Pranshu Kumar Agrawal
Pranshu Kumar Agrawal

Pranshu Kumar Agrawal

Understanding Bitcoin's Hidden value

Photo by Quantitatives on Unsplash

Understanding Bitcoin's Hidden value

Pranshu Kumar Agrawal
·May 15, 2022·

3 min read

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Table of contents

  • Intro
  • Fiat Currency
  • Problems
  • Is Bitcoin the solution?
  • Outro

Intro

Everyone on this planet has already heard about Bitcoin in one way or another. It's no more hidden that this thing has taken the world by a storm and I am not talking about that storm that just comes and goes. It has brought a storm that has the potential to change everything.

I will refrain to talk about the Market value of Bitcoin as in my opinion that is just a waste of everyone's time because at the end of the day you have to understand that 1BTC will always have the same value as 1BTC. It's not like the existing fiat currency whose value is eaten up by inflation.

So let's discuss some of the important terms first.

Fiat Currency

Well, the normal currency that we use in our daily life is Fiat Currency. For example- Indian Rupee, Dollar, Pound, etc. Now we call it Fiat because it is backed by Air. I mean literally because the Air might be in limited supply but the Fiat currencies backed by it aren't.

What are you saying Pk?????

giphy (2).gif

Ok, let's look back in time. There was a thing called a Barter system where we traded personal stuff with each other depending on the requirements of our own. For example- Someone had 50kgs of wheat and he needed sugar so he traded some quantity of wheat with Sugar with another person. Cool. It has its own flaws though.

Then this got replaced by exchanging things that were equally valuable to the people like Gold, silver, copper, etc. in form of coins. So 1 gold coin was equally valuable to all the people having that coin.

giphy (4).gif

Gold is made the standard of currency because it has some unique properties like:

  • Divisibility
  • Recognisablilty
  • Durability
  • Portability
  • Scarcity

Now gold as a currency was going well until people mutually came to an agreement that they should use something that is backed by gold and also easier to carry around and store, thus inventing paper currency( not today's Fiat Currency).

Until the 1970s( I guess) the paper currency was backed by Gold. Let's say I have 1 kilo of Gold safely stored with me and I have a paper currency signed by the federal reserve proving that I have 1 kilo of gold so I can purchase stuff based on that paper currency which essentially was the essence of Money.

But after the 1970s the government decided to take the money off of the gold standards ultimately backing it with nothing. It is true. The currency that we use today isn't backed by anything at all. That's all about fiat currency for this blog. Moving on now.

image.png

Problems

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Ok, it sounds funny but the above photo isn't a meme it's a fact. We are currently living like this only. And have you forgotten about

All these and many more incidents where our money is being used by the government according to their interests and just decreasing the purchasing power of the paper we have and hence calling it mere inflation.

image.png

Is Bitcoin the solution?

Eventually yes.

Outro

I have kept this blog unfinished as Bitcoin has a vast amount of value and it will be just too much to add in just one blog. So do keep an eye on my upcoming blog posts describing its values one at a time.

Thanks for reading

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