Does Bitcoin solve any problems?

published on 26 November 2022

Many conversations I have with family and friends end up in a common place: Bitcoin is worthless! I don't understand its value, and it is just internet magic money!

I've learned over the years to rebate those arguments and sometimes even convince non-believers of the incredible power of decentralized networks and blockchains.

How? By focusing on a basic fundamental for every innovation: explain the problem it solves!

So… Let's put aside all the price talks, all the speculation, and all the buzz and ask the question: What problem did Bitcoin initially solve?

Let's say I have 10 dollars and buy a product online that costs 8 dollars. Soon after, I decided to buy another product that cost 7 dollars. How do you prevent that from happening!?

It seems a straightforward problem, but digital currencies are not physical and cannot be held in your hand like cash. This means that you can't simply look at a digital coin and tell whether it has been spent before or not.

That's why, to use digital cash, many complex validation systems were developed by many centralized entities like payment providers, central banks, and other financial entities.

But here's the catch: you're not transacting peer-2-peer! Your money, and the amount of money you have, is controlled and managed by centralized entities and prone to manipulation and control by others.

And Bitcoin appeared as a well-designed solution for this exact problem: to prevent Double Spending *without* any centralized entity involved in a money transaction.

How? I'll leave the details for another day, but in short, bitcoin uses a distributed ledger of transactions as opposed to a centralized one, and most importantly, a beautifully designed incentive system for people all over the world to help secure the network (the famous miners!).

And with this design, Bitcoin started a significant peer-2-peer revolution!

So whenever someone says that Bitcoin has no value, tell them this: before Bitcoin, you never even had the option to have total sovereignty and control over your digital assets. Instead, your ability to transact online was locked by your access to banks and centralized players.

It seems simple, but before 2008 you never even had an option!
And now you can. And that's amazing!

And the reality is that financial independence and access to financial markets were gated to many people worldwide and that open access can be life-changing for many.

And it is because Bitcoin started all of this!  

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