One of the cornerstones of this vision is the need for a decentralized, distributed, and pseudonymous currency in order to digitally transmit value from person to person. You cannot truly transfer power into the hands of the people without giving them economic sovereignty, and they cannot have economic sovereignty so long as money and currency are tied to the real world and controlled by monopolistic central banks and governments. For various reasons, none of grondilu bitcoin calculator systems have taken off. Bitcoin is a peer-to-peer digital currency.
What are some of the properties of good money? Money should be easily divisible into arbitrary units of value in order to handle all sizes of transactions, from the small to the very large. In order to be a reliable store of value, money must stand the test of time. Anything which decays or rots would not be a good choice. One dollar is equivalent to another dollar, and one kilo of gold is identical to another kilo of gold.
Money can then act as a numeraire or measure of value, just like a meter is a measure of distance. The ideal money is one which holds its value and does not steal value through arbitrary inflation and deflation. When it comes to fiat currencies, central banks are supposed to fulfill this role, and when it comes to physical commodities such as gold, this standard is enforced by the laws of the universe. It is physically impossible for someone to conjure up a cubic meter of gold out of thin air, which is why it can preserve its value so well. For something to begin life as money, it should add value in order to seed its own growth. Gold added value through its beauty and artistic uses, and Bitcoin has the potential to add value through the properties of decentralization, openness, and pseudonymity.
I mention openness as the project itself is open source, and the code, protocol, and implementation are all open to scrutiny and analysis. I consider these to be among the most important properties that something needs in order to be accepted as money. It is ideal if the properties of money are inherent in the medium itself, such as with gold. Gold has all of these properties and more, and this is why it was not only chosen spontaneously by the people across different continents and cultures, but it is also why it has held its value for thousands of years.
So far, I’ve explained what money is but I haven’t yet said how this applies to Bitcoin. How can a digital currency possibly be scarce? After all, digital storage and processing power are extremely cheap and getting cheaper by the day. Bitcoin has employed a novel solution which uses encryption and brute-force power in order to preserve the scarcity of the currency. The graph on the left is a chart of the overall Bitcoin supply over time. Bitcoin has the potential to revolutionize the online payment industry, but furthermore, it could even place economic power back in the hands of the people. Hefty transaction fees currently discourage micropayments, but Bitcoin could completely change that, opening up a whole new micropayment industry in blogging, online gaming, and many other areas.