What In The World Is A Bitcoin?
Earlier in the week, we wrote about an Argentine car rental agency that had started accepting Bitcoins as a means to bypass local capital controls.
We received a lot of questions about the article, the most common of which was “What in the world is a BITCOIN?”
Let’s start by looking at our current monetary system.
In most countries, a small tiny banking elite exercises total control over that nation’s money supply. And we’re just supposed to trust them to be good guys.
Yet central bankers around the world have conjured trillions of dollars out of thin air, debasing the money’s value. It’s a concept any six-year old can understand. If money grew on trees, it wouldn’t be worth very much.
This is one of the key reasons why people buy gold. You can’t just conjure gold out of thin air. It takes years of exploration and investment to pull it out of the ground.
In the information age, though, we have an alternative.
Bitcoin is digital currency. It doesn’t actually exist in our physical world… only in computers.
If this sounds esoteric and far-fetched, it’s not. The vast majority of our monetary system today is already digital.
A very small percentage of all the currency circulating in the world exists in physical notes and bills. The rest of it is merely accounting entries in bank databases. Most financial transactions are just a reshuffling of these database entries. Physical currency seldom changes hands.
Bitcoin is similar in this respect… nothing physical exists. But there are some key advantages.
For one, Bitcoin is not controlled by any government or central bank. And two, it’s private.
In the world of conventional finance, governments can see every time you use your credit card, withdraw cash at an ATM, or make a wire transfer.