If you're new to cryptocurrency you have no doubt heard about Bitcoin. People will describe it in many variations to you. It's digital money. It's money over IP. It's a digital store of value. Bitcoin can be one or some or all of these things. Before we talk about the history of Bitcoin we should discuss what pain points Bitcoin is solving because it brings you to understanding why Bitcoin exists. This is the first of a three part introduction series to Bitcoin. We'll dive into the disadvantages of our current money system, the history of it, and end with an exploration of what Bitcoin is and how it works.
The last time you purchased something you used money to facilitate the transaction. Money comes in all varieties of forms. In the USA it might be in the form of a twenty dollar bill or in the form of a credit to be paid off later. No matter its form, money has three primary functions in an economy:
Sovereignty: Fiat currencies can be stored at banks and in some countries insured up to a certain amount. If a bank goes bankrupt in countries without insurance protection or legal frameworks are absent, then the risk of losing hard earned fiat currency exists.
Monetary Policy: Federal Banks have a variety of tools to stabilize modern economies. Among these tools is the ability to issue new currency. While certainly a useful tool, a tool is only good if used correctly. Failed inflation control policies can lead to hyperinflation and the loss of real purchasing power.
Government Seizure: In extreme situation, governments can seize assets from its citizens with little to no compensation. In 2016, the government of India withdrew 500 and 1,000 rupee notes from circulation. Citizens had to wait in long lines to turn in their notes in exchange for accepted denominations.
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