<>What’s the main difference between bitcoin and dollars? Bitcoin isn’t regulated by any government. It isn’t created “out of thin air” as fiat currency is. There will only ever be a finite amount of bitcoin, which controls its value. Once all bitcoin is mined there will be 21 million in existence, that’s it. No one can ever create more (as is done every year with fiat currency).
When fiat currency is created by central banks they reduce the value of the existing currency in the market, which results in inflation of prices. This is why the price of every day things (that haven’t changed in 50 years, like groceries or utilities) have gone up in price over time. There’s a lot of other differences, but it’s better for you to read up on them.
Bitcoin is already better than most of currently existing currencies. Let’s take a deeper look and compare it to classic (fiat) currencies.
- It may seem, that Bitcoin is too volatile and the price jumps like crazy
- Compared to USD, EUR, GBP – Yes
- Compared to the currency of Ukraine, Argentina and dozens of other currencies it’s much better
- Bitcoin is deflational
- This means, that supply is limited and noone can just print more money
- In the USSR there was a day, when the goverment decided to divide the value of it’s official currency by 10. With Bitcoin it’s not possible
- Western union or other similar services usually take 1–5% for a transfer of money
- With the Bitcoin the usual transaction fee is a couple of cents and you can even pay less if you’re not in a hurry
- As long as you are able to store 256 bits you can have bitcoins
- You can write the key at the piece of paper or even remember it
- The usual transaction time is negligible (less than 1 second)
- But if your transaction is extremely important you need to wait for 6 blocks (6 confirmations) which is usually around 1 hour
- If your bank goes down – you’re screwed
- In Bitcoin nothing can go wrong except that you can loose the key
- The bank is a single point of failure
- If your bank goes down – you’re screwed
- Bitcoin has a distributed nature, which makes it extremely resilient to different types of attacks
- You can have/buy/transfer as little as ~0.0000071411 USD (at current price) in Bitcoin.
- It’s the smalest unit and it equals to 0.00000001 BTC
10 Ways Bitcoin Trumps Fiat Currency
Traditional currency such as the US Dollar has some drawbacks, most of which seem to be overlooked or taken for granted by most people. Bitcoin can solve some of these problems as well as offer improvements. Below are some of the advantages bitcoin has over traditional currencies.
Bitcoin is a decentralized currency. No central entity regulates it or controls it. Not having a central entity means no entity can’t inflate bitcoin’s price or devalue it by manipulating its supply. With bitcoin, there is no risk of money printing by a government that could dilute your savings. Creation of bitcoin happens at a stable rate and halves every four years, creating a limited supply of 21 million units. In addition, there is no single point of failure. If the US Government were to fail, it could have harmful effects on the currency. Bitcoin was started, and is growing, without a central entity. It is a distributed network. If one part of the network were to fail or go offline, Bitcoin would keep working.
2. Free To Transfer And Hold
Remember, Bitcoin is not a company or a business. It does not charge its customer to use the service. It is an open source technology. As such, bitcoin is completely free to transfer and hold. The US Dollar is predominantly controlled by financial institutions that often charge fees to transfer it. Some services have been built for Bitcoin that charge fees but there is no obligation to use them — Bitcoin itself is free to transfer.
3. Privacy Protection
On one hand, Bitcoin is extremely transparent as the public ledger gives complete visibility into where transactions come from and where they are sent. On the other hand, no one knows who holds a particular bitcoin address. If you do not wish to be identified, you can stay anonymous while using bitcoin. Bitcoin has stronger privacy protections than something like PayPal. Bitcoin accounts are numbered, but have no personally identifiable information. Users can have multiple bitcoin addresses, and they aren’t connected to names, addresses, or other personally identifying information. If, for whatever reason, you don’t want anyone to know about a transaction that you’re making, bitcoin might be a better option than, say, a check. I suspect the privacy protection is the reason why Bitcoin has been used to buy illegal drugs online, though that certainly is not the only use case.
4. Freedom To Transact
Because Bitcoin does not have a controlling intermediary, there is more freedom to transact. With traditional currency, funds can be frozen or seized by an intermediary (such as PayPal, a bank, or a credit card company) or by the government. Intermediaries may also prohibit transactions for goods or services as they desire. If an intermediary decides they don’t want to let you make a given transaction, they can stop it. Payments companies such as PayPal have been reported to have prohibited transaction involving sexual content. If you owned a porn company or adult toy business, you may not be able to use PayPal.
5. Easy To Use
With traditional banks, it can be challenging and/or time consuming to even open a bank account. Setting up merchant accounts for payment is even more complicated. A Bitcoin address can be set up very quickly and with no fees. Bitcoin is easy to send. Instead of filling out forms with your address, credit card number, etc., you can simply send money to an electronic address.
6. Fast Transfers
While traditional wire transfers can take a long time to process (sometimes even days), bitcoin transactions can take just about 10 minutes to complete. You can send bitcoin anywhere and it will arrive minutes later. As soon as the Bitcoin network processes the payment, it is transferred. Physical banks often have business hours and close on nights and weekends. Even PayPal has restrictions on amounts that can be withdrawn in a given month, which means you might have to wait for a month to actually receive the actual funds.
7. No Chargeback Risk
Bitcoin does not subject merchants to chargeback risk the way credit cards do. Once bitcoin is sent, it can’t be retrieved (unless the recipient returns them). Bitcoins, like cash, are irrevocable. Merchants don’t have to worry providing a good or service, only to have a customer void the credit card transaction. For some businesses, chargebacks can really eat into profit margins.
Bitcoin can not be destroyed or damaged. Supply of Gold can be manipulated if more gold is found or if it is destroyed. Physical currency (cash) can be counterfeited or destroyed. Changes to supply result in changes in price.
Because Bitcoin is electronic, it is easy to store and carry. Gold is actually quite heavy and takes up a lot of physical space. Bitcoin can be stored on a portable credit card sized device or simply online. It could be hard to carry around gold and use it for regular purchases.
10. Reduced Fraud
Bitcoin eliminates the risk of credit card fraud. Criminals can steal personal customer information and credit card numbers and use it to make fraudulent purchases. Since Bitcoin is purely digital, the receiver of a payment does not see any information from the sender that could be used to steal money from the sender in the future. That information could be taken by the payment receiver (merchant) or by a criminal who steals that information from the merchant. Credit card fraud can be a major expense for merchants and credit card processors. Some online merchants are forced to reject some purchases that fear could be fraudulent. Credit card processors and banks have spent money on fraud detection systems.
Why Would I Invest In Bitcoin?
All sorts of reasons ranging from pure curiosity to love of new technology to investment diversification. Bitcoin is used as currency to buy things and as a store of value, i.e., a place to house your savings with hopes of value appreciation or hedging against the depreciation of stocks or savings held in fiat currency. One example often used is that of Cyprus.
Are you familiar with the country of Cyprus and its severe monetary crisis from a few years back? It was so bad that the Cyprus government controlled how much money their citizens could take out of their banks. Think about that. That government telling you that you can’t access your very own money! How scary is that? Bitcoin offers an alternative. No government (currently) can seize control of your bitcoin, this represents safety and security.
In the following short interview clip, Bill Gates says that “bitcoin is better than currency”, because it is cheap, instant and electronic.