Interestingly enough, money often has no intrinsic value. Instead, money is an object that has a value placed on it, which allows for the trade of goods and services. Some money, such as metal coins, has actual value in terms of the materials used. However, paper money is more common in the modern world and typically has no real value. Throughout the evolution of money, currency has taken several different forms.
Before money was invented, people bartered for goods and services. It wasn’t until about 5,000 years ago that the Mesopotamian people created the shekel, which is considered the first known form of currency. Gold and silver coins date back to around 650 to 600 B.C. when stamped coins were used to pay armies. Some evidence suggests that metal coins may be as old as 1250 B.C.
When there was no currency, people traded goods and services for what they needed. One farmer might trade livestock for vegetables, while another may trade labor or lumber for livestock. These transactions were the early building blocks of our modern economy and would go on to create the future of money the world knows today.
The first banks were started by the Roman Empire around 1800 B.C. These banks offered loans and accepted deposits from individuals, but would later disappear with the collapse of the empire. By the turn of the 19th century, banks had become respectable organizations within communities and learned the concept of fractional reserve banking. Since individuals didn’t all withdraw all their money at once, banks learned that they could loan more money than they actually had, which was a huge step in the history of money.
The first bank in the U.S., The Bank of the United States, was established in 1791.
In 1816, gold was made the standard of value in the country of England. What this means is that each banknote represented a certain amount of gold, so only a limited number of banknotes can be printed. This gave previously unbacked currency some semblance of value and stability. By 1900, the United States had followed suit with the Gold Standard Act. While this would lead to the U.S. establishing the central bank that plays an important role in the economy today. The government of the U.S. held the $35 per ounce price until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard.
Why did the US go off the gold standard in 1971?
The U.S. abandoned the gold standard in 1971 to curb inflation and prevent foreign nations from overburdening the system by redeeming their dollars for gold.
Now our money is broken. For a growing group of people it is getting more and more difficult to build up a notable amount of savings. They start their career with a high financial student debt. Houses have became unaffordable. You no longer receive interest on your savings for a long time. Everyone become 'poor sleeping'.
Worldwide, billions of people live under financial censorship and surveillance or high inflation. Their bank accounts are closed because they stand up for minorities or support the opposition. Or they work abroad and pay outrageous rates to send their wages back to their families. Central banks keep on print money to pump into the economies all over the world while at the same time the inflation is rising to enormous heights. This would mean the central banks should push on the buttons that are in their span of control; they need to raise interest rates on debt. In the U.S. the FED is already starting to do this in the 2nd quarter of 2022, but the Europe's Central Banks (ECB) hands are shackled because there are to big differences in the heights of the interest rates between the northern and the southern countries of the EU. The monster of rising debt rates will push the southern countries of the EU into the abyss, while the northern countries can survive. The EU cannot follow a general policy here without tearing the Euro apart.
Bitcoin could be part of the solution.
Bitcoin is a radically new monetary system ideally suited to a future in which we do more and more digitally. It is programmable money, an open protocol that anyone can build applications on, similar to the internet protocols we use every day. Besides this, it brings back the element of the fact that there is only a limited amount of the monetary currency and it is decentralized.
There will never be more than 21 million bitcoin. This limit, known as the hard cap, is encoded in Bitcoin's source code and enforced by nodes on the network. Bitcoin's hard cap is central to its value proposition, both as a money and an investment.
What is decentralization? A good or service is decentralized if it is run by a collective of participants using majority rule. In the case of bitcoin, its attributes, such as the total supply of bitcoins, are determined by the majority of its network participants.
The Lightning Network is a second layer added to Bitcoin’s blockchain that allows off-chain transactions, i.e. transactions between parties not on the blockchain network. Multiple payment channels between parties or Bitcoin users make up the second layer. A Lightning Network channel is a two-party transaction method in which parties can make or receive payments from each other. Layer two enhances the scalability of blockchain applications by managing transactions outside the blockchain mainnet (layer one), while still benefiting from the mainnet’s powerful decentralized security paradigm.
Each Bitcoin is basically a computer file which is stored in a 'digital wallet' app on a smartphone or computer. People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people. Every single transaction is recorded in a public list called the blockchain. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.
What Is a Block (Blockchain Block)?
Blocks are data structures within the blockchain database, where transaction data in a cryptocurrency blockchain are permanently recorded. A block records some or all of the most recent transactions not yet validated by the network. Once the data are validated, the block is closed. Then, a new block is created for new transactions to be entered into and validated. A block is thus a permanent store of records that, once written, cannot be altered or removed.
How are Bitcoins created?
In order for the Bitcoin system to work, people can make their computer process transactions for everybody. The computers are made to work out incredibly difficult sums. Occasionally they are rewarded with a Bitcoin for the owner to keep. People set up powerful computers just to try and get Bitcoins. This is called mining. But the sums are becoming more and more difficult to stop too many Bitcoins being generated. If you started mining now it could be years before you got a single Bitcoin. You could end up spending more money on electricity for your computer than the Bitcoin would be worth.
Why is Bitcoin safe?
Reason #1: Bitcoin uses secure cryptography
How is Bitcoin secure? Bitcoin is backed by a special system called the blockchain. Compared to other financial solutions, the blockchain is an improved technology that relies on secure core concepts and cryptography.
Blockchain uses volunteers — lots of them — to sign hashes that validate transactions on the Bitcoin network using cryptography. This system makes it so transactions are generally irreversible, and the data security of Bitcoin is strong.
This is just a short summary of Bitcoin. If you want to learn more of the details, you can read the original paper that describes its design, the developer documentation, or explore the Bitcoin wiki.
Reason #2: Bitcoin is public
While being public may not sound safer, Bitcoin’s ledger transparency means that all the transactions are available to the public even if the people involved are anonymous. That makes it very difficult to cheat or scam the system. With all the data publicly available, there’s nothing for bad actors to “hack in” and see — all transactions are public to everyone. Compare that to the common data breaches of traditional companies, and Bitcoin starts to sound a lot safer. When you buy or sell bitcoin, you don’t add any personal information to the blockchain like your passwords, credit card numbers, or your physical address, so there’s nothing to leak. That’s very different from when hackers break into traditional financial systems — just ask the folks over at Equifax.
Reason #3: Bitcoin is decentralized
Bitcoin’s distributed network has over ten thousand nodes all over the world that keep track of all transactions happening on the system. This large number of nodes ensures that if something happens to one of the servers or nodes, others can pick up the slack.
It also means that trying to hack into one of the servers is pointless. There’s nothing there you could steal that the other nodes and servers couldn’t prevent, unless you happen to control 51% of the nodes — not impossible, but extremely unlikely.
Reason #4:
Being public and decentralized means very little if you have to be allowed in by some authority. With no regulatory body, Bitcoin is open to everyone. Its lack of permissions keep Bitcoin open and fair for everyone.
Sources:
https://mint.intuit.com/blog/investments/the-history-of-money/
Book: Ons geld is stuk, Auteur: Peter Slagter & Bert Slagter
https://www.avg.com