I have often wondered about a new currency called bitcoin. It seemed strange to me that it would be coming from many people who are against fiat money and something not based on a gold standard. However, Ben Swann recently broke down bitcoin in recent video. Here’s the basics in case you are interested in the bitcoin market, and a definitive answer to whether or not bitcoin is real capitalism
Capitalism is defined as:
An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.
Swann breaks down the simplest definition of what bitcoin is:
“Bitcoin is a digital, decentralized currency, which is traded on an open-source, peer-to-peer network. Bitcoin can be bought with dollars or Euros, or just about any currency. Then it’s traded and can be sold in any currency.”
“What makes bitcoin so unique,” Swann adds, “is virtually an anonymous currency. To be clear, nothing is entirely anonymous, and there are ways to connect a bitcoin user with their bitcoin wallet. It’s certainly more difficult than dollars.”
Bitcoin has been growing in popularity over the past few years. However, like many things, including the stock market, it has been volatile at times.
Swann said that the media has not caught onto bitcoin and really begun to talk about it until recently with the FBI shutdown the website The Silk Road and arrested its owner. The site was best known for a place where illegal drugs were bought and sold anonymously with bitcoin.
Many claimed that after what too place with Silk Road, bitcoin was done. However, the reality is quite the contrary.
In fact, bitcoin’s value has soared from 1 bitcoin equaling just under $1 just two years ago to 1 bitcoin being worth $200 today. Keep in mind the volatility of the bitcoin market though.
In fact, the Guardian just reported this incredible story:
The meteoric rise in bitcoin has meant that within the space of four years, one Norwegian man’s $27 investment turned into a forgotten $886,000 windfall.
Kristoffer Koch invested 150 kroner ($26.60) in 5,000 bitcoins in 2009, after discovering them during the course of writing a thesis on encryption. He promptly forgot about them until widespread media coverage of the anonymous, decentralised, peer-to-peer digital currency in April 2013 jogged his memory.
Bitcoins are stored in encrypted wallets secured with a private key, something Koch had forgotten. After eventually working out what the password could be, Koch got a pleasant surprise:
“It said I had 5,000 bitcoins in there. Measuring that in today’s rates it’s about NOK5m ($886,000),” Koch told NRK.
With that in mind, why do people use bitcoin?
“Bitcoin’s greatest value is that it cannot be manipulated by governments or central banks,” says Swann. “It cannot be changed by monetary policy coming from the IMF (International Monetary Fund). If governments don’t like bitcoin, they can’t come in and raid the bitcoin offices and take away the bitcoin bosses because there is no centralized authority from which to shut the system down.”
While Bitcoin isn’t backed by anything (it’s a fiat currency), understand that the US dollar really doesn’t have anything backing it either.
It seems that the most attractive thing about bitcoin is that it may be the world’s best example of capitalism. We’re not talking about crony capitalism. In other words, it’s a system controlled by users, traded at will, completely voluntary to participate in, and cannot be controlled by governments, bankers, corporations or even the United Nations.
It’s simply people trading with people.
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