodies to govern a currency and put the best interests of the people first. History has many tales where there has been gross negligence in monetary policy.
Limited supply: Unlike traditional fiat currencies, which can be printed endlessly by governments, there is a limited supply of Bitcoin. The maximum number of Bitcoins that can ever be created is 21 million, which gives it a scarcity value similar to gold. Some would say more scarce than gold, as each year, more gold is discovered. Humans value scarcity and discount things that are in abundance. There will never be any more than 21 million Bitcoin, the same cannot be said for fiat currency.
Secure: Bitcoin transactions are secured by advanced cryptography and are virtually impossible to hack or counterfeit. This makes Bitcoin a highly secure form of money.
Fast and cheap transactions: Bitcoin transactions can be processed quickly and at low fees, regardless of the amount being sent or the location of the sender and recipient. This makes it a more efficient and cost-effective form of money compared to traditional banking methods. Don’t forget about the 3-5 day hold period when you transfer funds, deposit cheques, or complete international wire transfers. Bitcoin is not subject to those delays.
Privacy: While Bitcoin transactions are publicly visible on the blockchain, they are also pseudonymous, meaning that users can maintain a level of privacy and anonymity if they choose to.
Global acceptance: Bitcoin is a borderless currency, which means it can be used for transactions around the world without the need for currency conversion or exchange rates. In Western society, it is less readily accepted than in emerging markets, which often have a destabilized government and runaway inflation.
What are some pitfalls of Bitcoin?
It is important to note that not everyone agrees that Bitcoin is a superior form of money. Critics point out that Bitcoin's decentralized nature can make it difficult to regulate or control, which can lead to illegal activities such as money laundering or drug trafficking. Additionally, the volatility of Bitcoin's value can make it a risky investment, and its global acceptance as a form of payment is still limited. Let’s explore some of these pitfalls:
Volatility: Bitcoin's value can be highly volatile, which means its price can fluctuate rapidly and unpredictably. This makes Bitcoin a risky investment, as its value can rise or fall rapidly in a short period of time.
Security risks: While Bitcoin transactions are secured by advanced cryptography, there have been instances of Bitcoin exchanges and wallets being hacked or compromised, resulting in the loss of Bitcoin holdings.
Regulatory uncertainty: The legal status of Bitcoin is still uncertain in many countries, which can make it difficult for businesses and individuals to use and transact in Bitcoin without fear of legal repercussions.
Limited acceptance: While Bitcoin is accepted as a form of payment by some merchants and businesses, its acceptance is still limited compared to traditional forms of payment such as credit cards and cash.
Transaction fees: While Bitcoin transaction fees are typically lower than those charged by traditional financial institutions, they can still be relatively high during times of high network congestion.
Overall, while Bitcoin has several unique advantages as a decentralized digital currency, it is important for individuals to carefully consider the risks and pitfalls before investing in or using Bitcoin as a form of payment.
Looking to Learn More about Bitcoin? Read The BITCOIN STANDARD
The Bitcoin Standard analyzes the historical context of the rise of Bitcoin, the economic properties that have allowed it to grow quickly, and its likely economic, political, and social implications.
The book explores some of the most common questions surrounding Bitcoin: Is Bitcoin mining a waste of energy? Is Bitcoin for criminals? Who controls Bitcoin, and can they change it if they please? How can BitcoinT be killed? And what to make of all the thousands of Bitcoin knockoffs, and the many supposed applications of Bitcoin's 'blockchain technology'? The Bitcoin Standard is the essential resource for a clear understanding of the rise of the Internet’s decentralized, apolitical, free-market alternative to national central banks.
Looking to Learn More about Technology and Deflation: Read The PRICE OF TOMORROW
We live in an extraordinary time. Technological advances are happening at a rate faster than our ability to understand them, and in a world that moves faster than we can imagine, we cannot afford to stand still. These
advances bring efficiency and abundance—and they are profoundly deflationary. Our economic systems were built for a pre-technology era when labour and capital were inextricably linked, an era that counted on growth and inflation, an era where we made money from inefficiency.
That era is over, but we keep on pretending that those economic systems still work. The only thing driving growth in the world today is easy credit, which is being created at a pace that is hard to comprehend—and with it, debt that we will never be able to pay back. As we try to artificially drive an economic system built for the past, we are creating more than just economic trouble.
On our current path, our world will become profoundly more polarized and unsafe. We need to build a new framework for our local and global economies, and soon; we need to accept deflation and embrace the abundance it can bring. Otherwise, the same technology that has the power to bring abundance to us and our world will instead destroy it. In this extraordinary contrarian book, Jeff Booth, a leading mind and CEO in e-commerce and technology for 20 years, details the technological and economic realities shaping our present and our future, and the choices we face as we go.
Considering GETTING OFF ZERO and purchasing some Bitcoin?
I should mention that you are not required to purchase a whole bitcoin, you can purchase a fraction of one. Each bitcoin is made up of 1 million satoshis (sats). So in theory you can purchase 5 sats. I equate the sats to cents to the dollar. That’s how I first got started, I just purchased increments of sats and slowly grew my stack over the last few years.
I use two platforms (here in Canada) to accumulate my Bitcoin. Wealthsimple and BitBuy, you can find out more about them and use the associated referral link here.
If you are interested to find out about other alternative assets you can invest in, like fine art, wine, and whiskey, sign up for my intermediate course
Both the Bitcoin Standard and The Price of Tomorrow, have made it on my ‘16 Most Influential Reads’ list. You can grab your free copy of the list, here
For those looking to take the next step and learn about Bitcoin, you can purchase the guide below!
Embark on your journey into the fascinating world of Bitcoin with our course, Bitcoin 101 – Tailored for Beginners. In this course, we demystify the complexities surrounding Bitcoin, breaking down the fundamentals in a beginner-friendly manner.
Whether you're a curious individual exploring digital currencies or a novice investor looking to understand the ins and outs of Bitcoin, our course provides a comprehensive and accessible guide.
From understanding blockchain technology to navigating the nuances of wallet security, we cover it all. With a focus on practical knowledge, you'll gain the confidence to navigate the Bitcoin landscape, make informed decisions, and embrace the financial possibilities that this revolutionary technology offers.
Cost: $30 (INCLUDES PDF COPY OF OVER 160 SLIDES)
After this course, you should:
Know the fundamentals of Bitcoin
Know how money works and why there is a need for Bitcoin
Know how to secure your Bitcoin safely
Know the practical applications of Bitcoin
Know the financial implications of Bitcoin
Topics will include:
Course Intro/History of Modern Money
Module 1: Understanding Bitcoin
Module 2 :The Bitcoin Ecosystem
Module 3: Aquiring Bitcoin
Module 4: Using Bitcoin
Module 5: Investing In Bitcoin
Module 6: Beyond Bitcoin
Module 7: Practical Exercises and Resources
Bonus: Why We NEED Bitcoin
Struggling with unpredictable income in private practice? Discover actionable budgeting tips, strategies for building financial stability, and the importance of Return on Time (ROT). Learn how to handle income fluctuations, create a safety net, and make informed financial decisions.