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)
Bitcoin is about individuals' security and freedom. It limits the enforceability of regulation against privacy and 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 globally with no need of any middlemen.
Its invention have made financial self-sovereignty possible.
Remarkable features that make it a superior form of money:
1) Easily verifiable scarcity: NO third-party is required for the verification of bitcoins' authenticity nor to verify the amount of bitcoins that have been created. Just by running a node, counterfeiting is prevented.
Bitcoins issuance rate is constantly decreasing and the total supply of bitcoin units is mathematically limited to 21 million units, which protects assets from being diluted.
2) Non-custodial storage: NO third-party is required for its storing.
Ownership is enforced through possession of a small piece of data, so it is extremely difficult to confiscate.
3) Ability to be transferred from person to person globally without intermediaries in a pseudo-anonymous way: NO third-party is required to transact. It is censorship resistant.
4) It does not require permission to be adopted. NO third-party is required for granting approval.
Its digital nature and its decentralization provides security in performing those functions.
Are those characteristics really so disruptive? Let's compare with other monetary goods.
1) Gold is scarce due to the difficulty of extracting a small proportion of new units, but there is no way to audit its total supply. Its biggest monetary flaw is the difficulty to verify its authenticity.
2) & 3) Physical wealth is difficult to protect and to transfer over long distances.
Fiat monetary base consists both of Central Bank reserves and paper bills.
Only the Central Bank is able to authenticate reserves. Paper bill's authenticity is moderately easy to verify.
2) Central Bank reserves can not be stored individually. Paper Bills are difficult to protect.
3) Central Bank reserves can not be transferred directly by the individual, and there are restrictions to its indirect use, like anti-money laundering laws. Paper bills are difficult to transfer over long distances and there are legal restrictions for their exchange.
4) Having access to Central Bank's reserves requires a commercial bank's license, and there are restrictions to its indirect use, like KYC laws.
The fiat lack of storability and transferability makes necessary the use of banks and financial entities.
Savers are not able to control money directly, they are simply granted with online access to software that shows ledger's entries for it. Data centres are "honey pots" over which the state has gain greater control due to the emergence of the digital age.
Essentially, nobody has sovereignty nor control over their centralized digital assets.
Trusted third parties are security holes.
Bitcoin ownership is far more powerful, it is the first nonviolently securable property in history.
Fiat currencies have been transformed to a medium of positive law enforcement that regulate behaviour, which is increasingly making such money less reliable. Economic freedom is disappearing as Commercial Banks are being intervened and the use of cash is restricted.
Every time a money becomes more of a medium of censorship, it becomes less of 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
Bitcoin is sometimes compared to finance companies like Visa or Paypal, but Bitcoin is not the alternative to platforms of corporations, 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 100 countries. It is has become the most reliable and secure financial network in the world, a base that transfers value on a large scale, upon which consumer payment networks such as Visa or Paypal may operate.
Bitcoin could also be seen as an alternative to gold bullion. Both are scarce by nature, that is 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.
Bitcoin is a digital scarce good that performs monetary functions without intermediaries.
To defend its ownership, it is enough to possess a small piece of data.
Digitization of the financial system is facilitating more intervention and censorship in fiat currencies, which increases the competitive advantage of Bitcoin.
It is possible to build centralized systems on top of decentralized ones, but it is not possible to do the opposite.