Welcome to Crypto Corner, my name is Dinny Collins.
Learning to understand Bitcoin gave me more time to enjoy life and less financial worries about my future. I want the same for you.
My mission is to help as many people in Ireland to understand and to use Bitcoin to improve their lifestyles.
I will be writing in the crypto corner every two weeks so be sure to follow the series.
Ok so what is Bitcoin? Well one of the problems with gaining an understanding is that Bitcoin is so big it is difficult to explain it in a few sentences.
And there is too much information out there to sift through.
Some people think Bitcoin’s invention is as big an invention as the internet itself.
I tend to agree.
But what is it?
Well its a digital currency, everyone knows this but to me this is the least interesting thing about Bitcoin at the moment.
It is also Digital Property and Digital Energy.
Both of these are revolutionary transformations from physical to digital and we can dig into them in future articles.
But where we will begin today is to explain the narrative that Bitcoin is Digital Gold.
We all remember CD’s or tapes, even vinyl, these were all physical types of music but they are no longer in use because we have a digital version of these physical things now, it’s called Spotify or Itunes.
So we turned a physical item into a digital item, is it better? Yes, but how much better?
Well with one CD I have fifteen songs but the CD gets scratched by using it so it will need replacing eventually and I always need to carry it with me to access my fifteen songs.
But the digital version – Spotify costs less than buying one CD but I get to listen to more than fifteen songs, I can pretty much find every song in the world and they never get scratched and need replacing plus I do not need to carry anything with me because I can access my music anywhere in the world on any device. Spotify even learns what music I enjoy and builds playlists around my tastes.
So digital music is orders of magnitude better than physical music… is there anything else we have digitized?
Well yes we are turning everything we can into software, pens and paper into tablets, filing cabinets into the Cloud, paper maps into Google maps, meeting rooms into Zoom, shopping centers into Amazon etc.
Let’s look at physical gold, it has been for thousands of years of history acting as money. For something to be a money it needs certain characteristics. Like portability, divisibility, recognisability and scarcity.
Bitcoin shares all of these unique characteristics but like all digital versions of physical products it improves on each of them by at least 10x.
Bitcoin is much more portable than gold, I can move €10,000 of Bitcoin anywhere in the world instantly and for free versus taking weeks to move physical gold and at a large cost.
Bitcoin is much more divisible than gold because if I own a one ounce gold coin valued at €1800 then I need to sell the whole coin to extract value. But if I own €1800 of bitcoin then I can divide it up anyway I want and sell any amount of the total value.
Recognisability: Bitcoins network is two hundred million times more powerful than the second largest computer network on earth. So if the bitcoin network accepts your transaction then it is genuine and you need not worry about chargebacks or receiving counterfeit Bitcoin. However if I buy gold from a 3rd party I would need specialist equipment to verify the authenticity of the gold.
Scarcity: Why is Gold a better money than a Euro? Well simply because gold is more scarce than the Euro. It takes energy and diesel and man power to mine gold i.e it is difficult to produce and hence why it retains its value.
A Euro on the other hand can be created / printed for almost free and this is why over time Euros or any other currency will buy you less goods and services.
We call this an increase in the cost of living or Inflation but in reality it is a decrease in the value of our currency because new units of the currency were created which dilute existing units.
In the last two years, in response to the pandemic, governments globally printed over half the money supply, yes that is correct we created half of all the money ever in existence over two years. Now you know why things cost more these days than two years ago.
Now the best characteristic of Bitcoin is its Scarcity. The first thing I learned years ago was there could only ever be twenty one million Bitcoin created ( I’lll explain why and how this works in future articles).
So Bitcoin is not only scarce but it is actually finite, every other good or service on the planet finds balance between supply and demand. As the demand for any commodity or service rises then the supply is also increased to meet the demand.
However with Bitcoin this does not happen, as the demand for Bitcoin increases there can be no more than 21 million bitcoin created and this causes the price to increase.
Scarcity and value are deeply connected. If I am the only barber in a busy town my business is scarce and I have lots of customers and a valuable business. But if one hundred people copy me and open barber shops in my town my business is not as scarce and thus not as valuable anymore.
So one of the big inventions of Bitcoin was to create money with a fixed supply – 21,000,000 units.
Remember we have no idea how many Euros, Pounds, Dollars etc there will be. Every year we create/print more and this hurts the holders of these monies as they lose their purchasing power.
But in Bitcoin terms I know if I own 0.1 Bitcoin that I own 0.1 of 21 million and in 50 years I will still own 0.1 of 21 million.
So Bitcoin is a digital version of physical Gold. And we see more and more people come to this realization as over the last two years of epic money printing the price of Gold has not moved but the price of Bitcoin has risen hundreds of percent, the free market is choosing the digital over the physical.
Yes the short term price of Bitcoin is volatile as the world tries to figure it out. However, in the past by holding Bitcoin for four year periods you would have increased your wealth.
Now the past is no guarantee of the future as with every investment there is risk to calculate but by simply asking yourself these questions you can figure out where the price of Bitcoin has the ability to go over this decade.
In the future will humans move towards technology or away from it?
In the future will more humans choose to own or save in a money that goes up in value i.e Bitcoin or will they choose to own or save in a money that goes down in value over time i.e Euros?
I have lots more to share in my next Crypto Corner and please write in with any questions you have and I will answer these also.
My biggest advice for anyone thinking of investing into Bitcoin and Crypto is to firstly invest your time into your education before you need to learn costly mistakes with your money.
And never send Bitcoin to anyone you do not know, be careful out there.
I look forward to taking you further down the Bitcoin rabbit hole on my next article
Connect with me on Facebook and Instagram for more information, I go live most days chatting crypto and check out my podcast on YouTube and Spotify, search Bitcoin With Dinny
Dinny out…
Dinny Collins is owner of Bitcoin With Dinny Ireland’s first digital asset consulting company.
Bitcoin With Dinny helps people to build Bitcoin and Crypto investment portfolios so they can retire early.
It is also home to The Retire Early Club which teaches everything Dinny used to take himself from living in a caravan to becoming financially free.
Dinny also teaches a FREE Bitcoin Basics Workshop on Zoom every month – details on www.bitcoinwithdinny.com