The advantages of using Bitcoin over fiat money

By Zachary Gruskin Bitcoin, Fiat money, Paper wallet, Satoshi Nakamoto

Bitcoin was created in 2008 by the mysterious Satoshi Nakamoto. It is uncertain whether Satoshi was an actual person or a pseudonym for a group of people, and the true identity of Satoshi is unknown to this day. Satoshi wrote a famous paper describing the Bitcoin protocol ( https://bitcoin.org/bitcoin.pdf ) and then released Bitcoin's source in January 2009. Bitcoin began with the genesis block which Satoshi mined himself. After that point Bitcoin began to slowly spread, and by October 2009 the first Bitcoin exchange opened. A Bitcoin exchange is a place where you can buy/sell Bitcoin with fiat. Initially you could buy over 1300 Bitcoins for $1. The price of Bitcoin steadily increased as its use became more widespread, and currently each Bitcoin is worth $620. A famous story from the early days of Bitcoin is that someone bought a $25 pizza for 10,000 Bitcoins. The Bitcoins used to buy that single pizza are worth over $6 million today. Many early adopters of Bitcoin became millionaires, which undoubtedly increased Bitcoin's popularity further.

Bitcoin exists entirely within the computers of Bitcoin users. There is no single computer, person, or institution that controls Bitcoin. This makes Bitcoin completely decentralized, and it also means Bitcoin can never be destroyed, unless all the computers on Earth which use Bitcoin are wiped out. The decentralized nature of Bitcoin is a major advantage over fiat currency. Fiat currencies are completely controlled by the central banks of countries, and their value is at the whim of the central bank's decisions. Oftentimes central banks print large sums of moneys in times of crisis to buy war supplies or keep financial institutions afloat. This money printing causes all the fiat in that country to lose value. It is impossible to 'print' more Bitcoin in times of crisis, so during an economic crisis Bitcoin gains value relative to fiat. This makes Bitcoin an investor safe haven when the economy is going through rough times, much like gold. Both gold and Bitcoin can only be generated through mining. Bitcoin mining is a process where your computer solves algorithms until it finds a block, and when you find the block you get the block reward. Currently the reward is 25 Bitcoins per block, or $15,500. On average a block is found every 10 minutes, and the Bitcoin network constantly adjusts to ensure the rate of generation of new Bitcoins stays the same.

Perhaps the biggest advantage of Bitcoin is all transactions are conducted completely between users without the involvement of a third party. This is unlike every fiat payment method, where a third party is needed to transfer the money. Oftentimes problems arise due to the third party, such as money transfers being halted or accounts frozen. A particularly infamous payment service is PayPal, they are known to freeze people's money for months and put payments on hold, disrupting business. There is no third party making decisions for Bitcoin transactions, when you send money with Bitcoin it goes to the person you intended every time near-instantly. You can send money anywhere in the world with Bitcoin too, there are no limits to what countries you can send to unlike fiat payment methods. For example, it is illegal and difficult to send money from the United States to Cuba due to the embargo, but you can send Bitcoin to Cuba easily (although that would be illegal).

A major problem in the business world is chargebacks. Essentially any credit card transaction can be reversed by a scammer. This results in thousands of dollars of losses per year for small businesses, and for big businesses the losses are probably in the millions. Bitcoin cannot be chargedback. Once you send Bitcoin there is no way to reverse the transaction unless the person you sent to decides to send the Bitcoin back. This means that using Bitcoin can save businesses many thousands of dollars per year. This is great from an economic perspective, but also psychologically. Chargeback fraud can lead to business owners becoming quite anxious and stressed out since they never know when the next chargeback is coming. When using Bitcoin business owners can go to sleep at night knowing they won't wake up to a chargeback.

Another major advantage of Bitcoin is low transaction fees. It costs 0.0001 Bitcoin per transaction, which is currently about 6 cents. It doesn't matter if you send $1 or $1 million, the transaction fee is set at 0.0001 Bitcoin. This is unlike fiat payment methods which charge you a higher transaction fee for larger amounts of money. If you send $1 million with a  credit card that will cost $30,000, and $1 million sent through Western Union costs around $100,000. The low Bitcoin transaction fees help people and businesses save money, and ultimately lead to a stronger economy.

Perhaps one of the main reasons Bitcoin has become a global sensation is that it's almost completely anonymous. No personal information is required to send or receive Bitcoin, unlike every fiat payment method in existence (aside from meeting in person and paying with cash). The only identification you have on the Bitcoin network is your Bitcoin address, which gives no indication of who you are or what you're doing with the Bitcoin. This has led to Bitcoin becoming very popular on the blackmarket. Criminals buy drugs with Bitcoin on darknet sites like Silk Road, and since it's completely anonymous the only way to catch these criminals is if law enforcement intercepts the drugs in the mail. Billions of dollars of drugs have been bought with Bitcoin while arrests are few and far between. Also the anonymous nature of Bitcoin has attracted money launderers. Stolen money can easily be converted to Bitcoin, and if you send it between a few different Bitcoin addresses it becomes nearly impossible to trace where the stolen money went.

Bitcoin also has built-in security. You can 'encrypt' your Bitcoin wallet, which essentially means you can put a password on it. If you use a long and complex password it makes it nearly impossible for hackers to steal your Bitcoin. Additionally you can transfer your Bitcoins to a paper wallet. A paper wallet is simply a piece of paper with a public address and a private key printed on it. You can transfer the Bitcoins to the public address, at which point there is almost no chance a hacker can access them since the bitcoins are offline. If you want to redeem your Bitcoins you use the private key on the paper. Don't take any pictures or video of the paper wallet private key, and don't show it to anyone. Using encryption and paper wallets will keep your Bitcoins safe as long as you don't lose the paper wallet. It is recommended that you store paper wallets in a safe, although not necessarily a bank vault, since if the bank vault is robbed they won't cover your loss of Bitcoins. Some people store identical copies of paper wallets in different locations. For wallets on your computer it is important to save multiple backups of the wallet file on external hard drives, in case your computer crashes.

Thus, Bitcoin has several major advantages over fiat currency. Bitcoin is decentralized, meaning there is no third party controlling transactions and the Bitcoin supply can't be manipulated. This makes Bitcoin an investor safe haven when the economy is in crisis, since the Bitcoin supply cannot be altered by a central bank. Bitcoin can be sent near-instantly to anywhere in the world, and Bitcoin transactions are anonymous since they don't require personal information. The fee for sending Bitcoin is fixed near 6 cents, and this doesn't change even if you send millions of dollars, unlike most fiat payment methods which have costly transaction fees when sending large amounts of money. Bitcoin cannot be chargedback, which saves business owners thousands of dollars and also gives them peace of mind. Also Bitcoin has built in security which keeps your money safe. These advantages have led to Bitcoin gaining global popularity, with over $8 billion invested into Bitcoin at this time. Many argue that Bitcoin is the greatest invention of the new millennium so far, and perhaps just as important as the invention of the internet.