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10 Problems Elegantly Solved by Bitcoin

It’s often said that Bitcoin is just a speculative asset with no real value or use case.

However, this argument often comes from people too intellectually lazy to learn how bitcoin really works or what the value proposition is.

I could argue that quantum physics is a useless discipline but then again, what the f*ck do I know, right? Precisely.

Everybody thinks they are money experts, after all, we’ve been using cash all our lives. However, the reality is very different. One thing is earning and spending it and a very different subject is understanding the fundamentals of monetary policy.

To understand Bitcoin you have to understand money first and then you should be able to see what are the strengths and shortcomings of the current system and what could be done to improve it.

Here are some of the issues solved beautifully by Bitcoin.

1. Payment Network

Building a global payment network is an expensive business with plenty of middlemen that can only be tackled by giants like Visa or Mastercard.

Bitcoin has achieved this with a fraction of the infrastructure, cost, and people while reaching far beyond what banks did.

How is this possible?

Instead of building a network based on trust, which is costly and unreliable, Bitcoin uses a trustless protocol that is transparent and immutable. Anyone can access the blockchain from any device and see any transaction that took place and check the integrity of the operation.

Instead of having a central database with high security and maintenance costs, the Bitcoin network relies on a decentralized protocol where nodes and miners verify every transaction in a much more secure and efficient way.

Anyone anywhere can receive or send payments that are permissionless and censorship-resistant just by using a phone. This is a huge deal and a problem that no one has ever come even close to solving.

2. Store of Value

There are many ways to store value, some better than others.

Probably the worse way is fiat money.

Inflationary currencies can be printed ad infinitum, losing value fast and eventually collapsing. This is the opposite of value.

Everyone is aware of this, which is why most people invest in alternative assets. Real estate, gold, shares, and bonds are the typical options but Bitcoin offers superior qualities on many fronts.

Scarcity is important and this is one of the great qualities of gold but in the 21st century, you need more than just rareness.

Bitcoin is not only scarce but it is also predictable thanks to the halvings happening every 4 years. It’s easier to store, send, verify, and secure than the yellow rock. It can cross borders and be hidden just by remembering a few words. It has an inelastic, and predictable supply.

For all these reasons, it could be argued that there is no easier or more effective way to store value than Bitcoin. The naysayers would immediately argue that is too volatile, but since when volatility on the way up was a problem?

Amazon, gold, and even real estate have been volatile at times and yet those have been some of the best investments ever.

Adoption will continue to grow, as long as the market finds more use cases, and with such a limited supply the only way is up.

Buy Bitcoin, put it in a cold wallet, forget about it, and wait 10 years. That’s it. No need to take a mortgage, find tenants, find a secure place for your gold or become an expert in trading.

Nothing else comes even close when it comes to maintenance-free and extremely safe store of value.

3. Double spending

The same money can’t be spent twice if it’s to be used as a reliable medium of exchange.

Cash solve this problem easily. When you pay, you part with the cash and it can’t be spent again. Perhaps this is one of the things fiat does well.

Banks and electronic payment systems rely on a central database that keeps track of the money flow.

But every attempt to solve this issue in the digital world failed until Satoshi Nakamoto put the pieces together.

The solution comes from a decentralized network and a public ledger known as the blockchain. Every transaction gets recorded immutably and verified by the miners without the need for expensive centralized structures with all the security flaws.

Money in the bank can be spent twice if there is human error or flaws in the system. Bitcoin can only be spent once.

4. Digital Scarcity

It is difficult to recreate digital scarcity in a world where anything can be copied infinitely at zero cost.

However, this is exactly what a scarce digital asset solves.

How is this possible?

It is too easy to make a million copies of a song or a movie and send it everywhere for free. Hence the piracy problems.

It’s impossible to copy one Bitcoin.

The protocol dictates that there can only be 21 million and that’s set in stone. But the reason why Bitcoin is immutably scarce is the verification process done by a network of thousands of miners that trace every coin since inception ensuring the integrity of the system.

5. Corruption

Every centralized system controlled by humans has been or will be corrupted. It’s just human nature.

Bitcoin is an automatic protocol based on automatic verification by machines, not humans, and is run by consensus.

The blockchain is a public book where all transactions get stored forever for anyone to see. Nothing is more transparent than Bitcoin and transparency is the kryptonite of crooks.

Can you imagine a world without corrupt politicians and bankers? I can.

6. Inflation

Fiat money’s biggest flaw is perhaps inflation.

Money that can be printed forever out of thin air is bound to distort information and create price hikes due to the abundance of the underlying monetary instrument.

Prices should be dictated by the market and not by greedy central bankers printing in excess to give it to their friends.

A deflationary currency like Bitcoin will make prices go down and this is a good thing. Technology and productivity make prices go lower and there is nothing wrong with that.

My first computer cost $2000 in today’s money and now I can buy a Raspberry Pi a hundred times more powerful for $40.

Deflation is good and reflects the increase in productivity and efficiency. Inflation is a disease of inefficiency and waste.

A world running on Bitcoin solves this problem beautifully.

7. Bankless

It is harder to sell Bitcoin to a privileged audience living in the first world. Our fiat currencies, our banks, and our payment systems work (just about), and our mental laziness doesn’t let us explore anything else that requires effort.

But Bitcoin is easy to sell in the global south where 2 billion people don’t have access to a bank, hyperinflation is the norm and currency collapse is far too common.

You tell them that there is a form of money that is permissionless, deflationary, and secure and you got their attention.

Imagine that somebody offers to pay you in Bolivars, Sudanese pounds, Zimbabwean dollars, or Bitcoin. I think the choice is pretty easy, right?

Bitcoin solves the bankless problem where many ONGs, the IMF, the world bank, and many others have failed despite wasting billions. A simple and elegant solution, once again.

8. Remittances

One trillion dollars get sent all over the world yearly from immigrants to feed their families at home.

Western union and other intermediaries take a huge cut making these payments very expensive.

Bitcoin and the lightning network reduce these fees to almost zero as well as simplifying the process and making it more secure.

From phone to phone, no middleman, no corrupt officials, and no permission are needed. The future and present of payments is here and it’s called Bitcoin.

9. Micropayments

Paying small amounts electronically is wasteful. If you are reading this article and want to send me 50 cents it would be a hassle and you’d end up paying a lot more in fees.

The internet needs a reliable, frictionless, and secure way to send money p2p that doesn’t cost a fortune.

Traditional finance wasn’t built for this. Until recently, even paying for a coffee with a card was frowned upon.

Now with the lightning network is easy to send a few sats instantly at zero cost. Twitter and other platforms already use this system and is a great way to compensate value creators for their work.

Another problem fixed.

10. Trust

For me, the biggest problem Bitcoin solves is the need for trust between parties.

In the online world, it is hard to trust anyone. There are many scammers, thieves, and liars.

It takes time to build trust. Bitcoin does away with this system by creating trustless technology where the emphasis moves from faith to verification.

Paradoxically, a world where trust is not needed is a world more trustworthy.

Thanks, Satoshi for making the world a better place.

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