What Is Bitcoin, Anyway?
In 1995 I launched a glossy lifestyles magazine called Prestige Caribbean Magazine. The idea was to showcase the beauty and attributes of the Caribbean and its people.
The project got off to a fast start and before I knew it we were in Canada, Europe and several Caribbean islands. The magazine even landed us a visit with some editors at the posh Condé Nast Traveler on Madison Avenue, New York City.
Right around that time a fellow entrepreneur approached me with a novel idea. Our interchange went something like this:
“Wayne, I love this magazine, but I really believe you’re missing out on a big opportunity.”
“Really? Tell me about it.”
“There’s this new technology called the Internet …”
“The Internet. Your magazine should be on the Internet. Let me tell you all the reasons why.”
“Woah, dude. This is a magazine. Get it? People want to lay out on the beach or curl up on a Sunday afternoon with their favorite rag. They’re not gonna sit at a computer to read a magazine.”
“I understand what you’re saying, but you should look into it.”
And that was that.
I lost touch with him. I learned that he’d relocated—probably to Silicon Valley where he no doubt became an Internet mogul.
I, on the other hand, ventured on without the Internet. I pushed the paper product as far and as fast as I could—until I ran out of runway.
Sometimes I wonder what could have been.
But this article is not about magazines. It’s not about start-up businesses or even about nostalgia. We’re talking about Bitcoin, right?
And what does Bitcoin have to do with any of this?
My short (and very simplistic, but hopefully useful) answer is that Bitcoin is to money what the Internet is to paper magazines. Bitcoin has disrupted the world of money as we know it, and this trend will not stop.
Governments will seek to control it. Individuals will seek to manipulate it. Speculators will hype it. Traditional banks will pooh-pooh it, but, just like the Internet of 1995, nothing is going to stop it.
Before I tell you why, a brief explanation of what Bitcoin is.
That was my mistake in 1995. I didn’t understand what the Internet was, and so I was trapped in my own definition of what a magazine is.
I grew up reading magazines and comic books. I loved to dog-ear the pages and I even loved the smell of them. Anyone who loves the atmosphere and smell of a great library knows what I’m talking about.
I was that kind of guy. I couldn’t wrap my mind around a redefinition of what a magazine could be. I didn’t even try.
I wasn’t alone. It’s not like anyone in my circle saw it. We were all content with the way things were at the time. Twenty-three years ago, there were few people who understood or cared to understand the Internet. In fact, Bryant Gumbel (now infamously) asked on national TV, “What is Internet, anyway?”
So, in homage to Bryant and everyone who’s asking the same question of Bitcoin in 2018, here’s my down and dirty explanation.
What Is Bitcoin?
According to the whitepaper that established the Bitcoin protocol, it is simply “a peer-to-peer electronic cash system.”
Think of it as “a purely peer-to-peer version of electronic cash [which allows] online payments to be sent directly [over the Internet] from one party to another without going through a financial institution.”
In other words, Bitcoin is a digital or electronic currency. It allows you to send or receive payments from anyone connected to the Internet, without the need of a traditional bank or financial institution.
As such, Bitcoin, and other digital currencies following on its heels solves a lot of problems. Imagine that you’d like to send money to business partners or loved ones overseas.
To do so, you’d have to engage in a bunch of intra and interbank transfers to get your currency transmitted, exchanged, and securely delivered to your intended recipient. All of this at significant costs and time delay.
Imagine that you can do the same transaction directly from your desktop or smartphone, without involving a financial institution, and without expensive processing fees. You simply hit “send” and your payment arrives overseas, securely in the account of your intended recipient, for a minimal fee.
It’s a safe and effective means of moving money, engaging in borderless commerce, and storing value. Because it does these things so well, it’s also highly valued as an asset. In fact, I would go as far as to describe it as a new asset class. Some pundits have described it as digital gold.
For these reasons, I believe Bitcoin and other digital currencies (and the blockchain technology beneath them) are here to stay. To ignore digital currency as a “scam” or “Ponzi scheme” in 2018 is the equivalent of misunderstanding the emergent Internet in 1995.
Does that mean that you should run out and buy up all the Bitcoin you can?
Let me remind you of the Dotcom Bubble that lasted from roughly 1997 to 2001. Bitcoin may be in a similar bubble. That makes it extremely volatile.
And just as with Internet bubbles, real estate bubbles and even tulip bubbles of the past (yes, this happened), you’ve got to use sound judgment whenever you part with your money.
So here are some tips as you peruse this brave, new world:
1. Do your homework. If you can’t explain it, you don’t understand it well enough. If you don’t understand it, don’t invest until you do.
2. Avoid hype. Bitcoin is neither the Savior of the world nor is it the Devil. Bitcoin is a relatively new technology. It has (in my opinion) great promise, but lots of challenges.
3. Don’t risk more than you can afford to lose. Don’t risk at all, if you don’t already have a sound financial footing. Start with the basics of building your financial house before speculating in Bitcoin or any other volatile asset.
4. Dump the get-rich-quick mentality. I’ve read about people who struggle to pay rent, buying digital currencies on credit cards hoping for the “Big Score.” No offense to anyone reading this who may have gone this route, but that approach is plain dumb. Every year someone hits the lottery, but what are the odds?
In the years ahead, I believe Bitcoin and other digital currencies will disrupt how we all think about and experience money, just as the Internet disrupted publishing, retail, real estate and every other industry. I also believe that early adopters will do well in this sphere. Plenty will also lose their shirts.
I hope this article helps position you in the first group.
Thanks for reading my post. I'm an attorney and Christian minister. I'm also a #keynote #speaker and an author. I write about business, life and faith, focusing on how to know God's vision for your life so that you may fulfill your purpose.
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