Why Bitcoin is the Most Revolutionary Invention Since the Internet
- ocmdragon
- Oct 29, 2024
- 6 min read
Updated: Jan 20
Bitcoin is a decentralized digital currency, sometimes called "peer-to-peer electronic cash," that allows people to transfer money directly to each other without relying on banks or payment companies. Invented by an anonymous creator known as Satoshi Nakamoto, Bitcoin solves a big issue in digital transactions: it prevents “double-spending” (spending the same digital money twice) without needing a central authority to keep track of everyone’s balance.
So why should you care? Let’s break it down:
Control and Freedom: Bitcoin gives you control over your own money. No bank can freeze your Bitcoin account or limit where or how you spend it. This is especially useful in areas with unstable banking systems.
Transparent and Secure: Bitcoin transactions are public and verified by a global network of computers through a process called proof-of-work. This makes it tough for anyone to alter transaction records, which enhances security.
Inflation Hedge: Bitcoin has a limited supply (only 21 million will ever exist), making it similar to “digital gold.” Some people see Bitcoin as a way to store value, protecting their wealth from inflation seen in traditional currencies.
Digital Ownership and Assets: Innovations like Ordinals (digital artifacts on Bitcoin) let people own and trade unique digital items on the Bitcoin network, similar to NFTs on other blockchains. This adds a layer of collectible and creative uses to Bitcoin beyond currency.
Bitcoin is like a digital version of cash but without the middleman. You control it, it’s secure, and it can serve as a digital asset with both personal and financial benefits.
Bitcoin Tokenomics
Bitcoin’s tokenomics is all about how its supply, demand, and incentives are designed to create value over time. Let’s break it down into the main components:
1. Fixed Supply:
21 Million Cap: Only 21 million Bitcoin will ever exist, creating a hard limit on its supply. This scarcity is coded into Bitcoin’s protocol and cannot be changed, making it resistant to inflation in the same way that a limited resource like gold is.
Divisible Units: Bitcoin can be divided into 100 million units called satoshis (or "sats"), allowing small transactions and making Bitcoin accessible even if one Bitcoin becomes very valuable.
2. Mining and Issuance:
Block Rewards: New Bitcoins are introduced through a process called mining, where miners validate transactions and secure the network. As a reward, miners receive newly minted Bitcoin, but this reward halves roughly every four years in an event called the “halving.”
Proof-of-Work: Miners compete by solving complex mathematical puzzles, requiring computing power and electricity. This effort is proof-of-work, and it controls the pace of Bitcoin issuance, creating a predictable and transparent supply increase.
3. Halving Cycles:
Supply Reduction Over Time: The block reward started at 50 Bitcoin in 2009, halved to 25 in 2012, 12.5 in 2016, and 6.25 in 2020. The halving in April 2024 reduced the reward to 3.125 Bitcoin per block. This decreases the rate of new Bitcoin entering circulation, making it more scarce over time.
Deflationary Effect: As halvings continue, Bitcoin’s supply growth rate approaches zero, meaning eventually only transaction fees will incentivize miners.
4. Incentives for Security:
Mining Rewards: Both block rewards and transaction fees incentivize miners to secure the network. As rewards decrease with each halving, fees will gradually play a more critical role in sustaining the network.
Honest Participation: The network is protected by the proof-of-work mechanism and consensus rules, meaning that if miners try to change or double-spend, they’d have to overpower the majority of the network, which becomes prohibitively costly.
5. Demand Drivers:
Store of Value (Digital Gold): The capped supply and decentralized, secure nature of Bitcoin appeal to those looking for an inflation-resistant asset, often calling it "digital gold."
Global Adoption: Increased adoption for transactions, remittances, and institutional investments increases demand and, therefore, its price.
Summary of Bitcoin’s Tokenomics:
Bitcoin’s limited supply, predictable issuance, decreasing rewards, and strong incentives for miner participation combine to make it a unique, deflationary asset. Its tokenomics are designed to promote scarcity, security, and long-term value, making it distinct from traditional fiat currencies and many other cryptocurrencies.
Bitcoin is a Global Movement
Bitcoin has become a powerful tool for financial inclusion, a shield against inflation, and even a digital alternative to gold. Whether it’s helping people save on fees, avoid inflation, or simply access banking-like services, Bitcoin is truly becoming a “global currency.”
Bitcoin and other cryptos are seeing the fastest adoption rates in countries with young, tech-savvy populations and higher rates of mobile usage. In fact, 42% of crypto users are aged 18-34, showing it’s particularly popular among younger generations
Surveys show that 60% of users globally hold Bitcoin as a store of value or long-term investment, while 25% use it for remittances and cross-border payments.
As of 2023, 420 million people worldwide (around 5% of the global population) have used or owned cryptocurrency. That’s like all of North America using crypto
In the U.S., about 16% of adults have used crypto. Millennials lead the way, with nearly 25% having invested or traded Bitcoin at some point. Globally, 15-25% of young adults in tech-savvy countries like South Korea and Japan also own Bitcoin or crypto assets
Why People Use Bitcoin in Different Parts of the World
High Inflation Havens - In places like Argentina and Turkey, where inflation rates can exceed 100% annually, people buy Bitcoin to keep their savings safe from the falling value of local currency. For example, in Argentina, it’s not unusual for people to convert their paycheck into Bitcoin right away!
Remittances and Cross-Border Payments - Nigeria and the Philippines are leading examples. Families use Bitcoin to send money home because it costs less than traditional transfer services, which can take a big chunk out of every $100 sent. In the Philippines, some households now receive up to 30% of their income from remittances through Bitcoin, saving families more money
Tech Lovers and Investors - In the U.S., Japan, and Switzerland, Bitcoin is popular as an investment asset. Many see it as “digital gold” and a way to diversify investments. The number of institutional investors in Bitcoin in these regions has grown, including banks, hedge funds, and even some pension funds!
Can you just explain Bitcoin to me like I'm a 5-year old?
Yeah, of course.
Imagine you and your friends love to trade shiny rocks, but there’s a problem—how can you make sure nobody pretends to have more rocks than they actually do? And what if a friend tries to give the same rock to two people? That’s where Bitcoin comes in.
The Bitcoin Whitepaper, written by a mysterious person (or group) named Satoshi Nakamoto, explains a way to solve this problem so everyone can trade their “rocks” (or Bitcoin) fairly.
No Middleman Needed: Imagine you and your friends can trade without needing a grown-up to keep track of who has which rocks. Bitcoin lets people trade directly with each other without a bank or middleman.
The Ledger (or Big List): Think of a notebook that everyone can see, where each trade is written down. Once something is in the notebook, it can’t be changed or erased. This notebook is called the “blockchain,” and it shows who owns what.
Proof-of-Work (the Race): To add a new page to the notebook, people have to solve a tricky puzzle. The first person to solve it gets to write down the latest trades and earns new “rocks” (or Bitcoin) as a prize. This keeps the notebook safe because it’s hard for anyone to cheat.
Security through Teamwork: If everyone works together and checks the notebook, it’s nearly impossible for someone to lie about their rocks. Only if more than half of the people tried to trick everyone could they make a fake page, but that would take tons of work!
Limited Supply (Special Rocks): There are only so many Bitcoin “rocks” that can ever exist—21 million to be exact. This makes them special, like rare stones or gold, and keeps people interested.
In simple terms, Bitcoin is a clever way for people to trade digital “rocks” with each other using a fair, unchangeable list, no boss, and a puzzle-solving game to keep it secure.
