Why Bitcoin

...let me count the ways

Heather Doyle
July 18, 2023

Why Bitcoin?

A Twitter post one day last year fired us up to answer “Why Bitcoin.”

One major item we don’t hear a lot of discussion about is the timing around Bitcoin’s formation. The financial environment at the time tells an amazing story around the purpose of Bitcoin, and really should be included in “Why Bitcoin.”

In September of 2008, the world stood on the brink of collapse. The financial crisis of 2008 was caused by big banks playing fast and loose with our money. As a result, governments around the world were forced to bail them out using taxpayer money. Had this bailout not occurred, millions of people would have felt the implications of banks mismanaging our money. Interestingly enough, less than four months later the genesis block of Bitcoin was signed January 3, 2009 by creator Satoshi Nakamoto. The timing of its creation is important to understanding Bitcoin’s purpose. The Bitcoin ethos can be summed up by three main factors facing the financial environment at the time:

Less government “big brother”
Decentralization away from banks/government
Immutability aka no fudging the books

In a way, the above could be all the articulation anyone would need to understand Bitcoin’s purpose and potential value. Yet, “Why Bitcoin” is deeper than those three items. From our perspective, these would be the reasons to own Bitcoin (in order of priority, again from our perspective).

Digital Store of value vs physical store of value (gold, real estate, art, etc.)
- Digital store of value is easily accessible, transferable, liquid and scarce. We always know the final supply;
- Physical stores of value are hard to move, transfer, sell and we don’t actually know the final supply;
- If Bitcoin’s market cap was the same as gold, a bitcoin would be worth ~$500,000;
Eliminates Intermediary Risk
- The purpose of an intermediary (bank, Investment bank, etc.) is to keep your money safe, easy to access and use. In order for an intermediary to do this for you, they must use your money to make money. In the business of using your money to make money, you become exposed to losing your money;
- Bitcoin doesn’t require an intermediary to transact. Owners can go direct to one another;
Blockchain
- Blockchain is a real-time open ledger with the ability to prove we own something digitally without the help of a third party. Our current financial system relies on third parties to confirm your ownership of funds;
- Who audits the federal reserve? How do we know where our money is going? We simply trust them. Should we? Blockchain allows for immediate audit by the transaction;
- Transferring funds often times can be time consuming. Bitcoin is almost instant.
- Blockchain has huge opportunities for society. Some opportunities include but aren’t limited to: NFTs, processing payment, money transfers, monitor supply chains, retail loyalty reward programs, digital IDs, data sharing, copyright and royalty protection, digital voting, real estate/land/auto title transfers, data backup, insurance claim settlement, tax regulation and compliance, medical record keeping, weapons tracking, wills/inheritances, equity trading, etc.
Digital Currency “global means of transaction”
- Ability to transact across borders quickly without an intermediary and costs to do so;
- Protection against collapse of current financial system. When intermediaries or financial systems collapse, we lose our money;
Returns Government to Natural State
- The rules are permanent, public and cannot be changed in the middle of the game or ever;
- Governments control over the financial system returns to a free market, and as a result governments can focus their efforts on their people.

There are challenges to Bitcoin. It isn’t free and clear of competition and forces trying to stall its evolution. In order for Bitcoin to become all OR part of the items above, it will have to face significant competition. Here are the challenges faced as we see them:

Can the world trust a digital currency without the middleman?

Is the world capable of understanding cold storage and trusting it as the best form of wealth control and storage?

Will another technology be created to address the same issues Bitcoin addressed, and be better suited for adoption and utilization?

Bitcoin was born shortly after the 2008 financial crisis as a way to battle the financial system. In order for Bitcoin to excel, it will have to face fierce competition from governments and intermediaries. Is it ready to do so?

In Bitcoin We Trust,

CoinQueens & CoinKings

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