What was Bitcoin created for?
What was Bitcoin created for?
What was Bitcoin created for?
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Why was Bitcoin created?
Many people, when they hear about Bitcoin and other cryptocurrencies, ask themselves why it was created at all. Some say that it is a speculative instrument, others say that it is digital gold, and still others that it is to be a new means of payment via the Internet. The closest to the actual reasons is the latter - a means of payment, but with several characteristics that characterize it. Satoshi Nakamoto, because that is the name of the creator of Bitcoin, is anonymous himself. No one knows who they are or who they are because there is speculation that they are a group of people. For some, the fact that Satoshi Nakmoto is anonymous turns on a red flag. While its anonymity has the benefit of generating further interest, it delegitimizes the technology in the eyes of others.
Satoshi Nakamoto wanted to create a payment system excluding trust and intermediaries.
The assumptions of the creation of Bitcoin Satoshi Nakamoto described in the white paper of this project, you can download it HERE. The main reasons that guided the creators are presented below.
Anonymity - if you shop online and pay using a bank account, various financial institutions such as PayPal or a payment card, these intermediaries know what you bought, for how much, where and what it will be used for. This is pure surveillance of society. When paying with Bitcoin, no intermediary has access to this data.
International payments - to send 1 Bitcoin (BTC) to the other end of the world, you only need the recipient's public address and you can make a transfer at any time and place. It doesn't matter whether you send from Poland to Poland or from Poland to the USA - you will pay the same commission and the recipient will receive the funds at the same time.
Fees - note how many fees are involved in transferring money between bank accounts: transaction fee, bank account fee and payment card fee. In short, banks, card associations (like Visa) and other large operators with today's electronic payment systems charge a lot of fees. (The visa alone generated over $13 billion in revenue in 2014.) Avoiding these players was certainly a motivating factor in creating Bitcoin.
To understand the purpose of Bitcoin, let me quote Satoshi Nakamoto's post from early 2009 on a peer-to-peer forum;
“The main problem with conventional currency is all the trust that is required to make it work. The central bank must be trusted not to degrade the currency, but the history of fiat currencies is full of breaches of that trust. Banks must have trust to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with only a fraction of a reserve. "
Another reason is trust. Keeping our money in a bank account, we don't have it physically, we only have numbers on the web. I remember a friend of mine had a problem during the 2008 crisis with withdrawing money from the bank. He was told he could not withdraw more than 150,000. PLN because the bank does not have enough money to cover all the digits from the bank's users' accounts. When we leave our money in bank accounts (so that it can be transferred on our behalf), these deposits are not actually held for us. Instead, banks use deposits to find opportunities for additional financial return and are legally mandated to keep a certain percentage of money on hand - around 10% for larger banks. In short, we may not be able to withdraw our money at any time. It is often said that the main purpose of Bitcoin's creation was to free itself from banks as intermediaries, i.e. the so-called "third party".
Alternative cryptocurrencies
Apart from Bitcoin, there are over 2,000 other cryptocurrencies and tokens, some are copies of Bitcoin and others serve completely different purposes, such as maintaining the network, fees for hosting applications, etc. The first alternative cryptocurrencies were created by copying the Bitcoin source code with minor or major changes and they were mainly intended to solve the problems faced by Bitcoin itself. Even though there are actually much better, faster and cheaper cryptocurrencies used for payments, they still have a big problem with mass adaptation.
The Future of Bitcoin
You may hear some critics claim that it has no fundamental value, no real usefulness, and that it is just a Ponzi scheme. That's not true. Bitcoin has immense utility as a censorship-resistant store of value. No bank, government or company can control your wealth and how you transact. People don't realize how limited the conventional financial system is. If you try to make a transfer to some countries, say Madagascar, it's practically impossible. You can also suddenly see that your bank account is closed at any time for any reason. Banks have every right to close an account if they see fit. Bitcoins are not issued by governments. The amount of bitcoins in circulation is growing and will eventually reach around 21 million BTC. Changes in the amount of bitcoins in circulation can only result from the achievement of a majority consensus among users, not the decisions of individual governments. As of today, we are far from the reality where Bitcoin is widely used as a means of payment, it is not known if this will ever be the case. Due to the growing interest in cryptocurrencies and the high volatility of their prices, they serve as a carrier of value and an investment opportunity.
Why was Bitcoin created?
Many people, when they hear about Bitcoin and other cryptocurrencies, ask themselves why it was created at all. Some say that it is a speculative instrument, others say that it is digital gold, and still others that it is to be a new means of payment via the Internet. The closest to the actual reasons is the latter - a means of payment, but with several characteristics that characterize it. Satoshi Nakamoto, because that is the name of the creator of Bitcoin, is anonymous himself. No one knows who they are or who they are because there is speculation that they are a group of people. For some, the fact that Satoshi Nakmoto is anonymous turns on a red flag. While its anonymity has the benefit of generating further interest, it delegitimizes the technology in the eyes of others.
Satoshi Nakamoto wanted to create a payment system excluding trust and intermediaries.
The assumptions of the creation of Bitcoin Satoshi Nakamoto described in the white paper of this project, you can download it HERE. The main reasons that guided the creators are presented below.
Anonymity - if you shop online and pay using a bank account, various financial institutions such as PayPal or a payment card, these intermediaries know what you bought, for how much, where and what it will be used for. This is pure surveillance of society. When paying with Bitcoin, no intermediary has access to this data.
International payments - to send 1 Bitcoin (BTC) to the other end of the world, you only need the recipient's public address and you can make a transfer at any time and place. It doesn't matter whether you send from Poland to Poland or from Poland to the USA - you will pay the same commission and the recipient will receive the funds at the same time.
Fees - note how many fees are involved in transferring money between bank accounts: transaction fee, bank account fee and payment card fee. In short, banks, card associations (like Visa) and other large operators with today's electronic payment systems charge a lot of fees. (The visa alone generated over $13 billion in revenue in 2014.) Avoiding these players was certainly a motivating factor in creating Bitcoin.
To understand the purpose of Bitcoin, let me quote Satoshi Nakamoto's post from early 2009 on a peer-to-peer forum;
“The main problem with conventional currency is all the trust that is required to make it work. The central bank must be trusted not to degrade the currency, but the history of fiat currencies is full of breaches of that trust. Banks must have trust to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with only a fraction of a reserve. "
Another reason is trust. Keeping our money in a bank account, we don't have it physically, we only have numbers on the web. I remember a friend of mine had a problem during the 2008 crisis with withdrawing money from the bank. He was told he could not withdraw more than 150,000. PLN because the bank does not have enough money to cover all the digits from the bank's users' accounts. When we leave our money in bank accounts (so that it can be transferred on our behalf), these deposits are not actually held for us. Instead, banks use deposits to find opportunities for additional financial return and are legally mandated to keep a certain percentage of money on hand - around 10% for larger banks. In short, we may not be able to withdraw our money at any time. It is often said that the main purpose of Bitcoin's creation was to free itself from banks as intermediaries, i.e. the so-called "third party".
Alternative cryptocurrencies
Apart from Bitcoin, there are over 2,000 other cryptocurrencies and tokens, some are copies of Bitcoin and others serve completely different purposes, such as maintaining the network, fees for hosting applications, etc. The first alternative cryptocurrencies were created by copying the Bitcoin source code with minor or major changes and they were mainly intended to solve the problems faced by Bitcoin itself. Even though there are actually much better, faster and cheaper cryptocurrencies used for payments, they still have a big problem with mass adaptation.
The Future of Bitcoin
You may hear some critics claim that it has no fundamental value, no real usefulness, and that it is just a Ponzi scheme. That's not true. Bitcoin has immense utility as a censorship-resistant store of value. No bank, government or company can control your wealth and how you transact. People don't realize how limited the conventional financial system is. If you try to make a transfer to some countries, say Madagascar, it's practically impossible. You can also suddenly see that your bank account is closed at any time for any reason. Banks have every right to close an account if they see fit. Bitcoins are not issued by governments. The amount of bitcoins in circulation is growing and will eventually reach around 21 million BTC. Changes in the amount of bitcoins in circulation can only result from the achievement of a majority consensus among users, not the decisions of individual governments. As of today, we are far from the reality where Bitcoin is widely used as a means of payment, it is not known if this will ever be the case. Due to the growing interest in cryptocurrencies and the high volatility of their prices, they serve as a carrier of value and an investment opportunity.
Machine translated
Machine translated