Value proposition of Bitcoin
I don't believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can't take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can't stop. — F.A. Hayek (1984)
There are many important functions government does but if you can substitute them for a less violent and less abusable way to perform those functions that’s a big win. — Nick Szabo
Bitcoin is about individuals' security and freedom. It limits the enforceability of regulation against the natural right of private property.
It is the first easily verifiable scarce digital good integrated in a decentralized network that secures its ability to be stored and transferred individually without any middlemen.
Its invention have made financial self-sovereignty possible. It is designed to be secure money by removing the need for trusted-third parties to perform monetary functions.
Remarkable bitcoin features:
1)Easily verifiable scarcity: counterfeiting and non-programated inflation are prevented by the simple way to verify (running a node) its authenticity and the total supply that is mathematically limited to 21 million units, so the individual can not be scammed nor his assets can be diluted. NO trust is required for its verification.
2)Non-custodial storage: ownership is enforced through possession of a small piece of data (digital keys), so it is extremely difficult to confiscate. NO trust is required for its storing.
3)Ability to be transferred directly person to person without intermediaries in a pseudo-anonymous way, so the individual does not need any permission to participate nor he can be censored. NO trust is required to transact.
*Its digital nature provides security and efficiency in performing those functions.
*Its decentralized nature provides resiliency against attacks or censorship and makes it antifragile.
Are those characteristics really so disruptive? Let's compare with other monetary goods.
Gold and fiat paper:
1) -There is no way to audit total supply of existing gold, although its scarcity is guaranteed by nature.
Gold's biggest monetary flaw is the difficulty to verify its authenticity.
-Fiat is not scarce by nature. In order to audit the total supply, it is necessary to rely on Central Banks' reports (when available).
Paper bill's authenticity is moderately possible to verify.
3) Physical wealth is difficult to transfer to long distance.
Banks and financial entities provide the ability to fulfill those functions, but they need to be trusted. They create and control data that represents the money trusted to them.
Decades ago that data was in the form of receipts, but nowadays the data is kept and digitized, and the owners are simply granted with online access to software that shows ledger entries for it.
Vaults and data centres ultimately depend on the state for its security. The digital era has made possible for authorities to gain greater control over those "honey pots" by being able to control them electronically. As a consequence, the financial system has become more localized and compartmentalized.
But...Who will watch the watchmen? These guardians also rule. The dependence on national authorities imply vulnerability to its potential harmful behavior.
Legal ownership for physical wealth and custodied assets is necessary due to economies of scale for its costly protection. Essentially, nobody has physical sovereignty nor control over their centralized digital assets.
Bitcoin ownership is far more powerful. It's the first nonviolently securable property in history.
Why is this feature such a big deal?
At the behest of political activists, digitally centralized financial services have frozen accounts and cut off access to users due to their political views.
Fiat currencies have being transformed to a medium of law enforcement and political control that regulate behavior directly or indirectly. The monetary system is used to censor what looks suspicious, but many operations arouse suspicion, so an increasing number of people are being cut off from using digital fiat.
In a deep or prolonged recession, attacks by technocraties authorities & political activists against digitally centralized assets will increase in volume and scope. Other forms of political or legal instability could also lower the safety of those assets.
This is increasingly making such money less reliable. Every time a money becomes more a medium of censorship, it becomes less a medium of exchange.
Bitcoin is the only trend away from that.
Every time somebody gets censored, Boom! they become a Bitcoin fan. It’s almost a binary thing:
if you haven’t been censored, or have never been strongly sympathetic with somebody who has been censored by the financial system, then you don’t understand the biggest early use cases of Bitcoin. If you have, nobody needs to “convert” you. — Nick Szabo.
Not informed economists compare Bitcoin to finance companies like Visa or Paypal. But Bitcoin is not the alternative to private platforms, it is to the underlying system: the monetary base of the fiat system and the Central Banks. It is a high-value settlement layer that would survive a nuclear war: the full Bitcoin transaction history, exists in over 10,000 copies located in over 90 countries. It is has become the most reliable and secure financial network in the world, so its transactions are much more important than those of Visa or Paypal.
Bitcoin could also be seen as an alternative to gold bullion. Both are scarce by nature, that's why bitcoin is called digital gold.
E-gold was a popular system that provided fungibility & divisibility to digitized gold bullion, it existed from 1996 to 2009. The business was declared illegal and it was easily shutted down due to its centralization.
-Financial Self-sovereignty: No authority is able to rule over the money of the individual.
-Ownership: rightful or legal claim to a property.
-Possession: custody or control of a property.