Find out why this is a major network advantage
I don’t know who needs to hear this….. but physical Bitcoin is not a thing, and anyone who tries to suggest it is, is undoubtedly trying to scam you.
The feature image of this article is one of my pet peeves in the crypto space, as it is so widely circulated that many people entering crypto believe the final state of Bitcoin are physical coins that can be exchanged in person. This has led to many physical Bitcoin scams the world over.
The irony of this is that Bitcoin succeeds precisely because it does not have physical form, not in spite of the fact.
No Physical Form: The Many Advantages
Not only does Bitcoin not have a physical form, and by extension will never have a physical form, it is in fact a strength of currency design and not an oversight.
Some of the advantages include; portability, durability, divisibility and resistance to counterfeit units. All of these factors make Bitcoin stronger as a sound currency as compared to fiat currencies (AUD, USD, etc).
Currencies must be easily transferred between participants in an economy in order to be useful. In fiat currency terms, this means that units of currency must be transferable within a particular country’s economy as well as between nations via exchange.
The biggest impediment to free movement of money in a traditional sense is that banks operate as the border control of your money. That is, the limit on the amount of money you can access, send or where you send that money to. If you want to send that money overseas, you are charged excessive amounts, and the money can take weeks to reach its destination. For the most part this was considered the norm, but the reality is a transaction from Brisbane should take the same time whether it is going to Dublin or Sydney.
With Bitcoin and all other blockchain currencies, you control your own money, and what you want to do with it. The blockchain allows users to send money all over the world instantly, at a comparatively cheap cost with no intermediaries to act as bottlenecks. The fact that users control their own assets means they can also act how a bank traditionally would and lend these assets out to generate yield. This is how banks have made infinite money using it’s clients money this day one, and is why Decentralised Finance (DeFi) is exploding in popularity.
To be effective, a currency must be at the very least reasonably durable. That is, coins or notes should not be made out of materials that can easily be mutilated, damaged, or destroyed, or which degrade over time to the point of being unusable.
Even though this is obvious, and governments make efforts to pre-empt this, we all know that money is routinely damaged, destroyed and counterfeited. The Australian government is actually leading the way globally on durable currency, by printing its notes in polymer. This makes the nation’s banknotes totally waterproof, hard to counterfeit and relatively cleaner because they are resistant to moisture and dirt. Countries such as Canada, England and Vietnam have followed suit.
However these notes are still obviously not perfect. Digital forms of payment are not susceptible to these physical harms in the same way and for this reason, Bitcoin is tremendously valuable.
In short, Bitcoin cannot be destroyed or eroded in the same way that fiat currencies can.
While it is true that Bitcoin has a hard cap of 21,000 units, each individual bitcoin is divisible by 100 million. The smallest unit of Bitcoin is referred to as a Satoshi, and can be thought of as the cents that makes up the Bitcoin dollar. If Bitcoin is to become more broadly traded and become a financial standard, people will talk about the value of Satoshis as an entire unit of Bitcoin will become such a large amount of money.
Fiat currency has no business in being divisible, as it is not designed to appreciate in value beyond it’s unit amount. Unfortunately due to such broad global money printing, and the effects of inflation the purchasing power of fiat currency is eroding year on year as the supply grows.
It is not widely reported, however counterfeit money is a larger issue in Australia than many realise. Globally it is of course a multi-billion dollar issue annually. The Reserve Bank — responsible for production of the legitimate currency and charged with maintaining its integrity — said it typically receives around 30,000 counterfeits a year.
While this might not seem like alot, it was further noted that an average retail business would need to sell around $2,200 worth of goods or services to recoup the loss sustained through a single $100 counterfeit banknote. Based on this it is easy to extrapolate the danger of counterfeit notes to businesses in a much broader sense. A million dollars of counterfeit money could impact the community to the tune of $22.2m in damages.
However the broader dangers occur in the lack of certainty around viability of cash transfer as counterfeiting becomes more sophisticated. The RBA notes that counterfeiters are producing less notes but they are of higher quality than ever before, which makes detection a difficult and costly exercise.
A Bitcoin cannot be counterfeited, as there is a list of every transaction that has taken place and the chronological order in which they took place on the Bitcoin network. This list is called the blockchain and every Bitcoin user has access to this public ledger which acts as a form of ‘checks and balances’ for the Bitcoin network. This self-regulatory nature of Bitcoin is one of the key aspects of having a decentralized currency, and why it can never be susceptible to corruption or fraud. Bitcoin has no physical form by design, and the benefits make it not only more secure, but also more transparent. All steps towards sound money.