What Christians Should Know About Bitcoin and Cryptocurrencies
Bitcoin has been all over the news and if you have anything invested in it your crypto portfolio has literally looked like a rollercoaster with so many highs and lows. 🎢
Some Christian do know about crypto, yet most don't, but "we all likely will in the future" is probably the best answer.
Bitcoin appeals to some Christians because of its economic benefits, like free and easy international transfers.
But it's a tricky subject, particularly the morality of speculation.
In this article, I'll present a few facts about bitcoin in a straightforward manner to assist believers in making their own decisions. Warning this is a fairly long article but it's a good read and you should know about btc. Here's what we'll cover:
- What is Bitcoin
- What makes it valuable
- Is it the new gold?
- How does it work?
- Privacy concerns
Links:
Coinbase: You can trade crypto-only with a Coinbase account. If you happen to sign up we both get $10. 🥳
Robinhood: If you would like your portfolio all in one place you can buy and sell a few cryptocurrencies on Robinhood. Same on Robinhood but we each get a random stock. 🎉
What Exactly is $BTC? 🤔
Something to keep in mind is that even when we invest in stocks or hold money in a bank account - technically that money is just a number in a ledger. When we buy a stock we don't literally get stock certificates anymore.
The name of the world's most successful cryptocurrency's founder is unknown. Satoshi Nakamoto (Satoshi means "reason" in Japanese) self-published a nine-page paper in 2009 explaining how a digital currency could be created without the need for centralized third-party financial institutions (banks).
A third party acts as a mediator between the buyer and the seller for the purpose of electronic funds transfer in most forms of e-commerce. This mediation not only raises transaction costs, but it also gives the financial institution the ability to reverse payments, giving it the final say in any transaction. Although this function is required for the current trust-based online commerce system, it conflicts with one of Nakamoto's core values: absolute privacy.
According to Nakamoto, what was required was an electronic payment system based on cryptographic proof rather than trust. "Any two willing parties can transact directly with each other without the need for a trusted third party," according to the system. Without the use of a third-party intermediary, the buyer and seller could remain completely anonymous, exchanging goods and services without revealing any personal information.
Proof-of-work (POW) systems were created by computer scientists to protect network services from abuses such as spam and denial-of-service attacks. Before access to the network is granted, the system requires proof that some time-bound function has been completed (generally, solving a computation that requires computer processing time).
Hal Finney, a computer scientist, coined the term "bread pudding protocol" in 1999. A POW solution can be repurposed for other uses, such as the creation of a digital token, just as stale bread can be repurposed to create a new food (e.g., bread pudding). For Nakamoto's bitcoin system, such repurposed POWs—or RPOWs—form the basis of cryptographic proof. Because bread pudding isn't the most inspiring metaphor for a currency, bitcoin users refer to the process of creating new currency as "mining."
What Makes Bitcoins so Valuable?💰
The vast majority of global currencies are fiat money, or money that has value solely as a result of government regulation or legislation. Fiat money is not legally convertible into anything other than itself, such as gold or silver, and it has no fixed value in terms of an objective standard; its value fluctuates due to a variety of economic factors.
Commodity money, on the other hand, is a form of money that can be converted into a commodity for use in production or consumption. Minerals (e.g., gold or silver), found objects (e.g., shells or stones), or consumer goods can all be used as commodity money (e.g., ramen noodles in prison). Commodity money has lost favor because it limits the scope for monetary policy and other actions that alter the value of money, despite the fact that it has been the dominant medium of exchange for more than 2,000 years.
Bitcoins are a commodity form of money. Bitcoins are nothing more than digitized "bits" created by a laborious process on a decentralized network of computers, so they have no intrinsic value. However, because the supply is limited (they are a rare commodity that is difficult to produce) and their use as a medium of exchange is recognized, their users assign a value to them. The value of bitcoins is solely determined by how much people believe they are worth.
Is Bitcoin The "New Gold?" ⚜️
Bitcoin is similar to Gold 2.0. Tyler Winklevoss is quoted as saying.
No. While bitcoin appeals to many of the same people who once preferred gold as an investment vehicle, it bears little resemblance to gold. Because the price of gold is backed by... gold, gold is commodity money. Gold is also a physical asset with real-world applications. Bitcoin is an intangible asset whose monetary value is solely determined by the amount of hard currency willing to be exchanged for it.
Gold also has the advantage of being a long-term illusion: gold is valuable because we humans have convinced ourselves that gold is valuable for thousands of years. We could essentially give the same value to let's say - cement. Before Bitcoin and other cryptocurrencies can create a similar "money delusion," they have a long way to go.
How Does it Work? ⛓
A user must install a "wallet" on their computer or mobile phone in order to use the bitcoin system. The wallet generates a bitcoin address (similar to an email address) that the user can use to send and receive payments once it is installed. Bitcoins are divisible to eight decimal places, resulting in a total currency unit of approximately 211014. A person can spend a fraction of a bitcoin this way. Bitcoin transactions are irreversible, unlike traditional e-commerce and money transfer systems.
On online cryptocurrency trading platforms like Coinbase or Bitstamp, bitcoin can be traded like a stock.
A bitcoin is nothing more than a transaction log with a chain of digital signatures attached to it. Nakamoto's computer program (which is open source and distributed across a peer-to-peer network) created 50 bitcoins in the system's first transaction. When Nakamoto spent some of the coins, a new transaction was created that debited his account and credited the recipient's account. All such transfers require the previous owner to digitally sign a hash (a numerical value generated by an algorithm) of the previous transaction and provide the next owner with the public key for encryption. After that, both items are recorded in the coin's transaction log. A payee can check the signatures to see if the chain of ownership is correct, which prevents the same coins from being spent twice.
This transaction is distributed to the entire network for verification, as are all subsequent exchanges. When another computer on the network creates a transaction log for it that matches the previous blocks, the collection of transactions known as "blocks" is deemed valid. To prevent the falsified logs from being accepted, the system must provide a method of verification that is prohibitively expensive for individual users but relatively inexpensive for the entire network. According to The Economist:
This is accomplished by turning it into a forced-work task, which entails generating a 256-bit digest using valid blocks and new transactions (i.e., any number between 0 and 2256). When the system's algorithm produces a hash value that is less than a predetermined target, the task is finished (like 11 in the example above). The goal is for someone on the network to solve the puzzle every 10 minutes, and a new block to be approved. The target is lowered to make generating a value below it harder as the network's ranks swell and its combined computing power grows, in order to keep this rate constant as the network's ranks swell and its combined computing power grows. (On the other hand, if the network shrank, it would become easier again.)
The first user whose computer completes the RPOW task is rewarded with a set number of new coins as a reward for providing the computing power required to validate the logs. This is how the money supply is replenished with new bitcoins. For the first four years, 300 new coins were added to the system every hour because blocks are created at a consistent average rate (about every ten minutes) (210,000 blocks). The system is set up so that every four years, the minting rate is cut in half. The number of new coins issued per block fell to 25 in 2012. The rate will be 12.5% in 2017, and so on, until the total supply reaches 21 million coins around 2030.
The Privacy Creates New Issues 😭
Some privacy advocates' concerns, on the other hand, have less to do with political abstractions of liberty and more to do with a desire to keep their financial transactions hidden from law enforcement. The website Silk Road, for example, made headlines a few years ago when it became the first online marketplace for illicit drugs to accept Bitcoin.
Bitcoin users can remain anonymous, but they are not untraceable. "Attempting major illicit transactions with bitcoin, given existing statistical analysis techniques deployed in the field by law enforcement, is pretty damned dumb," said Jeff Garzik, a member of the bitcoin core development team, to Gawker.com. Ironically, drug users who believed they were concealing their purchases with bitcoin are likely making it easier for the DEA to compile a database of their purchases.
However, buying drugs isn't the only way to avoid the government that bitcoins facilitate. They could also allow Americans to gamble online on foreign gambling sites, circumventing the US government's ban on online gambling and the transfer of funds to offshore gambling sites. People can also use the currency to avoid paying taxes and make donations to groups targeted by federal agents. Bitcoin users, for example, can donate money to WikiLeaks without fear of their PayPal accounts being shut down by the US government.