Things to Understand about Bitcoin

Bitcoin Info > Things to Understand about Bitcoin

  1. There will never be more than 21 million Bitcoins produced,  unlike dollars whose printing is unlimited.
  2. What prevents the 21 million limit from being increased.
  3. Bitcoin is decentralized and not controlled by anyone.
  4. Bitcoin is more like the Federal Reserve than like VISA. (diagram) The banking system uses multiple layers.
  5. The Halvening: Every ~4 years, the amount of fees that are paid to miners for validating transactions gets cut in half.
    • This cuts the issuance of new Bitcoin in half, making Bitcoin more scarce
      • From 2016 – 2020, the fees were 12.5 bitcoins per block
      • From 2020 -2024, the fees are 6.25 bitcoins per block
    • This increased scarcity leads indirectly, to higher prices
  6. How Bitcoin is like Telsa: Tesla was built with early adopters who saw past certain drawbacks.  Once the innovation was adopted, prices dropped and drawbacks declined.
  7. Some alternatives to Bitcoin, called Alt-Coins serve  serve different roles like stocks, mutual funds, applications, membership tokens, and insurance.
    • In the future, people in Zimbabwe may get crop insurance even if their local governance and businesss climate does not support an insurance industry.  The insurance could use two crypto tokens:
      • One token, Etherium perhaps, will execute the contract.
      • Another token, Chainlink perhaps, will act as an application which uses a weather service API to look up the weather in Zimbabwe to determine whether the weather terms have been satisfied
      • These tokens function very differently from Bitcoin.

 

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