October 31, 2008 will spook the global financial system for the rest of time.
Near the brink of collapse, Wall Street had just been propped up by the Troubled Asset Relief Program (TARP) legislation on October 3, which gave $700 billion of taxpayer money to banks. Understandably, U.S. citizens were furious. Why should the bankers who caused an economic meltdown get a bailout?
Recognizing people’s cries, an unknown figure named “Satoshi Nakamoto” emerged on Halloween night and released a seemingly unassuming whitepaper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” What emerged, as a result, has created a $3 trillion industry that self-purports economic sovereignty and promises an equal financial system for all.
Bitcoin is a decentralized digital currency meaning that it isn’t issued by a central bank or government. Instead, Bitcoins are produced through a computational process called “mining”; when someone sends Bitcoin to someone else, miners process the transaction and permanently record it into the blockchain ledger to prevent someone from “double-spending” their money.
The introduction of Bitcoin poses great implications on the use of cash to transact. From the early Lydians to modern Mesopotamians, the usage of “sound money”–money that is not liable to sudden depreciation by economic changes such as inflation–has been characterized as one of the foremost ways that a society can store value and exchange it. However, over time as we transitioned from seashells, beads, and metals to Dollars, Euros, and Pesos, we traded off the ‘store of value’ element for better unit accounting. Slowly, as inflation has ravaged, the money we have has lost its value to inflation–just over 6% this year! Bitcoin solves this crisis. Because Bitcoin has a finite supply of 21 million coins, it maintains the store of value element that previous ‘sound monies’ possessed. It supplements this with the ability to be divided into fractions of a Bitcoin to the 8th decimal place–dollars only go to the 2nd decimal place! Bitcoin gives individuals far more control over their money and its long-term value.
Through my various volunteering opportunities, I’ve interacted with many people who’ve fled their countries in seek of refuge and a better life leaving all of their assets, controlled by authoritarian governments, behind. Coming with nothing but the clothes on their back and hope in their heart, they sought to build a better life for themselves. Having immigrant and risk-averse parents that place a great deal of emphasis on financial security, I have always stressed the importance of contingency plans. I see Bitcoin as being one of the greatest factors in curtailing stories like this. Because Bitcoin is fully decentralized, individuals are able to flee with their assets, fully independent of corrupt regimes, and are able to start a new life much easier.
I see value in the Bitcoin revolution beyond price speculation and hype. Rather, I see a paradigm shift in governance, finance, and personal sovereignty–and that excites me.
