When someone edits the list, they are just changing the balance of their bitcoin.
Why would anyone care about having bitcoin? Don’t we want U.S. dollars?
This question makes us think about what money actually is.
Ask yourself: Why exactly do you want dollars? I’m going to assume your answer is a combination of the statements below.
It’s a currency that a lot of people use.
I know I can use it to buy what I want.
I expect it to hold its value into the future.
These are some of the most important attributes we look for when determining what currency we want to use.. and the U.S. dollar has a clear advantage. It seems to check all of these boxes, so why would we ever need a different currency? And more specifically, why bitcoin?
The answer to this question will have a much wider range of opinions, so we won’t try to convince you one way or another. But we will highlight a key advantage that bitcoin has over other currencies.
That advantage is limited supply.
Every major currency on the planet has a supply that is constantly growing. There will always be more dollars, more euros and more yen created over time. There are good economic reasons for this growing supply of money, but there are also some issues.
Let’s say that Dave and Erin live on Apple Island. There were once hundreds of apple trees on this island, and Dave saw this as an opportunity. He cut down almost every tree and built himself a house!
He knew that Erin might want a place to stay too, so he offered to rent out his 2nd floor to her. Since apples are the only other thing on this island, they use apples as currency.
Dave decides 10 apples per month is a fair amount for rent, and Erin agrees. Now Dave has food and Erin has shelter, things seem to be working out well.
After a rainy summer, their remaining apple trees are thriving. The trees are now producing three times as many apples, but there’s a problem…
Apples are practically falling into Dave’s house after the favorable weather. He can now collect apples with much less effort, and 10 apples per month for Erin’s rent is starting to seem like it’s not quite worth it. He decides to raise Erin’s rent to 30 apples per month. It’s only fair, right?
Increasing the supply of currency causes this same problem.
Erin now has to collect three times as many apples to pay her rent, but she doesn’t seem to mind because they are getting easier to collect. Unfortunately Erin fails to realize that as long as there are more apples being produced… she can never afford to be the owner of that house. If Dave can collect apples with ease, why would he trade his house for apples? Either way, life goes on.
Until one day, Erin is out collecting apples and stumbles upon a boat that has washed up on shore. In all her time on Apple Island, she’s never seen this happen before. Erin is the proud new owner of a boat and finally has something of value besides apples.
Dave is astonished by the boat, and again, he sees potential. He starts wondering how long it might take for another one to find its way to their island. He would love to get out and explore the world, but Erin is the only one with that option right now.
He knows Erin has always been fond of his house and the island, so Dave decides to offer a trade. Clearly Erin will not accept apples for the boat, there’s already too many of them.
Instead, the trade will be Dave’s house for Erin’s boat.
This trade is only possible because Erin had something scarce.
As long as Erin’s only currency was becoming less valuable, her chances of being able to afford the house were almost zero. How could she possibly collect enough apples to convince Dave to sell his house to her? The value of apples is always going down and the value of the house is always going up.
How does bitcoin fit into all of this?
As we mentioned before, bitcoin has a limited supply. Currencies such as the dollar, euro and yen.. do not. They are the apples, and there is no telling how many will be created.
Bitcoin is the boat. It’s much more rare than apples and no more are going to be created. This allows you to own something that is not plentiful. It stops the cycle of needing to gather more and more apples just to pay higher rent for the exact same room.
Of course, the world is a more complicated place than Apple Island. Limited supply is just one thing to consider when deciding whether or not you care about having a balance of bitcoin.
Remember the things that make a currency useful, this is really all you need.
It’s a currency that a lot of people use.
I know I can use it to buy what I want.
I expect it to hold its value into the future.
So in short, the bitcoin list contains names and balances. On this list we keep track of how much bitcoin (₿) everyone has, not dollars.
The value of bitcoin is based off of what other people think it’s worth, just like the dollar. Bitcoin is infinitely more rare than the dollar, earning it the nickname.. “digital gold”.