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What is Bitcoin?

Simply put, it is a digital currency. To really understand why it's worth anything and why it is revolutionizing the world you need to know what currency really means.

Store of Value

One of the best ways to make something valuable is to make sure it is rare. Gold is more valuable than sand because it is much less prevalent. The incredible thing about bitcoin is that there will never be more than 21 Million Bitcoin created. Ever. The code limits that. The reason you can't copy and paste more bitcoin into existence is because anyone with a wallet, has a record of all other wallet addresses and their balance. If your balance doesn't match the network, your record is rejected.

Another component of money that makes it useful is durability - the currency can't expire. Bitcoin can't be destroyed. Even if you lose your wallet's private keys, the coins still exist. They are just no longer movable. Bitcoin's durability extends beyond traditional money since it isn't inflationary. Part of the weakness of the dollar's durability is that over time the value of the dollar decreases by 2-3 % because of inflation. Bitcoin is superior in this respect.

Finally, the most powerful part of storing value is when the currency is backed by something of worth. The higher the cost to obtain, the more valuable the currency. Bitcoin is backed by the high cost of generating a new one. To mine a new bitcoin requires expensive computer hardware, electricity, and cooling costs. With more competition to mine a bitcoin, the costs increase. A bitcoin isn't just another number in a ledger, it represents time, effort, cost, and risk - this is the definition of value.

Over time bitcoin has shown that it can store value. A single bitcoin is worth more than a single US Dollar, in fact many thousands of times more.

Medium of Exchange

In order for a currency to be useful it must be transferable. There must be an owner who has the power to transfer ownership to another person. Most currencies are transferable within a single country. Bitcoin is transferable to anyone in the world with a cell phone or computer. You can download a bitcoin wallet on a computer or smartphone for free, it is publicly accessible and easy to install. At coinbook we sell hardware wallets because they are the most secure.

The best medium of exchange is something that is universally accepted. Again most currencies are only accepted within a geographical location. This is not the case with Bitcoin, but full acceptability is something that proponents of Bitcoin are working on. Many merchants and individuals accept Bitcoin but not all. This will continue to improve as further developments and technological advancements are invented and released to the world. Over the years this is something that Coinbook believes will be solved.

Finally the most useful currencies need to be portable. Carrying briefcases full of cash or gold is difficult, inconvenient, and even dangerous. Bitcoin is the most portable currency on earth since you can hold less than a penny or even millions of dollars on a thumb drive. It can also be moved across the globe from your living room in seconds.

Unit of Account

One of the reasons money was invented was to value goods and services in a way that is measurable and divisible. In a barter system where you trade goods directly the need for divisibility becomes apparent. If you wanted to pay your neighbor in chickens, you would have to round up or down since a fraction of a chicken is likely not going to leave either party satisfied. When you use Dollars or Bitcoin, you can get very specific as to what goods or services are worth. You can go down to the penny in dollars and down to ~1/100th of a penny in Bitcoin, a bitcoin has 8 decimal places so you can spend 0.00000001 BTC at a minimum.

Lastly a currency money should be fungible, meaning that one coin should be just as good as another. No one should reject $20 because they don't like that type of $20 bill. This is nearly the same for bitcoin since one is worth the same as another. The only unique thing that Bitcoin has is that each unit can be traced back through every transaction to the block where the Bitcoin came into existence. So Bitcoin has a unique and traceable history.

Bonuses

The points above are the major definitions and aspects of currency and Bitcoin has them all. There are a few bonuses that make Bitcoin especially valuable even beyond the currencies that we use every day. The most important aspect of Bitcoin is the concept of decentralization. Most currencies are printed by a government or central issuing authority. This centralization requires the trust of its users to manage the money supply with care. The currency can suddenly be worth very little if another country invades and requires the population to use the invader's currency.

No one can take bitcoin down. There is no central governing body for Bitcoin. Anyone can mine - which ensures that transactions are validated, but not in a single location. There is no essential server that, if taken offline, would bring Bitcoin to a halt. Bitcoin functions as an internet with complete global redundancy.

No one can manipulate the Bitcoin money supply. If a government has a shortfall and doesn't want to raise taxes on it's citizens, they can suddenly print more currency to pay for bills. This is the definition of inflation, and at its worst can result in hyper inflation. As much as you trust your government to be a good steward of your money, there are many political reasons for changing the money supply. When Bitcoin began, there were 50 released to a lucky miner every 10 minutes. Roughly every 4 years that number drops in half. As of 2018, there are 12.5 BTC released every 10 minutes and this will drop to 6.25 in 2020.

If more miners come online and try to increase the odds of finding the 12.5 BTC faster, the algorithm adjusts to make it more difficult which keeps the funds released at a steady rate. This transparency doesn't exist with any other currency. You can see how many coins exist at any time in history and see generally how many there will be in the future. The money supply is completely public for bitcoin which gives all users clarity.

Why do I care

So hopefully you can see that Bitcoin is a currency by now, but why does it matter? Why are people interested in Bitcoin when we have a perfectly working Dollar with plenty of infrastructure in place? There are many reasons. The most compelling reason is that it brings money back to the people. Right now very few people control their own money. Did you realize that every time you swipe that debit card to buy groceries, you are asking your bank permission to use your own money? Have you ever had that card decline even when you know you have money? The fact is, you don't control your money. The bank does.

The US Dollar is still a necessity in the world we live in, but at Coinbook we believe that everyone should own some bitcoin. Don't get all crazy and sell your house or buy Bitcoin with a loan! But listen, if you have a rainy day fund of $1000 in cash at home, you should also have that much in Bitcoin. It is a plan B and a good alternative. Bitcoin is going to change the world and you really should be a part of it.

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