This article focuses on the most important quality of Bitcoin, decentralization. By eliminating third parties or centralized conflicts of interest, Bitcoin remains free from the grasps of corruption and bad policy.
Bitcoin and Decentralization
Decentralization is the most important quality of Bitcoin. After all, the immutability, predictability of inflation, security, and hard money qualities come second. What makes Bitcoin different than any other asset, and different than any other digital asset is the immensely spread-out decentralization. The more people mining Bitcoin, the further away from centralization Bitcoin moves. Bitcoin recently experienced its highest hash rate of all time.
Bitcoin hash rate increases when more people are mining the cryptocurrency. As more people mine, the algorithms become more difficult to solve, requiring more computing power. This equates to less Bitcoin per block per miner. While this reduces the profit of any random miner, it highly increases the security of the network. More network participants equals more validation; more computers double checking code and verifying validity. This is the power of Bitcoin.
This process is why Bitcoin has become the safest, largest digital asset. No other crypto asset comes close, even Ethereum is leagues behind regarding decentralization. But why does this matter? This process involves no government, no bank, no regulatory body. Users can trade peer to peer, this is true supply and demand. With no governing body to manipulate the rules of the game, the inflation cannot be changed. Bitcoin has a predictable code, with predictable inflation, halving periods, miner difficulty increases and more.
This predictability brings increasing confidence in the asset year after year. If we knew our US dollars would inflate at a guaranteed rate of 1% per year, many larger net worth individuals would likely hold more cash. If we knew that third parties could not influence the monetary policy of the dollar, our confidence would grow. Unfortunately, the government has the power to inflate the US dollar to oblivion, to fund their needs whether it be hiring more IRS workers or building a new development. Ever since we moved away from the gold standard the dollar has plummeted in purchasing power.
Purchasing Power
Because of this decentralization and security, Bitcoin reigns supreme when attempting to take financial freedom into one’s own hands. Bitcoin allows users to transfer funds and store value in the most secure manner possible. The decentralization is key to the prosperity of the asset. Governments have admitted that they have no power over Bitcoin since it cannot be stopped. Since the blockchain continues on with no regard for the governments failed ideas, the asset is attractive to users who want to free themselves from the grasps of corruption.
The US dollar only became so inflated because the government chose to print away its value. Even gold has inherent inflation. As more people spend their time finding and mining gold, more gold is found per year as a percentage. Banks hold massive reserves of gold ready to sell on the market if the price rises too high, this is to protect the value of the dollar [1] . With the US dollar so far ahead of other world currencies in regards to inflation, other nations will have little choice for store of value.
Governments will have to choose between the ever-inflating US dollar, Gold which suffers from inflation, or Bitcoin which has a sound, mathematically coded monetary policy. The chart above shows about eight years of purchasing power metrics Bitcoin vs. US dollars. With an average inflation of about 2.5% per year for the dollar, Bitcoin has risen slowly against it. The last 10 years has had at least 25% inflation according to [source] . Inflation metrics are suppressed by outdated and inaccurate mathematical models. The real inflation over the past 10 years is likely at least 50% higher. Please remember to stay safe out there, none of this is financial advice.
[2] https://www.in2013dollars.com/us/inflation/2012?amount=1#:~:text=Value%20of%20%241%20from%202012%20to%202022&text=The%20dollar%20had%20an%20average,Labor%20Statistics%20consumer%20price%20index.
