To simply put it, Bitcoin is a new form of money invented in January, 2009.
Who created it?
That we don’t know, but the creator operates under a pseudonymous identity of Satoshi Nakamoto. We don’t know if Satoshi is him/her or a team of individuals.
What purpose does Bitcoin solve?
It was created in January 2009, just after the United States housing bubble (and the Great Recession of 2008).
To understand its purpose, let's first go through the series of events that led to the Great Recession.
- The housing industry in the United States was booming in the period of early to mid 2000s.
- To make the most of this opportunity, banks and other financial institutions started giving loans to all sorts of borrowers, even to those who have low credit scores.
- Some of those loans were not recovered and the banks had to file for bankruptcy.
Now, the US government had to step in to revive the economy. They did 2 things:
- Lowered the interest rates
- Printed more money
As more money got pumped into the economy, the actual value of the existing money reduced.
To understand this better, let’s use an example.
Imagine the country’s economy has $100 in total, and out of that you own $10. This way you own 10% of the total money in the economy.
Now, what will your ownership percentage be if another $100 get pumped into the economy? It’ll be reduced to half, right? You'll now own 5% of the total.
What happened exactly? All of your lifetime savings got reduced even though you spent nothing. It resulted purely out of government’s decision to pump more money.
No one would want that. Right?
But that continues to happen.
Estimates say that in 2020 alone, the U.S. has created 22% of all the USD issued since the birth of the nation.
As a matter of fact, there is no limit to how much a government can print money.
In order to address this issue, Bitcoin was created.
You may ask, how do I know this?
Well, Satoshi Nakamoto left a message in the genesis block (the very first block in the bitcoin’s blockchain).
The message reads:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
Here is a link to the article.
Just right now, I came across this website that can make you rich if you have a copy of this newspaper, lol.
So how does Bitcoin solve this problem?
- Bitcoin is limited in supply. The total number of bitcoins can never exceed 21 million.
- Bitcoin has removed the need of banks, financial institutions or any other centralized agency to facilitate transactions. No middleman is needed in case of Bitcoin.
This sounds like magic, I know. I had this same feeling when I got introduced to Bitcoin for the very first time.
This technology is filled with such eye-opening moments and with this platform I want to make it more accessible.
Hope you learned something new today. Thanks for reading :)