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Digital Gold: Bitcoin an Alternative to Central Banks?

Aktualisiert: 23. Aug. 2023


Are you ready for an exciting journey of discovery into the world of Bitcoin and Blockchain? Then buckle up, because today we're diving deep into the secrets and concepts from the book "The Bitcoin Standard" by Saifedean Ammous. In this blog article, we will explain the Bitcoin Standard in a vivid way and explore the fascinating ideas behind this revolutionary technology.


1. the history of money

Before we get into Bitcoin, let's first take a step back and look at the history of money. As Saifedean Ammous explains in his book, money is not only a medium of exchange, but also a store of value and a unit of account. Through the centuries, people have used different forms of money, such as livestock, shells, and metals. Eventually, gold crystallized as the preferred money because it is scarce, divisible, transportable, and easy to audit. But gold has its weaknesses: It is difficult to transport and store, and it can be easily stolen. Therefore, banks were introduced to store gold safely and issue banknotes that could be used as promissory bills for gold. However, this system also has weaknesses, such as the problem of trustworthiness of banks and inflation caused by printing too much banknotes.


2. the emergence of bitcoin

This is where Bitcoin comes into play. In 2008, when the global economy was in crisis, an individual or group under the pseudonym Satoshi Nakamoto published the Bitcoin whitepaper. This revolutionary document laid the foundations for a new form of money - a digital currency based on a decentralized distributed technology called blockchain. Bitcoin is not only an alternative medium of exchange, but also a solution to many problems associated with traditional money and the banking system. It is scarce because the maximum number of Bitcoins that can ever be created is limited to 21 million. It's tamper-proof because every transaction is verified and secured on the blockchain. And it's transparent because all transactions are available for anyone to see.


3 The Bitcoin Standard as the New Gold Standard

Now we come to the core of Saifedean Ammous' book: the Bitcoin standard. The author draws a parallel between Bitcoin and gold and sees Bitcoin as digital gold. But why? Here are some reasons:

  • Scarcity: Like gold, Bitcoin is scarce because the maximum amount is limited. This scarcity makes Bitcoin a solid long-term store of value.

  • Decentralization: Unlike the traditional banking system, Bitcoin has no central controlling authority. The network is decentralized, and each participant contributes to the verification of transactions. This makes the system resilient to manipulation and attacks.

  • Forgery-proof: Blockchain technology ensures that transactions are forgery-proof and that once completed, transactions cannot be reversed.

  • Transparency: All transactions are visible to everyone, and the issuance of new Bitcoins follows a predictable schedule. This creates trust and reduces the possibility of inflation and abuse by central entities.

  • Independence from political and economic influence: Because Bitcoin is not controlled by a government or central bank, it is less susceptible to political or economic influence.

4. the role of blockchain

Blockchain technology is at the heart of Bitcoin and a crucial aspect of the Bitcoin standard. A blockchain is basically a decentralized digital ledger system that stores all transactions that take place on the network. The information in the blockchain is stored in blocks that are chained together chronologically. Each block contains a list of transactions and a unique code called a "hash." The blockchain offers several advantages:

  • Security: Since the blockchain is distributed on many computers around the world, it is almost impossible to hack the system or manipulate transactions.

  • Transparency: anyone can view the transactions in the blockchain, which provides transparency and trust.

  • Immutability: Once a block has been added to the blockchain, it can no longer be changed or deleted. This ensures that transactions cannot be reversed and the system is tamper-proof.

5. mining and the creation of new bitcoins

A central aspect of Bitcoin is the process of mining, which creates new Bitcoins and verifies transactions. Miners use powerful computers to solve complex mathematical problems called cryptographic hash functions. When a miner successfully solves a problem, a new block is added to the blockchain and the miner receives a reward in the form of bitcoins. The mining process is designed to be self-regulating: As more miners participate in the network and computing power increases, it becomes harder to solve the mathematical problems, which keeps the rate of bitcoin issuance stable. This system ensures that the total amount of Bitcoins increases slowly and predictably until the maximum of 21 million is reached.


6. the future of the bitcoin standard

In his book, Saifedean Ammous sees a promising future for a Bitcoin standard. He argues that Bitcoin has the potential to fundamentally change the global financial system and can serve as a stable store of value and medium of exchange in the long term. Because of its scarcity, decentralization, anti-counterfeiting, and transparency, Bitcoin could help people around the world maintain their purchasing power and build wealth, regardless of political and economic turmoil. Some of the possible developments the author sees in the future of the Bitcoin standard are:

  • The increasing acceptance of Bitcoin as a means of payment: more and more companies and individuals could accept and use Bitcoin as a means of payment, increasing its usefulness and value.

  • Technology improvements: the further development of blockchain technology and the introduction of new solutions such as the Lightning network could lead to Bitcoin transactions becoming faster, cheaper and more efficient.

  • Regulation and integration into the existing financial system: While some countries have already started to regulate Bitcoin and integrate it into their financial system, further progress in this direction could increase Bitcoin's legitimacy and acceptance.

  • Increased use of Bitcoin in emerging and developing countries: In countries with unstable currencies and weak financial systems, Bitcoin could offer an attractive alternative and improve access to financial services for billions of people.

Conclusion

In this blog article, we have explored the fascinating ideas and concepts from Saifedean Ammous' book, The Bitcoin Standard. From the history of money to the creation of Bitcoin to the role of blockchain technology and the potential of cryptocurrency to change the future of the global financial system. The Bitcoin standard is more than just an idea - it's a vision for a more stable, equitable, and transparent global economy. And while Bitcoin is still an emerging phenomenon with many challenges and hurdles to overcome, it could still play a critical role in fundamentally changing the way we think about and use money. If you want to learn more about the exciting world of Bitcoin and cryptocurrencies, "The Bitcoin Standard" by Saifedean Ammous is an excellent place to start. It offers insights not only into the technology behind Bitcoin, but also into the economic and social implications that this revolutionary invention brings. Get ready to dive into a world that is as fascinating as it is complex, and discover how the Bitcoin standard has the potential to leave a lasting mark on the world we live in.



Click here for the Bitcoin whitepaper: Bitcoin: A Peer-to-Peer Electronic Cash System


Here is a link to a possible valuation model: Modeling Bitcoin Value with Scarcity


Are you ready to write your own success story? Get a copy of my book now:






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