For today’s blog, we’ll be taking a detour from events and weddings to talk about an exciting technology that has been around for only a few years but is now becoming more visible in mainstream media and social media. I’m talking of course about Bitcoin. Bitcoin is a cryptocurrency that aims to function as a long term store of value, a currency for peer to peer transactions, and an uncensorable money. These can be pretty complicated topics so today let’s just cover why Bitcoin is a thing rather than how it works. In further posts, we can get into how this might affect the events and wedding industries someday.
Life Before Currency
How did people transact before money? Before even gold and silver coins? Most people would probably say that humans bartered, but that’s probably not how they did it. As I learned from Wences Cesares, bartering just wasn’t a convenient way of transacting. Let’s say you live in a prehistoric tribe and you just killed a wild boar. If a fellow tribe member asked you for some of the boar meat, you’d be obliged to give some because you’re in the same tribe. But they wouldn’t give you anything back directly, it would be too inconvenient to carry all of your valuables with you to make transactions. You would have to remember that you gave some boar meat to your fellow tribesman and remember all the other people that owe you and all the people that you owe as well.
But one day your tribesman wants boar meat and instead of saying they’ll owe you, they offer you some beads. Who wants beads? But he tells you they’re not beads to use, they’re beads to remember how much he owes you. This first currency was a ledger of debts so people can easily transact and it’s the same concept that evolved into today’s paper currencies issued by governments around the world.
The Ideal Currency
So great, we’ve explained the concept of currency and we already have cash around the world so why do we need Bitcoin? Well for all the advantages that the US dollar and other currencies offer, they also have distinct disadvantages that the ideal currency would not have. So what would the ideal currency look like? First, it would be accepted anywhere you go. Currency needs to be universally recognized so you can pay your debts to anyone. Second, it should be easy to carry with you. Sure you can carry maybe a few thousand dollars easily, but anything over even $5,000 is inconvenient or even dangerous to carry. At even larger amounts, you would have a hard time carrying gold because it’s too dense. Third, ideal currency needs to be durable. Paper money gets wrinkled and can be destroyed, as can coins. Fourth, currency should be homogenous, that is a dollar is a dollar is a dollar. This is largely true for the US dollar but there are several editions of the five, ten, twenty, fifty, and one hundred bills in circulation. Fifth, it cannot be counterfeited. A great deal of technology goes into making paper money uncounterfeitable and yet routinely money is counterfeited. Finally, currency should maintain its value over time. Inflation means that paper money issued by central banks loses its value over time.
Bitcoin was invented to be this ideal currency! Come back next month to learn about how Bitcoin accomplishes these goals.
Disclaimer: I am not an expert on cryptocurrency technology; I am merely a fan of Bitcoin and a believer in Bitcoin’s goals. Also, the information I’ve shared with you I’ve learned from following many of the cryptocurrency community’s best minds and I encourage you to learn about Bitcoin for yourself before making an investment. Please do not take this post as financial advice. Do you have questions about bitcoin? Post them in the comments below!