Is Bitcoin better?
Bitcoin was launched on the 3rd of January 2009 by an unknown person going by the pseudonym Satoshi Nakamoto. It was the first working example of a purely digital form of money not controlled by a central authority, and was a major breakthrough. People had been trying for a long time to develop an electronic form of cash, and one of the last unsolved pieces of the puzzle was the so called “double-spend” problem. In simple terms, how do you prevent digital money from just being copied and duplicated, like any other digital file? Governments and banks achieve this by having a centralised database, or ledger, which records individual account balances and transactions between those accounts. You cannot duplicate the digital money in your bank account, because the bank controls the record of what you own (you would need to hack the bank’s centralised computer system). How do you achieve the same in a decentralised system, not controlled by any single authority?
Satoshi solved this problem by having many copies of the same ledger, distributed on a network of computers: for any new transaction to be validated, every ledger in the network had to agree on it. If Michael has one bitcoin and sends it to Bonnie, every ledger, or “node” in the network, has to confirm: “yes, Michael does indeed have one bitcoin to spend, ownership of that bitcoin is now being transferred to Bonnie and Michael now owns zero bitcoin”. This means that even if Michael controls one (or several) node(s) in the network, he cannot cheat and say that he still owns one bitcoin despite spending it. So long as a majority of nodes in the network agree and say “no, this isn’t what we recorded”, his dishonest claim will be rejected. This also means that if someone were to control more than half of the network, they could in theory cheat to their advantage. However, the Bitcoin network is now so large, and its geographic distribution so extensive, that this has become virtually impossible (see here, now several years old). Not only this, but if Michael did control a majority of the network, he would only stand to lose from such bad behaviour: other users of the network would immediately lose trust in it and sell their bitcoin, crashing the price and rendering Michael’s bitcoin worthless.
This distributed architecture means that the Bitcoin network is virtually impossible to hack, and, to date, this has never occured. Again, one would need to hack more than half the nodes on the network, and as soon as this became public knowledge Bitcoin’s value would drop precipitously. Various mainstream media stories reporting Bitcoin hacks, refer to events where in reality, the passwords, also known as private keys, to bitcoin wallets were stolen. Think of a private key like a physical key to a private security box: if you don’t secure the key properly, whatever is in the security box can be stolen.
Nodes in the Bitcoin network don’t just agree on who owns what. They also adhere to a core set of rules, written into the Bitcoin software. Because Bitcoin has grown beyond a point of no return, these rules can never be changed (once more, you would need to convince a majority of the network). One of these rules is especially important: the network will continue to issue new bitcoin, (the equivalent of government money printing), but over time this issuance will diminish, and will be capped at 21 million bitcoins (this cap will be reached around the year 2140). The software halves the amount of new bitcoin issued every four years. This exponential decline means that most of the bitcoin ever to exist has already been issued. New bitcoin being issued today (currently 6.25 bitcoins every ten minutes) does very little to dilute the value of existing bitcoin (compare this to the trillions of dollars injected into the US economy in response to the COVID crisis). In effect, Bitcoin is a money which cannot be devalued by inflating its supply, because nobody can can decide to print more bitcoin.
There is one last crucial part to the story: Satoshi made Bitcoin’s software open source, meaning that anyone with programming skills could audit the software, looking for vulnerabilities and also making sure that Satoshi hadn’t planted any tricks to surprise us down the line.
Satoshi created a transparent, un-censorable money which cannot be devalued, is controlled by no one, and can be sent over the internet. And unlike our legacy financial system, this new monetary network is open to every single member of our species. The direct and downstream ramifications of this are already unfolding all over the world, and will continue to play out in decades to come. Nobody can predict the future, but for many, Bitcoin represents the hope for a better world.