Crypto Veteran and Blockchain Engineer Helps You Understand Bitcoin Once and For All

From running his own crypto mining operation to building a Top 700 website in the US, Sam Kazemian knows a thing or two about what is at the cutting edge in tech. His current project, Everipedia, plans to decentralize knowledge by utilizing blockchain technology. After a lot of careful thinking, Sam was able to answer the important questions ranging from Bitcoin philosophy to his favorite alt coins in a manner that even the newest people in crypto could understand.

 

How did you get into Bitcoin? How has the field evolved since you joined?

I got into bitcoin in 2013 when I first started researching it in depth. I heard about it before in passing but it wasn’t until late 2013 I took a deep, technical look. I was a double major at UCLA and didn’t really have the time to go all in, but soon I started to get so interested in Bitcoin, mining, and altcoins that I started prioritizing it above studying. At the time it seemed irresponsible, but my parents can’t stop asking me about bitcoin now so they’re glad I was being delinquent back then.

 

Sam’s homemade mining rig

What was your mining operation like? What attention did it require and what did you learn from it?

In 2014ish, there were a lot of profitable altcoins to mine with GPUs and CPUs so I took a bunch of my old desktop comps at my house + some laptops and hacked together a GPU + CPU rig. I tried to get a lot of GPUs and use CPUs for Primecoin (and derivatives) mining. Dogecoin was my first true love since it was so dominant in those days. Bitcoin was difficult to mine without ASICs so I was pretty active on various multipools and wafflepool.

The entire setup looked ridiculous in my apartment and lots of people who came over complained that it looked sketchy. The maintenance guys always asked me if it was illegal.

 

In the debate of scaling bitcoin, are you in favor of Seg-Wit or bigger blocks? Why?

I actually think that both sides have pretty good points and anyone saying one faction is clearly superior is wrong (just like in most political disagreements). But with that said I’d consider myself more of a big blocker. Gavin was the main Bitcoin core dev while I was involved in the community and he is a big blocker today. Most of the old school people I know are big blockers. Bitcoin is supposed to be a peer-to-peer cash system (literally word for word from the original whitepaper) not peer-to-peer digital gold. So if we are trying to stay true to the vision, then it’s obvious Satoshi would be a Bitcoin Cash guy. However, the market mechanics of SegWit BTC are going to make it the higher priced coin, so some people think that gives it more credence to being correct (because it accrues and represents a store of value first and foremost). It’s basically a big nerdy cat fight!

 

How do you think Bitcoin and cryptocurrency can become more user-friendly? Will it ever get to that point and if it does, do you think it will be more centralized in structure?

There’s no real reason cryptocurrencies can’t become as easy to use and understand as normal cash. Institutions are finally intrigued by the technology and this is just the beginning, things will get much more interesting soon as large institutional players get into the game. The old days of a community mainly composed of ancaps and tech nerds is long gone (sometimes I miss those days).

 

Are you a Bitcoin Maximalist? What are your arguments for or against the concept?

I’m definitely not a Bitcoin maximalist. Most BTC maximalists I know of are just massive Bitcoin hodlers that missed out on huge breakthroughs like Ethereum. I don’t think one chain can or will necessarily rule all functions. If there’s one chain that is closest to taking over the world, it’s honestly Ethereum. Vlad Zamfir is the most talented theorist working on blockchain governance combined with Vitalik who needs no introduction. I still think ETH will overtake BTC in 2018. It didn’t happen this year, but it got close. 2018 is when Coinbase is going to go all in on ETH so it will be very interesting when non-technical consumers get access to ETH tokens.

The other blockchain I am extremely bullish on is EOS. What the block.one team is doing with EOS is so promising it could be one of the most breakthrough projects since Ethereum itself! I am already writing EOS code and the tech is very impressive.

 

What are some of the most promising projects out there now?

I’m closely watching EOS, OmiseGO, and IOTA. They all have their flaws and strengths, but their unique value propositions are too intriguing to ignore. We’ll see where they go in 2018. I have high hopes for them.

 

What is your favorite coin and why?

Dogecoin without doubt. I still wow to this day.

 

How is EOS different from Ethereum? Can they co-exist or will one have to be destroyed?

EOS is one of my favorite projects currently. I strongly believe that EOS will grow alongside Ethereum and overtake a lot of the consumer dapp market from other Turing complete blockchains. That’s why Everipedia is utilizing EOS technology since it has a lot of features that no other chain offers right now. In 2018, there will definitely be massive, huuuuuuge ETH and EOS growth, you can quote me on that.

 

A comparison you hear often is how the internet disrupted media and publishing is how cryptocurrency will disrupt finance and banking? What do you think of the comparison?

I think that’s a reasonable comparison. How I like to think about it is:

The first wave of the internet allowed for seamless communication of worldwide social data such as pictures, video, text, and VoIP between any two interconnected people around the world. This is what made social media, blogging, online news, and other applications possible. The second wave of the internet (the blockchain revolution) will allow for the seamless communication of worldwide economic data such as stores of value, cash, tokenized securities, bonds, debt, and scarce representable assets.

 

With the volatility in the cryptocurrency world, many people are looking for a stablecoin as a haven from massive fluctuations. In addition, a number of articles have come out raising suspicion about the most known stablecoin, Tether. How promising do you think stablecoins are and why? How do you envision stablecoins will work?

For anyone that doesn’t know, a stablecoin is a token that has very little, if any, direct price volatility, usually it is pegged to the price of 1 USD. Stablecoins are actually one of the most important parts of the crypto ecosystem if we are to ever have hope of people using crypto as actual currency. Let’s face it, no one uses crypto as actual cash (not even Bitcoin Cash). It’s because crypto doesn’t have attributes of fiat, floating point currency backed by standard monetary policy. Stablecoins allow for crypto to actually be used exactly the same as cash. My favorite stablecoin implementation is basecoin. Nader, who’s building it, is a brilliant theorist with a vision. I’m also working on a stablecoin as a side-hobby which is gonna be baller. Eventually, I think everyone will have some stablecoin cash lying around on their computer/USB.

 

Is there an easy way for new people to conceptualize Bitcoin? If so, how?

Bitcoin and all cryptocurrencies are just distributed databases that keep track of which addresses control what amount of coins. Ethereum is slightly more complicated since it does more than keep track of balances. I found this YouTube video to be the most helpful in onboarding new people, highly recommend people watch this simple 20 minute clip: https://youtu.be/bBC-nXj3Ng4

 

What advice would you give for people first starting off in Bitcoin?

Try to really get nerdy with it and get into it. You have to understand how things work by playing around with the technology. Most people just want to put money into something and watch it multiply, but they don’t realize that the people that got rich off of cryptocurrencies originally got into it for the technology and not just the profits. That’s why they were in it before any coins were worth much at all. If you want to “become rich” like those people, you have to find the “next Bitcoin” or “the next Ethereum.” That means you can’t just listen to your friend or invest in random cryptocurrencies, that means you have to become a part of the revolution and do your own research into what you think will shape the world in the coming months/years.

BY FAR the Easiest Way to Buy Bitcoin (With Screenshots)

What the hardest part about getting into Bitcoin? If you’re like most people who are first starting out, you’re probably trying to figure out how to actually buy it, right?

Personally, it took me years from when I first heard of Bitcoin before I actually took the initiative to purchase some myself. Luckily for those who are just starting out in 2017, buying Bitcoin has come a long way from its early days and has become a consumer-friendly product. Not only is it easier to buy, but there are now secure online platforms you can use to make your transfers and storage safer.

Introducing: Coinbase

Today, the easiest way to buy Bitcoin is through Coinbase. All of your digital currency is fully insured if Coinbase suffers a significant breach and all your fiat money is backed by the FDIC. Coinbase is the safest and easiest way to buy Bitcoin, Ethereum, and Litecoin.

How to Sign Up for Coinbase

To sign up for Coinbase, click here. Once you sign up, you start the process of verifying your identity and adding bank account information to transfer funds in and out of the platform. It will take a few days to set up but once you do, you can instantly buy and hodl the crypto of your choice.

Also, Coinbase offers an incentive to get others to sign up. For every $100 someone spends on Coinbase that you recruit, you get $10 of Bitcoin, and they receive $10 of Bitcoin as well. It is a great, simple way to introduce your friends and family to Bitcoin

 

The Drawbacks of Coinbase

Although Coinbase is the easiest way to buy Bitcoin and other cryptocurrencies, it does come with some downsides depending on how much you care. When you hold your Bitcoin on an exchange, you always run the risk of having your account hacked; Coinbase is not responsible for those stolen funds. In addition, you are at the mercy of Coinbase’s decisions and not your own. An example of Coinbase showing their power was in the case of the Bitcoin Cash hard forks. While people holding wallets were able to split their Bitcoin, Coinbase users have to wait until the end of 2017 to receive theirs. It’s these details that take out individual agency that may concern people on how a decentralized product such as Bitcoin is becoming more centralized. There is the simple alternative to this problem.

 

How to Use a Bitcoin Wallet

When I first wanted to buy Bitcoin, I was in the process of verifying myself on Coinbase. I couldn’t wait, and I knew I didn’t want to risk holding it on an online platform. Instead, I decided to go the Bitcoin ATM route and searched for one near me. I then downloaded a Bitcoin wallet, which is basically an offline place to store your Bitcoin. There are a number of wallets to choose from like Jaxx and Exodus that can store not only Bitcoin but other cryptocurrencies too, but my personal preference is Electrum. It solely stores Bitcoin, but in my opinion is simple to use.

Screenshot of what the Receive tab looks like

When setting up your wallet for the first time, write down your seed phrase and store them somewhere safe. This part is vital because if you forget your password, this is this the only way to retrieve your funds. Once done completing the onboarding process, you get to a screen that will show a complete history of your Bitcoin transactions. Next, click the receive tab and write down the address (or copy the QR code) shown. This address is needed for when you want to receive Bitcoin; your wallet automatically regenerates new addresses once an old one is used.

Once you have your address, get some cash and make your way to the Bitcoin ATM of your choice. Enter your receiving address into the ATM and deposit the cash and voila! It’s that easy. By the time you get home and check your wallet, your Bitcoin will already be there.

 

Conclusion

Purchasing Bitcoin has never been easier, but it does come with its trade-offs. Coinbase is best in terms of ease of access, but you have to give up a few freedoms for it. Although you are in complete control when you have a wallet, there is an element of personal responsibility involved. Even though I think a wallet is better for long-term storage, there is no right or wrong answer on how you want to handle your Bitcoin. Just remember to do your research and do ever what you feel most comfortable with.

 

The Unlikely Truth About Bitcoin Hard Forks

2017 has been quite the year for Bitcoin. Not only has it reached all-time highs, but by the end of it, Bitcoin will have hard forked several times. From an outsider perspective, people may view this uncertainty as negative. The truth is that hard forking is not only healthy for Bitcoin but a necessary step for its future development.

What is a Hard Fork?

A hard fork is a permanent divergence within a blockchain that happens when one group of nodes (computers connected to the blockchain network) signal for the original protocol while another group of nodes signal for a different protocol, isolating themselves from each other. The transaction history in each blockchain is identical up until the point of the fork.

Why Hard Forks?

Hard forks are a natural process in an evolution of a network when participants in it become isolated from each other. They don’t happen just in Bitcoin, they happen everywhere else, too.

Image result for hard fork bitcoinThe best example of a hard fork of a complex network similar to Bitcoin is The Reformation. When Martin Luther posted his 95 Theses on a Church in Eisbein, Germany, it signaled the beginning of the schism between the Catholic Church and soon to be created Protestant sects. One group of people (to think of the last phrase in Bitcoin Terms, conceptualize a ‘cluster of nodes’) began to believe (or, in Bitcoin Terms, ‘signal’) the words of new Protestant leaders, they no longer participated in the universe of the Catholic Church (or in Bitcoin Terms, the blockchain of the Catholic Church).

If you think of Christianity as a Blockchain, all denominations have agreed upon interpretations up to a certain point. Small disagreements in interpretations and practices add up and evidently lead to more serious conflicts. When the conflict causes a split, the separated chains begin to record a different history on their ledger. It is not a surprise that certain different denominations have different leaders and literature to which they ascribe to.

In other words, any network of nodes that interacts with each other has the potential to split when different factions of the network have differences in objectives and values.

Now, let’s go over three of Bitcoin’s most well-known hard forks.

Bitcoin Cash

The Bitcoin Cash hard fork was over a community disagreement for how to scale Bitcoin’s Blockchain. Bitcoin can only process 3-4 transactions per second which is abysmal compared to Ethereum (20 per second), Paypal (193 per second), and Visa (1,667 per second).

Image result for bitcoin cashIf Bitcoin wants to become the medium of exchange it intends to be, then actions must be taken in order to make transaction speeds faster.

To increase the network capacity, the community proposed two scaling solutions:

  1. Seg-Wit (mentioned later in this article), which would allow transactions to take place on a ‘side chain’ run by another entity, alleviating the load on the original chain.
  2. A block size increase, which would record all the transactions on the chain.

The politics of Bitcoin are for another post, but a common critique of Bitcoin Cash is that it centralizes hashing power for those who can afford to mine large blocks. This centralization is antithetical to Bitcoin’s ethos of being decentralized.

Because of this, the vast majority of the Bitcoin community opted for Seg-Wit with 97% of nodes in the network signaling for it. Bitcoin Cash still exists, but is considered by the community to be currently an altcoin. 

Bitcoin Gold

Image result for bitcoin goldIn the case of Bitcoin Gold, the fork will change the Proof-of-Work algorithm from SHA-256 to an Equihash. This fork isn’t as contentious as Bitcoin Cash and is driven by the ideological belief that mining should become more decentralized.

A main critique of SHA-256 is that it requires expensive ASIC miners which are dominated by centralized mining pools mostly located in China. Equihash is mostly mined by GPU cards which is much more accessible to the average miner and is employed by Ethereum and zCash (Classic).

It is important to note, however, that the man behind Bitcoin Gold, Jack Liao, is also the CEO of multi-GPU mining unit manufacturer LightningASIC, giving him a financial incentive to back the hard fork. The fork is intended to take place on October 25th.

Segwit2x

Segwit2x finds its origins in the New York Agreement signed earlier this year. Basically, the different entities in Bitcoin agreed to implement segregated witness by August 1st, 2017 and later increase the block size by November. When the Bitcoin Cash hard forked in August, many Bitcoin core developers felt like the NYA was void, and have refused to increase the block size. Others in the industry, such as Jeff Garzik, support increasing the on-chain Bitcoin block size from 1MB to 2MB, and along with Segwit will increase total block size to 4-8MB.

Image result for segwit2xThe main contention with Segwit2x is that it does not offer replay protection. This means that, if you send your B2X coins to one address, you may find your BTC coin may disappear as well. Since no side will offer replay protection, then what we will witness is a giant game of chicken and when November, whichever protocol has more hashing power will absorb the other one.

The price of Bitcoin will probably be volatile until the Segwit hard fork is completed. Leading up to the Bitcoin Cash hard fork, the price of Bitcoin fluctuated between $1,900 and $2,900, but once the event horizon (the August 1st hard fork) was realized, it only took 13 days until the price of Bitcoin reached $3,000 for the first time.

Although it is next to impossible to predict anything short term in the price of Bitcoin, it can be expected something similar to happen preceding and during the Segwit2x hard fork. Only when the hard fork is resolved and there is a clear winner, then certainty will enter the market again.

Conclusion

Put simply, hard forks are a natural cleansing of the system as well as nice dividends for hodlers. With three notable hard forks happening in 2017, it should be expected that they will not go away in the future. Because of this new reality, cryptocurrency exchanges should be more prepared to deal with hard forks.

 

From Vocabulary to Slang, Here Are the Bitcoin Terms You Need to Know

Bitcoin has created a new world of vocabulary to articulate its universe. Some terms are completely new (ex. Blockchain, Cryptocurrency, Proof of Work) while others adapt existing words for new purposes (ex: Wallet, Address, Mining). As I started to write posts about Bitcoin, I realized that most people are not familiar with definitions of common terms used. Because of this, I have compiled a list to help readers comprehend and understand articles that cover Bitcoin and cryptocurrency.

Formal Vocabulary

ASIC: An acronym for “Application Specific Integrated Circuit”. ASICs are silicon chips specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.

BTC:  A common unit to describe one bitcoin, as USD represents one United States Dollar.

Bit:  There are 1,000,000 bits per bitcoin so 1 bit = 0.000001 BTC.   Cheaper items are denominated in bits.

Blockchain:  type of distributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks (rather like collating them on to a single sheet of paper). Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows block chains to be used like a ledger, which can be shared and accessed by anyone with the appropriate permissions.

Bitcoin:  Bitcoin with a capital ‘B’ is used to describe the network or protocol that bitcoin runs on, bitcoin with a lowercase ‘b’ represent the digital token or money that is used on the Bitcoin network.

Bitcoin Address:  Also known as a public key, is similar to an email address.  Give your bitcoin address to anyone who you want to receive a payment from.  It is best practice to use a new bitcoin address for each of your transactions.

Block:  A block is a group of bitcoin transactions that are being processed & confirmed.  Roughly every 10 minutes a miner will find a new block, which will confirm any bitcoin transactions that were processed during that 10 minutes.

Confirmation:  A confirmation means your transaction was processed by bitcoin miners and added to a new block on the blockchain.  It is generally accepted that after 6 confirmations your transaction has been set in stone globally and cannot be reversed by anyone.

Difficulty: In Proof-of-Work mining, is how hard it is to verify blocks in a blockchain network. In the Bitcoin network, the difficulty of mining adjusts verifying blocks every 2016 blocks. This is to keep block verification time at ten minutes.

Double Spend:  When a malicious user tries to send their bitcoin to two different people at the same time to pay for several services with the same bitcoin.  It is up to miners to decide which of the transactions are accepted into the network.   One transaction will receive confirmations, the other will be rejected by the network.  Most users never have to worry about double spend attacks, they are rare and difficult to pull off.

Mining:  Bitcoin mining is making computers do complex mathematical calculations for the Bitcoin network to confirm users bitcoin transactions in a block.  Bitcoin miners greatly increase the security of the network and are rewarded with new bitcoins and transaction fees for their efforts.

Full node: A node that fully enforces all of the rules of the blockchain.

Gas: A measurement roughly equivalent to computational steps (for Ethereum). Every transaction is required to include a gas limit and a fee that it is willing to pay per gas; miners have the choice of including the transaction and collecting the fee or not. Every operation has a gas expenditure; for most operations it is ~3–10, although some expensive operations have expenditures up to 700 and a transaction itself has an expenditure of 21000.

Hash Rate: Is a measurement of computer processing power of bitcoin miners.  Miners earn bitcoin for their share of the network hash rate, so they are incentivized to have the highest hash rate possible.  This works out for everyone because the security of the Bitcoin network increases as the network hash rate grows.

Node: Any computer that connects to the blockchain network.

Private key:  Every public key (bitcoin address) has a private key associated with it.  A private key is a secret piece of data that proves your right to spend bitcoins from your wallet.  Your private key(s) are stored in your computer if you use a software wallet; they are stored on some remote servers if you use a web wallet.  If you don’t encrypt your bitcoin wallet it makes it easier for someone to steal your private keys.  Anyone with access to your private keys can spend your bitcoin from any computer worldwide.

Proof of Authority: A consensus mechanism in a private blockchain which essentially gives one client (or a specific number of clients) with one particular private key the right to make all of the blocks in the blockchain.

Proof of Stake: An alternative to the proof-of-work system, in which your existing stake in a cryptocurrency (the amount of that currency that you hold) is used to calculate the amount of that currency that you can mine.

Proof of Work: A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.

Protocols: Sets of formal rules describing how to transmit or exchange data, especially across a network.

Satoshi:  The penny of bitcoin.  1 Satoshi = 0.00000001 BTC  This is the smallest measurement of bitcoin.

SHA 256: The cryptographic function used as the basis for bitcoin’s proof of work system.

Smart contracts: Contracts whose terms are recorded in a computer language instead of legal language. Smart contracts can be automatically executed by a computing system, such as a suitable distributed ledger system.

Softfork: A change to the bitcoin protocol wherein only previously valid blocks/transactions are made invalid. Since old nodes will recognize the new blocks as valid, a softfork is backward-compatible. This kind of fork requires only a majority of the miners upgrading to enforce the new rules.

Token: A digital identity for something that can be owned.

Transaction block: A collection of transactions on the bitcoin network, gathered into a block that can then be hashed and added to the blockchain.

Transaction fees: Small fees imposed on some transactions sent across the bitcoin network. The transaction fee is awarded to the miner that successfully hashes the block containing the relevant transaction.

Wallet:  Where you store your bitcoins. A bitcoin wallet is a program that manages all of your bitcoin addresses and allows you to save or spend your bitcoin.

Common Slang

ALTCOIN = Any cryptocurrency other than bitcoin.
ASHDRAKED = A situation where you lost all your money.
BAGHOLDER = A person who buys and hold coins in large quantity hoping to make good profits in the future.
BEAR/BEARISH = Negative price movement
BTFD = Buy The Fucking Dip (an indication to buy a coin when it has dumped so hard)
BULL/BULLISH = Positive price movement
DILDO = Long green or red candles
DUMP = To Sell off a coin
DUMPING = Downward price movement
DYOR = Do Your Own Research
FA = Fundamental Analysis
FOMO = Fear Of Missing Out (A coin is pumping and you get the feeling it’s gonna pump more, so you buy high)
FUD = Fear Uncertainty & Doubt
HODL = Hold On for Dear Life
JOMO = Joy Of Missing Out
LONG = Margin bull position
MCAP = Market Capitalization
MOON = Continuous upward movement of price
OTC = Over The Counter
PUMP = Upward price movement
SAJ CANDLE = Huge green candle
SHITCOIN = A coin with no potential value or use
SHORT = Margin bear position
SWING = Zig zag price movement (Upwards and downwards)
TA = Technical Analysis
REKT = When you have a bad loss
REVERSE INDICATOR = Someone who is always wrong predicting price movements.
RSI = Relative Strength Index
WHALE = Very Wealthy trader/Market mover

Sources

https://steemit.com/blockchain/@mio31337/69-common-terms-in-blockchain-vocabulary 

http://bitcoindaily.org/bitcoin-vocabulary/

How To Perceive Bitcoin Through Understanding Money and Content

Bitcoin has been around for nearly a decade, and yet, it is still a mystery to many people how it works. After listening to several experts speak about the nature of Bitcoin, I noticed that in order to understand it, you need to deprogram how you think about money.

The Different Functions of Currency

Depending on who you ask, money has several definitions and functions.

  1. Money is an efficient medium of exchange that avoids the need for bartering
  2. store of value that holds wealth for long periods of time
  3. unit of measurement

One can argue that money has become a system of control, but that is not the point of this article, rather, it is to show how money is a form of content that instrumental for societies to function.

How We Live in an Ocean of Content

Content is an outside force in which you can interact and absorb information from. This definition extends to anything that can make you reflect on yourself including but not limited to media, people, and substances. The way I view the world is that we are surrounded by content the same way fish are surrounded by water, and when people share commonalities among content, that is how culture forms. From reading your Facebook feed to posting a Snapchat story, there are plenty of simple ways of posting and absorbing content. Another form of content that is a level more complex is having a debate with someone about ideas; you are simultaneously creating and absorbing information at once. One of the most powerful forms of absorbing content is through drugs and alcohol. The reason why I call drugs a form of content because of the way the chemical composition of them drugs interact your brain. There are uppers, downers, psychedelics, and everything in between that temporarily but drastically changes your perception, and consistent use can have an effect on who you are. It is not a coincidence that drugs are the most regulated forms of content by governments. Who knows what the world would look like with unfiltered access to them? Similar to how fish do not question what water is, people do not question what content is either because we are engulfed by it.

Money is a form of undefined content; it can become anything. By being accepted is the foundational medium of exchange by society, money is reserved potential that can become anything you choose it to be. Spending money to attend a concert is using that potential reserve into a memorable experience or buying drinks at a bar with the intent of getting drunk is transferring your funds in order to change your state of mind. There is something about money, and its ability to become anything makes people’s imaginations launch into the stratosphere. Especially true in American culture, money has been elevated to a holy status. Money is a major theme in the vast majority music we listen to and entertainment we consume. Americans are chasing dollars due to it being the ultimate sign of success in the United States’s capitalist system, but rarely ask where money gets its value in the first place.

Why the Dollar has Value

In the international monetary system, the US Dollar holds a special place among the world’s currencies because it acts as the world reserve currency, meaning that governments are required to hold some of it in order to participate in global finance. The dollar used to be backed by gold, but since Nixon decided to leave the gold standard in 1971 in favor of a fiat system, the only thing that has been backing the dollar is the sheer size of the US Economy and the faith that the US Government can pay back its debts.

Dollars come into existence through the policies of the Federal Reserve System. The Federal Reserve is the Central Bank of the United States and is sanctioned to issue currency and set monetary policy. The Federal Reserve lends money to banks like Goldman Sachs and JP Morgan who then lend it to business. Quite simply, the Federal Reserve is the bank’s bank; they are the gatekeepers of what I like to call the faucet that floods our world with undefined content.

Bitcoin differs from the Federal Reserve and other central banks because the faucet of creation is not controlled by a centralized group of bankers but a decentralized network of computers solving complex problems. What gives Bitcoin its value is that it possesses all three essential traits to be classified as currency. The blockchain technology seamlessly keeps track of every transaction to ensure accuracy, wallets serve as one’s own bank account that is free from government scrutiny, and Bitcoin is becoming widely accepted among merchants, most notably Expedia and Overstock. Every ten minutes, you can be sure that a new Bitcoin block will be mined and added to the chain.

Conclusion

Just as the internet decentralized publishing allowing anyone to share their work to the world, Bitcoin and cryptocurrency will do the same with banking. There is something powerful about decentralizing the faucet of the uncertain potential of money because it will shift the world monetary system from being fiat-based to crypto-based. That is not to say that fiat money will just disappear, but rather that Bitcoin will play a much more substantial role in the global economy.