BITCOIN

Is Bitcoin one big economical experiment or a revolutionary technology which will change the way we perceive money and will our grandchildren look back at our use of coins and chuckle at this cumbersome method of payment that in Britain has been used since about 80 BC, over 2000 years.

My opening gambit when raising the subject of digital money is …“have you any understanding of distributed ledger technology and Blockchain?”…The standard response is invariably …“No”.

Only when i then say …“Do you know what Bitcoin is?” The lights come on and i get a more enthusiastic and meaningful response. The point i make is we are at this early stage in the life cycle of digital currencies and most people are sceptical because of the fear of the unknown and view bitcoin as a get rich scheme and the bubble, perpetuated by the media, that will invariably go pop one day. A few in the know with investment knowledge, bought into bitcoin because they saw merit and anticipated growth, believing they may get rich and some indeed have become Billionaires such as Michael Novogratz who previously worked at Goldman Sachs and Tyler and Cameron Winklevoss, famed for their fight with Mark Zuckerberg of facebook. Earlier still were the aptly named ‘Cyber punks’ who bought into bitcoin when the price was rock bottom because they understood the code and made an assessment of its future use case.

When we boil it down, why the sudden interest in Bitcoin? What is it about Bitcoin that has gripped so many worldwide?

Well for a start bitcoin for me spells hope in the future of money, as after the abysmal period the world experienced in 2008 with the banking crisis, we needed trust to be re-established in a new banking and monetary system that affords world citizens greater control, and let’s face it when it comes to control of our finances, are we really in control? As we touched upon previously, money is government controlled, this through central banks, with a commercial banking system, as well as implementing the government’s monetary policy and issuing currency. Bitcoin has all of the qualities of money, but in a digitalised and upgraded form, and the real value of bitcoin as a future store of value is as subjective as whether or not money has intrinsic value and that bitcoin will eventually replace government fiat currency, moving essentially from a currency that can be debased and devalued and one that cannot. What i can say is this … bitcoin is scarce, easily divisible, durable and it is interchangeable and more importantly bitcoin is portable. We know the supply of bitcoin, yesterday, today and tomorrow. It does not degrade, and more importantly vast quantities can be moved from one individual to another. Let’s face it the dollar was just a more convenient way of transacting than in gold. Some advocates of bitcoin, make the case and argue that liberty allows for free markets and that individuals should be able to interact financially in whatever way they so choose. That’s as long as they are not breaking laws and defrauding one another, and that regulations only serve to suppress this philosophy. Bitcoin in fact has a strong resemblance to gold and of course then there is the mining, so Bitcoin replicates the properties of gold and it has a 21,000,000 million scarcity, that said, a single bitcoin is divisible into smaller units, all the way down to eight decimal places, or 0.00000001 BTC. What gives bitcoin value? It is essentially confidence, confidence that other people will accept it in the future. Desirability in an open marketplace. That’s the same confidence that gives the dollar value accept you have legal tender and whole banking system and society built around it and of course pay your taxes with your fiat currency.

Some argue and debate the fact that the fiat monetary policy we have is clearly not going to work long term as a debt based economic system and therefore the question is whether bitcoin or another fiat digital currency will replace money? Bitcoins price action creates some hair-raising news coverage and will this instability be self-correcting over time? Well we only have to look at the bitcoin price moves daily over the years to see that it is increasingly becoming more stable.

Something for all of us to consider is … whether or not, we are already witnessing the early signs of Worldwide adoption to a Digital or Bitcoin Standard of Currency?…

Thank you for taking the time to read this....  

Michael D Polak is the founder of Tanden Charles International and Bitcoin Advisory Group

www.bitcoinadvisorygroup.co.uk 

Risk Disclaimer: We do not provide investment advice. The information presented is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction.