“O brave new world”
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These words of Miranda’s (Shakespeare, W. (ca. 1611), The Tempest, Act V, Scene I, ll. 205) couldn’t bear more significance. That we live in an evolving world (even if, alas, it sometimes appears as if it’s devolving) it’s undeniable. Technology advances, customs and traditions change, for good and for evil. But any change often bewilders and sparks suspect and admiration, at least initially, towards the new winding road about to be taken.
Today the world is but a few steps away from a revolution, to which we’ll be the witnesses in the years to come. A “cryptorevolution”. Bitcoin is back, stronger and more resolute than ever; an army of cryptocurrencies follows it, veterans and recruits, rising up as his squires.
The reader may ask himself how this revolution differs from 2017’s “criptobubble”; there’s not one single answer, but dozens: dozens of private institutions, investment funds of any kind and size, insurance firms and banks that now firmly believe in this “brave new world” in which money will become digital.
Let me take a step back to aid the less informed reader: what is Bitcoin and, more in general, what’s a cryptocurrency? The latter is, put quite simply and as it’s clear from the word itself, a currency. From case to case it may resemble a fiat currency (i.e. those which are called stablecoins, whose value is pegged to a “real” currency’s) or be an “alternative digital currency”, also called altcoin (Yang, Stephanie. “Want to Keep Up With Bitcoin Enthusiasts? Learn the Lingo” The Wall Street Journal [New York, NY] 31 January 2018. 22 December 2020), or yet again a governance token, an NFT or any one of many interesting technologies that, alas, can’t be all mentioned in one article.
Of fundamental importance is the structure which the aforementioned cryptocurrencies are built on: the blockchain, which is in its essence an immutable data structure, whose integrity is guaranteed by the cryptographic technology on which it relies (for brevity’s sake it is up to the most curious reader to look more into this fascinating technology).
But where to find Bitcoin in all of the above? Launched back in 2009, not without its fair share of controversies, as of today Bitcoin is not only THE cryptocurrency, but it’s now been defined “gold 2.0”. A well deserved title indeed, because having now broken its all time highs Bitcoin has become a safe-haven asset on par or even better than what, since the dawn of mankind, is pure value.
Bitcoin has become what’s called a “store of value”, in other words a good/service which doesn’t lose value as time elapses, but on the contrary its value keeps growing at a rate superior to inflation’s, making it safer and more profitable in case of sale. The reader may ask himself: why?
Besides having been a pioneer in its field Bitcoin, as the majority of other cryptocurrencies it is characterised by a limited supply (21.000.000 Bitcoin will ever be produced, some 18.500.000 of which are already in the market) which translates in the non-existing inflation rate discussed above. Such a quantity is, per the blockchains’ nature, non-modifiable. Contrary to many altcoins this quantity is relatively low (some 1000 times lower), which translates in higher per unit prices.
The limited supply joint with the increasing difficulty of mining (each Bitcoin and its fractions are extracted by miners, who use specialised computers in order to solve convoluted mathematical problems) make Bitcoin extremely sought-after and only a small fraction of Bitcoins extracted to this day is currently being exchanged on the market. The rest is stashed firms’ and individuals’ wallets, most of them having no intention of selling the coins in the near future. On top of that, recent studies have shown that, for one reason or another, between 20% and 30% of all Bitcoins ever mined has been lost.
In short: it’s but a simple case of increasing demand meeting extremely tight supply, thus driving the price upward.
Bitcoin’s and many akin technologies’ goal is to decentralise (Further information about this and other objectives of cryptocurrencies shall be discussed in Cryptogenesis, Act II, soon to be published on Il cambio) the monetary system: a “new world” in which a currency’s value is not determined by national, international or supranational institutions, but by users, with but the slightest risk for someone to manipulate and control the system to his/her own ends. It is hardly unknown that technology is imperfect and therefore risk exists, no matter how infinitesimal it may be. But the claim sure is inviting.
“O brave new world”, what marvels the future holds is not for us to know. The cryptogenesis is coming…