How can people, through the power of using Bitcoin, communicate with each other on a global scale in such a way that potential disasters, such as wars and earthquakes, don’t destroy the planet? And how can a small group of scientists instead of billions of dollars collaborate with a small group of amateurs? The answer is to use cryptocurrency for transactions which previously were too cumbersome to be used. Bitcoin is a wonderful innovation because the limitations of current money-creation systems give us a really powerful, early-stage way to build the systems we will need in the future. The power of cryptocurrencies goes beyond economics — its use on the internet could actually be transformative, creating forms of social solidarity unseen in human history.
One of the most effective things about Bitcoin is that it has a quite simple, democratic mechanism for distributing the value of its virtual currency.
Basically, anyone with a computer can create a Bitcoin account by providing a set of personal data. You can start using the digital currency for your transactions, your files, your accounts in other people’s accounts, your gift-giving, and even as a donation to favorite charities.
You can use Bitcoin as a source of additional personal data to improve it. The bigger your Bitcoin account, the better your data source, since you are more likely to be the person who can give an account to a fund making donations to the largest and most active charitable organizations.
If your Bitcoin Account is large enough, your data source will become a real money-making opportunity. Once you start monetizing your data, you can get rich! If you leave that data anonymous, you will often have even more positive economic effect, because the system will focus its efforts on the problems of the largest data sets.
Bitcoin gets rid of complexity
We had lots of instruments for making trade and getting paid for transactions before we invented Bitcoin. These include bank notes, invoices, barter, and many systems of payment. A few of these are really important, but all of them can be thought of as complex and impractical. The largest problem with the old system is that it makes little sense if you live in a small country like the U.S. or Australia, because you spend most of your money in other countries. You might be tempted to go down the traditional path, to buy a $100 bill with a $10 bill or an $80 bill with an $80 bill, but you will find that your money won’t really be worth what you want. Unless you know exactly how much money you want, and can get that information at your computer, you will never be able to know if there is enough money in your account for your purchases.
With Bitcoin, there are two clear ways to see if your account is adequate for your needs. The first is to get it listed on a trading platform. At the moment, these platforms include many of the larger online retail services like Amazon, BitTorrent, and PayPal. If you are purchasing something like a big television set, you can simply go down to the store, look at the big window sign on the door, and then, easily and inexpensively, you can check to see if the price will be right if you make the purchase.
The second and more important way to see if you have the cash you want for your purchases is to check on the prices of cryptocurrencies with the various exchanges. In this way, you check to see if the virtual currency you are buying is worth what it says. From the point of view of the provider of the trading platform, selling $100 bills with $100 bitcoins gives them the equivalent value in digital currency, to add to their bank accounts and continue to make their fees possible. When the holders of the $100 bills will be spending their Bitcoins, the exchanges will adjust the prices accordingly.
Bitcoin gets rid of complexity and complexity creates division
One of the main mistakes people make in dealing with Bitcoin is to put excessive restrictions on what their account holds. If you run a bitcoin exchange, for example, you will tell people they can’t buy/sell drugs, guns, software, or other physical things that might harm society. Other uses are acceptable, but not everything that goes into a store or on the internet can be transferred digitally. So we are limiting people’s choices about what to buy and sell by restricting what makes sense for them to use.
I like the exchanges because they allow both big institutions and small individuals to participate in this new system. If you wish to buy the rare software that has sold out, then you can put a lot of your money into the exchange. If you want to sell something to someone else, you can go down to the store, look at the shelf, and see if that price is available in the exchange. If not, you can pay the price you want