Many ideas circulate about the reason behind the success of Bitcoin. As many people think only the blockchain technology is enough to boost the successes of Bitcoin. Transactions around the globe are registered within moments and validated within minutes.
In addition there is the consensus principle combined with the Proof of Work – mechanism. The Bitoinnetwork can be active on many servers building a loose network, that continues to work as long as one single server is online, what makes it very resilient. The proof of work helps the network to set the latest transactions within the network.
Last but not least there is the “deflationary” (in fact it has a decreasing inflation) currency Bitcoin. But the specialty behind it is that Bitcoin is defined by a hundred percent transparent set of rules that everyone can participate in to improve.
Looking at this raw description it is maybe understandable what makes bitcoin so special from a technical point of view. But to understand the “success” of Bitcoin, we have too look at the status-quo before 2009.
Before Bitcoin private money already existed. Bigger firms often had their own currencies that were mostly vouchers to buy goods and services at their own store. Private money that was used by more economic participants were mostly regional currencies that were only valid in small areas.
Here an intrinsic principle for money is shown. Only if a ledger (paper, digital or virtual) can accumulate enough trust it is used in a broader space. In other words: only when the people have trust that they get something back for their part of the ledger, the ledger will accepted. Another possibility to make a currency accepted is to define it as the currency a tax has to be payed in. These currencies are in competition to the private money, as both are only getting their worth out of the actual usage.
But how has Bitcoin accumulated so much trust in the last years?
One important factor is the open structure described earlier. But the more important reason is the crisis from 2007/2008 which was a pure financial crisis. This crisis of 2008 was inevitable as inflationary money always blow up bubbles that will burst during rather spontaneous events. The Central Banks had pumped massive amounts of money in the economy that build up extreme bubbles. As they burst the fiat money that is build upon the same principle inside every country worldwide, suffered a huge trust loss. Supporting right wing parties all over the world.
Although history since 2009 had shown that Bitcoin also has the tendency to build up bubbles it still has a big support. The usage as money is actually much closer to the state predicted by skeptics. This is most likely due to its rather deflationary character. Money that increases in worth over time is hoarded and not used to exchange it for goods and services.
So, Bitcoin has many facets that helped to make it trending but why is it revolutionary?
The idea here is that we as a society are suffering under the selfish and short-term fiscal policy of the central banks. Most likely they just do not know better and are so far away from the everyday lives of the affected citizens, that they see their selfish interest as the base that holds the society at the brink to chaos. In fact only a few realize that the level of debt was unsustainable from the first banknote on that was brought into the world as debt with interest.
While the fiat system is not threatened by forces that only see the central banks as the cause of the problem it is very well threatened by private money.
And this is where Bitcoin – and especially its derivatives the Altcoins – comes into play. They have the potential and the trust to include many people that are cut of from money supply by the rigid fiscal policy of the central banks that even accept wars to keep up the status-quo.
Now we have the technology, we have the knowledge, we have the key. Will we have enough trust in ourselves to open up the lock and free ourselves from the repression of inflationary fiat money?