Last updated on November 16th, 2021. Posted in Bitcoin Blockchain And Cryptocurrencies.
"Why should I care about bitcoin?" That's a great question. And by the end of this video, you'll not only have a very clear understanding of what bitcoin is and what it means (all in non-techie plain-english, of course!) but you'll also know exactly why you should care about bitcoin!
Here are links and resources mentioned in today's video. Enjoy!
So why should I care about bitcoin? That's the question right? And this a great place to start -- why should you care?! Well, here's why...
Recently I ran some numbers, which are freely available online -- you can go and double-check these for yourself if you'd like. I choose the time period of August 2020 to August 2021, so a full year.
In that timeframe, in the US inflation ran at about 5.3% or 5.4% -- this means that if you didn't get a 5.4% raise in this timeframe, you took a paycut. We'll talk more about inflation in just a second.
Now what about specific investment assets during this same timeframe? If you held your money in gold, your return would have been about -1.5% -- so you lost money.
If you held silver during this time period, your return would have been 5%. Stocks -- specifically the S&P 500 returned a whopping 33%...but here's where it gets interesting:
For that same time period, again August 2020 to August 2021, if your money was held in bitcoin, you would have seen a staggering 242% return. Even more jaw dropping is Ethereum, which returned a brain-melting 576% for that timeframe.
So that, my friend, is why you should care about bitcoin. See, with inflation running hot, we need something to protect our money and more specifically our purchasing power. Let me explain:
When you go to the grocery store or the gas pump, no doubt you've noticed that prices are creeping higher and higher. Meanwhile, your income remains flat. This means that you've gotta stretch your dollars further and further.
This increase in prices (in everything from fuel to food to other living expenses) is the result of something called inflation. Inflation is caused when the government pours more and more money into the financial system.
The more new money pours in, the more existing dollars that are already in circulation lose their value.
And by the way, this is why I use the example of gas pumps and grocery stores -- they're things we all know, understand, can relate to, and can see increasing in price for ourselves.
So how does this relate to bitcoin? Well, bitcoin is what's known as a hard asset. What this means is, it has a strict and limited supply...just like gold, silver, real estate, and other hard assets. In other words, they ain't makin' more of it!
Wait though, how is it possible that bitcoin can have a limited supply? After all, isn't it just digital money? Can't they just magically create more and more of it anytime they want?
No, they can't. And this is one of the many incredible things about bitcoin. But to explain why more and more bitcoin can't simply be created out of thin air, we need a better understanding of what bitcoin actually is.
So what is bitcoin? Well, here's my definition: "Bitcoin is a global, peer-to-peer protocol for trustlessly storing and transmitting economic value."
That's a heck of a mouthful, isn't it! See, the biggest thing that's working against bitcoin is that it's difficult to understand (just as the internet was in 1995). So let's break all this down.
Bitcoin is global (just like the internet) and it's a peer-to-peer network (just like the internet too). Now if you're not sure, peer-to-peer is just a fancy way of saying, "we're all on a level playing field." As you know, online, you can have a website that's just as reachable as Amazon, the US government, or anyone else. Everyone's on the same level.
So far so good? Okay next, in my bitcoin definition, I said that it's a protocol. What'a protocol? Well, a protocol is simply an agreed-upon set of rules that everyone has to follow.
This makes bitcoin trustless -- that is to say, there's no governing body or central authority who has to be trusted to ensure that everything functions as it should. Instead, trust is a result of everyone on the peer-to-peer network following the same set of rules.
Who upholds the rules? Everyone on the network does. If someone doesn't follow the rules, or tries to change the rules, they get rejected by everyone else on the network.
It'd be like playing a game of baseball with a group of friends. "Well couldn't the players just cheat and make up their own rules?" No, because the rules are known and being upheld by everyone who's playing the game.
The bitcoin protocol works exactly the same way...so I hope this makes sense!
Alright now, the last little bit of my bitcoin definition was "storing and transmitting economic value." When I say economic value, I mean money -- the stuff you earn at your job or through your online business.
And the words storing and transmitting should hopefully be self-explanatory -- storing means saving money (and not having it lose value over time) and transmitting means sending money to other people, anywhere on the planet.
So what makes bitcoin a hard asset and secure store of value? Because that's programmed into the protocol. Asking, "can't they just make more bitcoin out of thin air?" is like asking, "can't the batters on my baseball team simply earn 5 runs each time they make it to home base?"
They can't because the rules are hard-coded, upheld by everyone, and can't be changed. So hopefully with all this explanation, my definition of bitcoin makes more sense.
Once again, here's my definition of bitcoin: "Bitcoin is a global, peer-to-peer protocol for trustlessly storing and transmitting economic value."
Now all this ties back to why you should care about bitcoin in the first place. It's a digital hard asset. But more so, bitcoin is a form of digital money that has a strict and limited supply, that is being adopted more rapidly than any other technology in human history.
It doesn't take an economics or investing mastermind to understand what happens to an item's price when it's in very limited supply and more and more people clamour to adopt it.
The biggest challenge I have is explaining to people exactly why they should care. And you know what? The further down the crypto rabbit hole I go the more and more it reminds me of 1995.
Yeah, 1995! See way, way back then, nobody thought this new thing called "the internet" was anything significant. Nobody could see what was coming.
"Experts" would say things like "It's a trend!"
"websites will never replace libraries and encyclopedias!"
"It's for computer dorks!"
And you and I both know what happened next, of course. Over the past 25 years, the internet went on to single-handedly dismantle the publishing industry, the music industry, the newspaper and magazine industries, cable television, and many others.
And guess what? Today, bitcoin and blockchain are in the same spot. That is to say, most people think it's all just a fad or a trend, that it's all stupid and nothing to take seriously.
But think about this: Back in the late 90's, the internet was the most rapidly-adopted technology in all of human history. Prior to that, it was mobile phones.
But here, today, bitcoin adoption is growing at twice the speed the internet did. TWICE!
And with a market cap (total global value) of over $1 trillion, bitcoin's certainly not a fad or a trend and it certainly isn't going away!
By the way, that's 4x the size of Nike, 8x the size of Starbucks, 2x the size of Samsung. So no, bitcoin certainly isn't some flash-in-the-pan short term trend.
Bitcoin's here to stay and it can't be stopped.