It's easy to get a little lost when trying to first understand Bitcoin. Part of the reason is that most of us are introduced to Bitcoin AND 'cryptocurrency' as a whole. It's a lot to take in, and it's natural to get confused.
So I thought I would take a moment to remind everyone why Bitcoin is a genuine technological innovation.
If I want to pay someone in cash, it's as simple as handing them a $5 bill. I give them the money, and now it's theirs. Digital payments today don't work that way. In order to send someone a payment digitally, a bunch of intermediaries get involved.
At a minimum, there are two – my bank and your bank. Usually, there are more though, like Zelle, Visa/Mastercard, Cash App, Venmo, or PayPal. To pay people digitally, we need to get routed through a bunch of financial companies. It works fine for small and local payments, but it is nothing like handing someone a dollar.
What if you wanted to send a family member in Japan or Norway $15,000? How would you even do that? None of these higher-level intermediaries, like Paypal, would let you pay that much. Odds are the recipient's bank account doesn't accept USD, and even if they do, it will take up to a week for the wire transfer to clear. So you have to go through another intermediary like Western Union instead and pay fees there as well. It's just complicated.
Bitcoin was created to make digital payments more like handing someone a $5 bill than the intermediary-driven system we have today. When you send a payment through the decentralized Bitcoin network, there is no intermediary the payment has to run through. It is fully peer-to-peer and direct.
If I want to send $15,000 in Bitcoin to someone in Japan, I can do it immediately, without going through a single intermediary. This is the innovation of Bitcoin. Digital payments without intermediaries.
You need to understand that before Bitcoin, this simply was not possible. That alone is valuable. How valuable? Well, now that is up for debate. And there is undoubtedly more to the Bitcoin picture than just what I described here.
But just for grounding purposes – that is the innovation. Digital payments that don't need to run through any bank, government, or company. To make sending money over the internet just as direct as handing someone a dollar bill.
Maybe you don’t need that ability, and that’s fine. But many people do. And for the first time ever, it’s now possible, because of Bitcoin.
- Sean M. Cover
Sean Cover is the founder of 808 Digital. After years of experience in strategic finance and program management, Sean became fascinated by the history of money and monetary systems. Sean engages in daily reading and research about these topics, which has allowed him to develop a deep understanding of money, economics, and the effects of monetary systems on an economy.
Follow him on Twitter at: www.twitter.com/seancover