What Is Bitcoin?

Bitcoin has been called a digital asset, virtual currency and cryptocurrency, but is it really money? According to the definition of “money,” it must meet three criteria. Money must act as a store of value, a medium of exchange, and a unit of account. At this point, most economists (and a number of judges) fail to give bitcoin a clear path to meeting some or all of these criteria. Most agree that it comes closest as a medium of exchange. But its history of radical price volatility provides the greatest argument against its ability to qualify as a stable store of value and retailers who accept bitcoin transactions regularly use other currencies as their principal unit of account.

Bitcoin was invented by an unknown programmer or group of programmers, under the name Satoshi Nakamoto and was released as open-source software in 2009. Bitcoin is called the first decentralized digital currency, because it operates without a single administrator or central repository. Bitcoin transactions take place directly between users, are verified by network nodes, and are recorded in a public distributed ledger called the blockchain. A bitcoin transaction must have one or more inputs and an input must be an unspent output of a previous transaction. Bitcoin is a network of communicating nodes running the bitcoin software, which validate transactions, add the new transactions to the ledger, and broadcast the newest version to other nodes. The blockchain technology is secure, due to a decentralized distribution system that records easily verified transactions across many computers in such a way that transactions cannot be altered retroactively. Blockchain technology removes the problem of “double spending,” by confirming that each unit of value was transferred only once.

Many world governments and the International Monetary Fund (IMF) have been enthusiastic about the technology, but therein exists the dangers, as well as the potential benefits. The IMF, central banks and individual government oversight committees created the game and manufacture the rules for bitcoin. But it is a virtual currency. You can’t touch it or feel it and like any fiat currency its value is only as viable as the system willing to accept it. Bitcoin’s value is completely dependent on what users are willing to assign it, at any given moment. Throughout history, every fiat currency has ended in collapse. Ultimately, a cashless society provides government with greater control and transparency of its citizens, while reducing or eliminating a variety of personal freedoms. It’s more than a serious step toward a truly Orwellian State.

Nevertheless, physical precious metal ownership remains the single most powerful method of wealth protection. Gold and silver have met all the standards of “money” throughout recorded history and will continue to do so. Physical precious metals can be touched, stored, and passed down to succeeding generations. Their consistent demand and scarcity ensure long term appreciation and protection. Don’t leave your family in a position to fall victim to an oppressive and overbearing digital future. Secure your future with physical precious metals, today!

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.