Bitcoin for Beginners: Explaining Crypto and DeFi Coins During the Next Bull Run
Crypto experts believe the next bull run is coming. When it comes, you’ll need to once again explain crypto to your friends and family.
How do you explain the power of blockchain to someone? What’s a good elevator pitch to get someone to invest in bitcoin? How do you explain the power of crypto in a few sentences?
Preston Pysh (@PrestonPysh) just answered these questions on Twitter. Preston published several paragraphs on Twitter explaining how to explain the potential of crypto to friends, family, and anyone else you talk to – when they inevitably ask during the next bull run.
Before bitcoin hits $20,000 by the end of 2020, we’re here to help explain Bitcoin to your friends and family.
What Problems Does Bitcoin Attempt to Solve?
For technology to change the world, it needs to solve a problem. The iPod solved the problem of transporting 1,000 songs in your pocket. The internet solved the problem of global communication. The wheel solved the problem of moving big things around.
So what problems does bitcoin solve?
Bitcoin was created as the most secure, stable digital currency. It’s designed as a global, digital peg on fiat currency.
Some had seen fiat currency as a problem since the 1930s when the United States government seized gold from U.S. citizens and made it illegal to hoard gold. Others pointed to 1971 when global economies agreed to remove their fiat currencies from the gold standard, which is why today’s currencies are no longer pegged to…anything.
The lack of a fiat currency peg has led to…issues. Governments around the world are overusing inflationary monetary policies with no monetary peg. The $100 USD you owned 50 years ago only buys a fraction of the amount of stuff it did back then – due to inflation.
Bitcoin is deflationary. It has a fixed supply. There will never be more than 21 million bitcoins in existence. Out of the 17 million bitcoins in circulation, a significant portion (most experts guess around 4 million, but it could be higher) have already been permanently lost. If the demand for bitcoin continues to rise, and supply remains fixed, then bitcoin’s price can only go one direction: up.
But Bitcoin’s Price Is So Volatile!
“Why would I buy a bitcoin for $10,000 today when it could be worth $100 tomorrow? The price changes all the time, and I can’t trust a significant amount of money to crypto!”
It’s true that bitcoin’s price is volatile. Ten years ago, you could buy a bitcoin for a few pennies. Today, bitcoin is priced around $12,000. A few years ago, one bitcoin was worth $20,000.
Over time, bitcoin’s volatility should flatten. Bitcoin is a new asset, and investors are still trying to price that asset. Markets for uncertain assets fluctuate, and bitcoin is no different. The market is trying to find the actual value of bitcoin.
Of course, grizzled bitcoin fans will tell you that the price of bitcoin only fluctuates when comparing it to USD: 1 BTC has always been equal to 1 BTC. It’s only the BTC/USD (and BTC/any other fiat currency) ratio that fluctuates.
How Does Bitcoin Have a Fixed Supply? Can’t Someone Raise the Supply?
Bitcoin’s supply is fixed. There can only ever be 21 million bitcoins in existence. Nobody can copy their bitcoin to duplicate it. That’s one of the key technological innovations of bitcoin: unlike other digital files, one bitcoin cannot be spent twice or copied in two places. Bitcoin’s blockchain innovatively solved the “double-spend” problem.
There are 21 million bitcoins, but you can still break down bitcoin into smaller units. Each bitcoin can be broken down to 8 decimal places, which means there are 2,100,000,000,000,000 total bitcoin units (people call these ‘Satoshis’). There will never be more than this supply because of blockchain.
There Are Thousands of Cryptocurrencies – Why Would I Buy Bitcoin?
Bitcoin isn’t the fastest cryptocurrency. It’s not even the most secure or private cryptocurrency. In fact, from a technical standpoint, bitcoin has few advantages over many of its competitors. However, bitcoin has one significant advantage: first-mover advantage. Bitcoin was the world’s first cryptocurrency, and it’s the coin most people think about when they hear “crypto.”
Preston Pysh recommends thinking of it like another open-source project everyone knows about – Wikipedia:
- Wikipedia is an open-source website that anyone can legally copy and duplicate.
- Anyone could copy the open-source code for Wikipedia, change the name, and try to adopt new users and overtake Wikipedia as the world’s best repository of knowledge.
- This doesn’t happen because of “network effects,” explains Preston: bitcoin has the most substantial protocol network effect for pegged money.
- Yes, bitcoin has its issues – but despite the fact, anyone can copy bitcoin, people don’t. And bitcoin has remained the world’s largest and most valuable cryptocurrency since launching in January 2009.
Won’t Governments Just Ban Bitcoin?
It’s true that governments have banned bitcoin in the past. The Chinese government banned crypto exchanges in September 2017, for example.
During the early years of bitcoin, it was a credible threat that governments could ban it. Today, it’s less of a risk. Countries around the world have already passed laws that legitimize bitcoin and protect bitcoin hodlers. Germany, Australia, South Korea, and other countries have laws protecting bitcoin ownership – just like they have laws protecting any non-digital property for citizens.
The government has the power to ban virtually anything – from free speech to guns to methods of payment. As long as the majority of people want bitcoin, and as long as you live in an open democracy, you should have nothing to worry about.
How Much Will One Bitcoin Be Worth Ten Years from Now?
Inevitably, bitcoin conversations turn to price – and how much money you can make by investing in bitcoin.
Of course, nobody can predict where bitcoin will go next. It could sharply fall before it rises again. It could skyrocket to $20,000 by the end of the year – and $100,000 next year.
People have all types of bitcoin predictions – they’re all over the board with predictions.
One thing to consider is that fiat currencies like the US Dollar may lose their value while bitcoin rises in value. With central banks around the world implementing inflationary policies and pumping new money into the economy, it’s possible fiat currencies will slowly become a thing of the past – while digital currencies become more popular for their fixed supply.
This is all conjecture – but this is the type of speculation that could get friends, family, and others interested in cryptocurrency.