Bitcoin's Introduction- The First Digital Money
Beginning in the 1950s with the development of the first completely programmable computer, technical solutions to previously unsolved issues have encroached on a wide range of tangible elements of our lives. Despite the fact that banks and start-up businesses are increasingly relying on computer and network technologies for payment and record-keeping, none of the inventions that have been successful have provided a new form of money. Let's discuss more how Bitcoin's the first digital money.
In Bitcoin, we may discover a possible answer to the issues of scalability, soundness, and sovereignty, which are all related to the issue of money. After nine years of almost no failures, Bitcoin is a compelling solution to the issue of money, allowing people to retain control over their money while simultaneously being highly marketable across all dimensions of time, location, and scale.
If Bitcoin continues to function as it has, all prior forms of currency, such as shells, salt, livestock, precious metals, and government paper, may seem archaic and out of date in comparison to Bitcoin's cutting-edge functionality.
It was created in the digital age, and it makes use of various technical advancements that have been made over the last several decades, as well as many previous efforts to create digital money. For this reason, we will look at Bitcoin's monetary characteristics and the network's economic performance since its birth.
Like a gold standard book that does not go into great depth on the chemical characteristics of gold, this chapter will not go into great detail about the technological operation of the Bitcoin network and instead focus on the monetary features of bitcoin currency.
It's helpful to look back to the world before Bitcoin was founded, when payment methods could be easily divided into two separate, non-overlapping categories: cash and credit cards.
- Payments made in person between two people, when the money is exchanged directly. These payments are quick and easy, and neither side to the transaction has to put their faith in them. Neither the payer nor any other third party can successfully act to halt such payments. As telecommunications make it more and more probable for people to desire to deal with others who are not in their local area, its biggest downside is the necessity for both parties to be physically present at the same moment.
- An intermediary payment is one in which money is exchanged via a third-party intermediary such as a bank or a credit card company, as well as more contemporary advancements like PayPal. An intermediated payment is one in which a third party acts as an intermediary between the two parties involved in the transaction. Payments may be made without both parties needing to be in the same area at once, and the payer doesn't have to carry her money around with her when she makes a payment. There is a high level of confidence necessary in the transaction, the danger of the third party being compromised, and the time and expenses required for the payment to be finalized before the receiver may use it....
For the most part, consumers use a mix of cash and credit cards in their economic transactions since each has benefits and disadvantages. Intermediary payments prior to the development of Bitcoin included (but were not limited to) all kinds of digital payment, including Bitcoin. It has always been the essence of digital items that they are not in short supply. Due to their infinite reproducibility, they could not be used as a money since transmitting them would merely result in the creation of more of them. Unless a trustworthy third party was watching the account and able to check the integrity of the payments, there was no way to ensure that the payer was being honest with his money, and not using them more than once, unless there was an intermediary. All digital payments had to be overseen by a third party, while cash transactions were restricted to the physical domain of face-to-face interaction.
Bitcoin was the first technical solution that enabled for digital payments without depending on a trusted third-party middleman after years of inventive trial and error by many programmers and using a broad variety of technologies. Due to its verifiable scarcity, it is the first digital item.
In other words, the qualities of money as a medium of exchange held by its owner, with high liquidity enabling him to sell anytime he wishes, are significantly diminished when payments are intermediated. Fungibility (the capacity to exchange one unit of money for another) and liquidity have been two of the most enduring features of money throughout history (ability of the owner to sell quickly at market price).
People want fungible and liquid currencies because they demand control over their monetary resources. A sovereign currency has all the authority it needs for spending; the desire of others to keep it outweighs the power of others to impose limits.