Bitcoin for Dummies
The Blurb
Bitcoin Dumbed Down
You’ve definitely heard of Bitcoin at this point. The price of Bitcoin has fallen from $69,000 to $35,000 in the past two months. Whether you want to hear it or not, these levels are a good time to start thinking of adding exposure to the asset. Prime buying opportunities will present themselves in the future with upcoming rate hikes. I’ll explain the different use cases for the asset relating to a current event.
Russian President Vladimir Putin recently spoke about Bitcoin and cryptocurrency. Putin urged the Russian Central Bank to rethink their outright crypto ban. He said “The central bank does not stand in our way of technical progress and is making the necessary efforts to introduce the latest technologies in this area of activity,”. Russia’s actively searching for a replacement of the USD in their trade of goods. The U.S and U.N have been rumored in banning Russia from using the SWIFT payments system. The same payment system that interconnects international trade and the U.S dollar. In theory, this would exile Russia from a large part of global trade. This groups Russia with other less fortunate 3rd world countries.
Politics aside, if you think President Putin is going to sit around and be fine with that ruling, you’re dead wrong. Banning Russia from the Swift Payments System would be catastrophic for the Russian economy. This comes at a time where countries already exiled from the Swift Payments System and world trade have been testing and adopting the Bitcoin Network. A decentralized peer to peer payment network that operates itself using software and the fundamentals of math. A network not controlled by a centralized party or entity, but instead by the users.
Think of the Bitcoin Network as a payment rail like Western Union wire transfers, Mastercard, Visa, etc. I’ll keep this anology in USD terms for it to be easier understood. You can send x amount of $ to you’re friend in Africa and have the payment settled within minutes. This can be sped up to seconds using Strike on Bitcoin Lighting Network. One thing credit card company’s forget to tell you is that they can only “Process” payments within 48 hours. Key word PROCESS not SETTLE.
“The Bitcoin network can do final settlement of 7 transactions per second. After a few blocks, there is no reversing transactions and they are permanently settled. For networks like Mastercard and Visa, this number is 0 transactions per second. The key difference is that these networks can approve e.g. 1700 transactions per second in the case of Visa, but the final settlement of these transactions can take up to months, which is where many of the costs come in.” (Wouters, Sam, “When might the Bitcoin network process volumes like Mastercard & Visa?”, block data.tech)
Nobody ever thinks of the fees merchants receive for payments. Fees can range anywhere from 0.5% to 5%, plus a $.20 to $.30 flat fee for each transaction. This may seem minuscule, but with large payments its adds up after 365 days. Bitcoin payments can be sent and received at extremely low cost or none at all. How much of this “wasted” money can be poured back into the economy? I’m no economist, but I believe any money poured into our economy would be beneficial. This was the same thought our politicians had with the stimulus bills.
The delay in legacy payment rails with final settlements is a big deal. It’s part of the reason why the U.S is CURRENTLY experiencing financial struggles. This massive mess of processing credit has only added to the already gigantic $28 trillion of debt. It’s always been a conversation of “tomorrow” not today regarding this issue. After covid and government spending it was clear the U.S dug themselves into a hole with no way of getting out. $13 trillion was added to the American economy since covid. This doesn’t only affect the U.S economy, but the entire worlds economy. We violently decreased the purchasing power of the USD. The same currency we’ve successfully campaigned for the rest of the world to use. All foreign currency has some tie to the USD for the most part. Just as the USD is decreasing in value so are countries domestic currencies. It’s happening at an alarming rate with $5.2 trillion for COVID + $4.5 trillion for quantitative easing + $3 trillion for infrastructure. That’s more than the U.S spent on its 13 most expensive wars COMBINED.
Now you understand why so many countries are looking for other ways to price their goods/services. Why should other foreign economy’s fail at the expense of U.S political decisions? For example, in 1980 $1,000 dollars cost 546 Naira (Nigerian currency). Today 546 Naira will purchase only $1. It’s easy to understand interest in Bitcoins real-world use with the Society for Worldwide Interbank Financial Telecommunication (SWIFT) threatening to ban countries from using their payment rails.
Oil and energy production is a massive part of the Russian economy. With them being exiled from SWIFT payments they can’t sell energy to other countries. So obviously they’re looking to set up bitcoin mining operations. This allows them to monetize their nuclear power grid and sell it to other countries using the Bitcoin Network. This same payment rail can be used by any person/country in the world. There’s no Bitcoin ‘Board” or leaders than can exclude or stop countries from using the network. Another example of real world benefits of the Bitcoin Network is what’s happening in Afghanistan right now. Afghan women are receiving emergency aid in crypto as the Taliban limits their cash withdrawals. These women are going hungry and the Bitcoin network is literally saving their lives. They’ve been receiving money through the Bitcoin network because any foreign aid will be confiscated by the Taliban.
Lastly, you never hear about the real world usages of Bitcoin in the media. You also never hear about the financial struggles foreign countries are going through. Do your due diligence in becoming educated about the asset and you’ll realize why it’s the future. Remember the Bitcoin Network finalizes more payments in a day than the legacy payment rails do in a month.
Have a good week! Peace