Why do we need Bitcoin?

What problems does Bitcoin solve?

The current way of exchanging value between people is using money or what is know as “fiat currency”. Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

The problem with fiat money is that governments control supply. They can vastly increase the amount of money in circulation resulting in a devaluation of the existing money. Inflation over the years has significantly decreased the purchasing power of fiat currencies. Since 1933, the U.S. dollar has lost 92 percent of its domestic purchasing power. As an example, in the USA in 1944, $1 would buy you 20 bottles of Coca Cola. You can barely get anything for $1 now.

Spending fiat money also relies heavily on a third party (usually a bank or credit provider) to complete the transaction which requires a level of trust in the system. These third parties also charge a fee for their services. The only way around this is to use cash but that can be difficult if the person you want to pay is not close or the amount of money involved is large.

Why Bitcoin is better than government issued money (known as “fiat”).

Firstly, the supply of Bitcoin is fixed by the code. This means that there will never be more than 21 million Bitcoin in existence. The value of Bitcoin cannot be undermined by printing more of it, like the current money supply can.

Bitcoin is a “peer to peer” payment system which means you deal directly with the person you are paying. There is no need for a “middle man” like a bank to complete the transaction. This means you don’t need to trust anyone to ensure that the payment goes through.

The process of paying by Bitcoin is the same whether you are transferring 0.0001 BTC or 100 BTC. The time that it takes to process the transaction is also the same with blocks being processed on average every ten minutes.

Bitcoin is universal. It is the same in every country on earth. Fiat is almost always different wherever you go. If you want to pay someone in another country in Bitcoin, you do not need to convert it first. Widespread use of Bitcoin to settle international settlements would eliminate foreign exchange fees and save a significant amount of money and energy.

But the most important reason why Bitcoin is better that fiat is that no one person or entity controls it. Bitcoin removes the governments from your money. It is not subject to the whims of any politic ideaology.

Anyone can use it and you do not need to obtain permission from anyone to do so. That is true financial freedom.