Time from last block
Governments and banks are cashing in on people,
turning the economy from science to religion.
Bitcoin is a revolutionary economic invention. It combines a number of key differences that make it the most modern and honest form of money.
Through the centuries, mankind was trying to find the ideal form of money. One that could store the value over the time and be suitable for use as a medium of exchange and measurement of value.
One of the key problem that has been faced during the search of ideal money is that any commodity used for the accumulation of wealth is subject to depreciation due to a significant increase in the production of this commodity. The only commodity that turned out to be the most suitable for relatively safe storage of wealth turned out to be gold.
Gold was chosen by trial and error. It turned out to be a quite rare substance with unique physical properties that doesn’t allow it to be synthesized on an industrial scale. These properties are a physical barrier that protects gold from a significant increase in its production. The average annual increase in the volume of gold mined in the world is no more than 2.5%, despite the increase in its supply, technical progress and the development of technology. For comparison, silver has many times higher rates of annual increase in total supply, which led to a significant depreciation of it relative to gold over time. These properties are natural restrictions that protect accumulated wealth from depreciation.
Throughout history, rulers exacerbated store of value problem by trying to control money and its emission. They practiced minting coins with a lower content of precious metal, while maintaining the denomination of the coin, thereby profiting from the citizens of their state. After the onset of paper money, banknote printing is practiced, and with the development of computer technology it is sufficient to regulate the banking multiplier parameter in the banking system to increase the money supply. These processes no longer belong to the natural, but are artificially created by those who control the money. There have been periods in history when the monetary value was strictly tied to the weight of gold. During these periods of accumulation were subject to inflation only for natural reasons.Nowadays, all states have switched to totalitarian monetary policy, using paper cash and non-cash money in the form of records in banks' databases. Central banks fully control the money supply, where the cost of increasing the money supply is about zero. Inflationary monetary policy has become the backbone of the economy.
Bitcoin, in contrast to the previously existing forms of money, has completely limited emissions. The rate of emission is set by the algorithm and decreases every 4 years by 2 times. By 2020, the bitcoin emission rate will correspond to the average gold production rate and will gradually continue to decrease. The total number of bitcoins is limited to twenty one million, on which achievement bitcoin mining will stop altogether. This property protects Bitcoin from depreciation due to increased production and makes it more efficient than gold to save value. Emission stretched in time, allows to obtain a relatively even distribution of money than the concentration of large volumes of a small number of persons.
The high volatility of the price, which we are now seeing, is associated with the stage of the formation of Bitcoin as money. Over time and the growth of capitalization, these price fluctuations will become insignificant.
The emergence of a democratic form of government, the destruction of monarchies and dictatorial regimes, is associated with the economic transformations that have taken place in our history.A huge role was played by the development of international trade and the development of banking and trading houses. The ancestor of paper money, is a hierarchical system of promissory notes, invented by bankers and traders of the Middle Ages, who were persecuted by rulers, pursuing only their own interests, ambitions and desire to retain power. To solve financial problems, such as financing wars and the safe transportation of large sums of money when collecting church taxes, one had to resort to services of joint trading and bank houses. What ultimately led to the merger of states with bank houses. As an example of such a merger, the appearance of the Bank of England and the issuance of the first banknotes on behalf of the king can be cited. This event in history is revolutionary, because, contrary to the wishes of the rulers, had to share power.
Bitcoin de facto is the only decentralized system, without any leader or group of people managing this system. All actions in Bitcoin occur according to a strictly defined algorithm, which is available to everyone for study and familiarization. Any changes in the algorithm are possible only if the majority of users come to a consensus on making these changes. At the moment, the Bitcoin network consists of approximately 10,000 nodes distributed throughout the planet. The need to reach general consensus protects Bitcoin from control and the lack of a single center protects against destruction. The more bitcoin is distributed the more protected it becomes.
After the invention of Bitcoin, various other cryptocurrencies began to appear, to a greater or lesser extent, copying Bitcoin, but all of them have individuals controlling the change in the algorithm or are completely controlled by a small group of individuals.
Throughout history, the rulers somehow controlled the money. Since the introduction of government paper money, control only continued to intensify. In the history of America in 1933, a ban on possession was introduced and gold was confiscated from the population. The exchange of paper money for gold was available only to states.
With the development of technology and the Internet, this control moves to a new level. They are trying to deprive us of financial freedom completely, even in the use of government money. At the moment, there is an active campaign to eliminate cash paper money. Already, we exist in a world where a veiled cash tax is practiced. Banks offer loyalty programs for card payments, which de facto makes using cash payments more expensive than non-cash payments. As soon as this process of transition to completely non-cash payments is completed, we will find ourselves in total control of governments and banks. When making a purchase in a store using a bank card, or when making a transfer through a bank, we first ask the bank for permission to perform this operation, with the money that is stored in the bank account. The account can be blocked at any time or a direct withdrawal (confiscation) of funds in the account can be made.
Bitcoin, thanks to its decentralized architecture, asymmetric cryptography and a system of transaction fees, is protected from various types of censorship. The censorship of transactions in the Bitcoin network is possible only if all members of the Bitcoin network who verify the transactions and form the blocks of miner transactions are controlled. The more decentralized Bitcoin mining, the more difficult it becomes to gain control over all miners. Even in the case of short-term success in censoring transactions, an increase in transaction fees creates additional economic incentives for the emergence of new miners who will be interested in conducting censored transactions. Asymmetric cryptography used in Bitcoin provides protection against censoring when creating accounts, it is impossible to influence this process, just as it is impossible to confiscate or debit money from an account to anyone except the owner.
Double spend protection
Cash has one of the major drawbacks - the need to physically be present for both parties to the transaction in the same place.With the development of modern computer communication systems, non-cash payment systems were invented. Cashless payment systems up to Bitcoin, had a centralized architecture and were built with the participation of the central hub acting as an arbitrator. The arbiter is the central banks or the operator of payment systems. They in turn guarantee that the sender will not be able to send the same money several times, reducing the available balance on the sender's account. Naturally, such an architecture allows an arbitrator to abuse trust in various ways. It is important to consider that in these systems all funds are fully stored and controlled on the side of the arbitrator, and other participants can only ask the arbitrator to perform operations hoping for his loyalty.
Bitcoin represents the first digital money system similar to cash, where an arbitrator is not required for a transaction and trust between participants in the transaction is not required. This is achieved through several components:
- transaction validation and double spend prevention is done by miners
- the algorithm of the proof of work ensures the randomness of the choice of the miner, which allows for fair operation even in a deliberately aggressive environment
- chain of verified transaction blocks protect transaction history from changes due to cryptographic fingerprints
- economic incentives in the form of transaction fees and emission rewards, gives the miners the initiative to come to a consensus
Together, these components protect against double spending, without the participation of the arbitrator and without the parties' trust to each other. This innovative solution is a common case of solving the "problem of the Byzantine generals" from cryptology, which was formulated when Bitcoin was invented and is one of the most significant innovation.