November 27, 2022
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Building a reputation: why is Bitcoin (still) important after 10 years

I enter that declining number of people who, despite market capitulation, still passionately believe in Bitcoin's potential as unsurpassedalternatives to both fiat money and our traditional financial system. But even if you have a different opinion and it is supported by sufficient knowledge, the emerging competition in this area will still be a pleasant development stage for almost everyone who has a bank account, and especially for those two billion people who do not have access to banking service and completely cut off from the global economy.

The good news for Bitcoin isthat the bar is not overestimated ... Everyone who remembers the economic collapse in 2008 doubts the honesty of politicians, bank employees and lawmakers who manage our financial system. Centralized control over the money supply gives rise to corruption in politics, inflation and the depreciation of the currency. It is not surprising that today people have very little trust in economic leaders. The bad news for Bitcoin is that people always resist change, so the world will have to persuade a very long time to accept Bitcoin as a lasting value. In order to gain mass distribution, taking into account the volatility of the price of Bitcoin, the world will have to truly believe that Bitcoin has three advantages:

  1. Bitcoin is a stable currency. Bitcoin as a currency should be more resistant to long-term depreciation than fiat money.
  2. Security. Bitcoin as a payment system should have a higher level of protection than banking technology.
  3. Reliability. Bitcoin as a payment system should be more reliable, cheaper and more efficient than the current financial system.

Stable currency

Unlike other currencies that were usedin the entire history of civilization, the number of bitcoins is limited - 21 million. Due to the nature of Bitcoin, there can be no more than 21 million Bitcoins in circulation. Bitcoin groups with a small fixed number are issued every ten minutes. Every four years, these groups are halved. This basic property of Bitcoin turns it into a very limited asset with an inflation chart that decreases at a predictable rate until it reaches zero after the release of the last batch of bitcoins. Due to the mechanisms of decentralized consensus of Bitcoin's monetary policy (some of which will be described in the next section), this property is extremely difficult to change.

: ihodl

Important Note. The economic principle of insufficiency implies that limited resources with high demand increase in price as output decreases. This means that over time and as demand grows, bitcoins will become much more resistant to depreciation than fiat money, which is not limited in quantity and can be freely printed by supposedly unscrupulous central banks.

Security

Bitcoin software code hasSeveral built-in functions that provide a high level of security and resistance to hacking. These are the key features of any payment system. These security features operate in a very decentralized environment thanks to advanced level encryption.

Decentralization: Bitcoin does not have a central point of failure, becausethat he is not subordinate to a centralized company or institution. The Bitcoin network consists of many independent participants around the world who are financially interested in collaborating and following a common set of strict rules.

  1. Miners These are tens of thousands of high-power computers from around the world that form the basis of the Bitcoin blockchain - a digital registry (or balance sheet) with open access, in which all transactions with bitcoins are recorded. Every ten minutes, miners compete, and one of them receives a fixed number of bitcoins as a reward each time new confirmed transactions are grouped into a data block, which is then added to the blockchain. Individuals and companies that own mining computers invest significant financial resources (computing power and electricity costs) to get the opportunity to create blocks and win bitcoins. Miners can keep the reward in the hope that the price of bitcoin will increase, or sell it on the market and earn income.
  2. Developers Miners depend on hundreds of volunteer developers who support software code for mining farms. These programmers (who may have invested part of their fortune in Bitcoin) are introducing new features and creating improvements that provide Bitcoin's ongoing value in the free market. Miners strive to regularly update software, otherwise they risk using old versions that are no longer supported or contain vulnerabilities.
  3. Nodes Miners also depend on the consensus of the majority, which is formed by thousands of nodes around the world or by computers whose sole purpose is to confirm new blocks. Individuals or companies (mining companies, cryptocurrency exchanges, wallet developers and cryptocurrency payment service providers) own nodes and maintain them. Without their confirmation, block reward is not guaranteed.
  4. Investors and traders. These are early Bitcoin supporters, influential people, speculators and institutions that pay the market price for bitcoins that enter the market after they are sold by miners. If they did not have an interest in storing bitcoins, then miners would have no sense in wasting real resources.

: Bitnodes

While among the above participants there arecentralized influence groups, the Bitcoin-based game theory of economics motivates them to collaborate and support the most transparent, apolitical and secure monetary policy.

Important Note: As Bitcoin becomes more and more popular, its decentralized power structure becomes more and more resistant to corruption and manipulation, especially in comparison with the concentration of power that is observed in the centralized banking system.

Encryption: another critical Bitcoin security feature- This is the use of encryption to detect fraudulent activity and protect against writing fake transactions in the Bitcoin public registry. Those blocks mentioned above have a unique hash or a digital fingerprint created using encryption that is generated based on all the data of the block and the hash of the previous block (the hash of each block is associated with the hash of the previous block, so a chain leading to the very first block). If an attacker tries to modify a transaction in any group of data in the chain, the nodes on the network will easily detect fraudulent activity and reject or delete the unconfirmed change.

Important Note. The Bitcoin blockchain over time is becoming less fragile and stable, so it can be called practically unchanged, resistant to censorship and much more resistant to attacks than any other network in the world.

Reliability

Since the first bitcoins in historythe network worked with virtually no interruptions 99.99% of the time. The blockchain has never been hacked (most of the attacks you may have read about were carried out on private cryptocurrency exchanges or other, less secure blockchains), and Bitcoin flourished even though countries like China and India are constantly trying to limit it using. The speed of creating blocks or the speed of adding new transactions to the public distributed Bitcoin registry is almost always associated with ten-minute intervals. Bitcoin followed this schedule with virtually no pauses, around the clock, for almost ten years. Most of this time, transaction fees for independence of the number of bitcoins transferred were less than one dollar, and the average transaction confirmation time was less than an hour. Moving bitcoins on the network does not always happen quickly. Transactions are cumbersome and expensive when the network is heavily loaded or a large number of transactions, but second-level solutions such as Lightning, which are already being implemented in Bitcoin, can significantly increase the efficiency (as well as privacy) of the network.

Important Note. As soon as the transaction is recorded in the block and confirmed, a permanent uncontested record is created that your money has successfully arrived at the desired destination.

Bitcoin supporters in ideal conditions considerits stable currency and an impeccable payment network with a minimum need for trust, which uses decentralized and encrypted encryption technology with open source code to conduct peer-to-peer transactions without the participation of intermediaries and the risk of third parties. In fact, Bitcoin's ability to meet this description is highly dependent on the integration and diffusion of new technologies that are still being created and tested. Solutions for decentralized communication protocols, scaling and privacy, as well as more advanced user interfaces are incredibly important for the enormous price volatility of Bitcoin and are gaining more and more trust. Perhaps this will happen in ten years, but given the fantastic history of the first ten years of Bitcoin's takeoff, during which he received the status of a serious competitor in the field of currencies, we can say that the battle has just begun.

Part 1: Organic Growth: Why Bitcoin (Still) is Important After 10 Years