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Why Bitcoin is more than a currency – and why it represents the most important invention in the modern financial system.
To understand what Bitcoin is, we first need to understand what money actually means. At its core, money is stored working time or stored labor. You have to work to earn money – and that money can then be saved and used later.
From this stored value, you can pay others to provide services for you. Money is the universal medium of exchange for labor and value.
There are many different forms of money and currencies. In Germany it is the Euro. But in a broader sense, real estate, gold, stocks or other assets can also serve as stores of value.
The central problem with modern money is inflation. Governments and central banks can create new money at any time – without any corresponding value behind it.
This wasn't always the case: until 1971, the US dollar was backed by gold. When President Nixon abolished the gold standard, money became a pure object of trust – so-called fiat money.
"Money slowly but surely loses its value – not by accident, but by design of the system that created it."
The result: every Euro you save today will have significantly less purchasing power in 10 years. Inflation silently erodes your stored labor.
Inflation means that the same amount of money buys fewer goods over time. At an annual inflation rate of 3%, your money loses half its purchasing power in 24 years.
People have always searched for a way to safely store their labor. However, the classic alternatives all have significant weaknesses:
Bitcoin was published in 2008 by a person or group under the pseudonym Satoshi Nakamoto – in the middle of the global financial crisis. Nakamoto designed a system that works without banks, governments or intermediaries.
On January 3, 2009, the first Bitcoin block was mined. In 2010, the first real transaction took place: 10,000 Bitcoin for two pizzas – today those coins would be worth hundreds of millions of euros.
Bitcoin is not a company, not a stock, and not a bond. It is a protocol – like the internet – that cannot be controlled by anyone and runs simultaneously on thousands of computers worldwide.
Bitcoin is still highly volatile – the price can fluctuate significantly in a short period of time. This is because Bitcoin is still a relatively young asset and the market is still in the early adoption phase.
Historically, Bitcoin has always reached new all-time highs in the long run despite all setbacks. Anyone with a long investment horizon who has held for at least 4 years has never made a loss with Bitcoin.
People have searched for centuries for an ideal way to store value. Bitcoin fulfills these requirements like no other asset before it. It is limited, decentralized, transparent and globally accessible.
Volatility is not a weakness of the system, but a characteristic of its early phase. With growing adoption, Bitcoin will become more stable – and its intrinsic value as the ultimate store of value of the digital age will become ever clearer.