Bitcoin, Put Simply.
Bitcoin Is Simpler Than You Think
If you’ve heard the word “Bitcoin” and think it’s some tech-nerd exclusive thing or you think its just gambling, you’d be wrong. It’s important to also make the distinction between Bitcoin and cryptocurrency in general, which we’ll go over later.
In this article, we’ll go over what Bitcoin is, why it’s useful, and why it’s better than fiat. We’ll also debunk some criticisms of Bitcoin.
Let’s start from the bottom and work our way up.
What Is Money?
Sounds like a dumb question, but not many have actually stopped to think about it.
Money is essentially just a trading medium people use to trade value. For years, that medium was gold and silver. Gold and silver were great because it’s hard to fake, you can’t exactly print more gold. Then western governments came along and thought “hey.. this paper right here? it represents gold trust me” so essentially printing “gold”.
But that didn’t last long either, at some point in the 1970s, the banking in the United States completely broke this link, the paper didn’t represent gold anymore. So then what’s it backed by? What’s the value of this paper?
Well, that was decided by the government. The US Dollar is backed by nothing but words. Following this, every government’s currency is now in some way or another pegged to the US Dollar as a global currency. That’s what “fiat” means.
But why is this so bad?
The Problem With Fiat Money
When money is backed by nothing except a central authority and the words it says, that central authority can create more of it whenever it wants.
The issue with this is that when more money is printed, it also subsequently loses a little bit of value. Imagine you have $1000, and then the government decides to print 500 notes of $1000. Now that $1000 you have is worth less than what it was, because that $1000 is more accessible and less “rare”, so your money lost value and you had nothing to do with it.
The people hurt by this are you! The ordinary working class, or someone who’s been saving money. I mean, you’ve worked hard for your cash, trading your effort for value, but in the end the value loses weight!
But, it only gets worse from here.
Usury And The Fractional Reserve
Usury is a word that used to mean lending money with interest, but now it’s become watered down and means lending money with excessive interest to make those who control the banks more moral.
All interest is excessive.
The point is, the entire system is built on usury and “the debt trap”. Here’s how it works.
Through something called fractional reserve banking, a bank can lend out more money than it actually holds in deposits. You then have to pay that back with interest. But the interest itself was never created. So more debt has to be created somewhere else to cover it.
Here’s an example:
Omar walks into a bank and deposits $120. The bank takes the full $120 but only actually deposits $20, the $100 left is used as loan money for lenders.
John walks into the same bank and asks for a loan, the bank gives him Omar’s $100 and tells him “You must pay this back as $150”.
So now that $100 is being counted twice**.** Omar thinks he has it. John also has it. But only one of them actually deposited it. That extra money that came from nowhere, the bank just wrote a number in two accounts instead of one.
When John pays back his loan, the bank now profited $50.
Omar then walks in to withdraw his money, the bank gives him his money, and they still profit from that loan they gave to John.
Essentially, they created money out of thin air.
The whole system requires constant expansion just to function. That’s also why banks are so obsessed with “growth”. The whole system collapses if it stops growing. Ordinary people have to deal with usury everyday through mortgages, credit card debts, regular loans, car loans, and the list goes on.
Then more people deposit, and more people loan, and the money essentially gets multiplied by nothing.
The issue here is, say a crisis happens and people rush to withdraw their money, the bank won’t have enough to give back to the depositors because a percentage of the depositors money was loaned. The entire system is flawed and only running in the interest of banks. No pun intended.
Bitcoin
So, where does bitcoin come into play here? Let’s start with a brief history of bitcoin and how it works first.
Bitcoin was created in 2008 by someone using the name Satoshi Nakamoto. Nobody knows who this person or group actually is. They released the code, launched the network, and then disappeared. That’s actually important, we’ll come back to it.
Bitcoin is digital money with a hard cap. There will only ever be 21 million bitcoins. Ever. That number is baked into the code and cannot be changed. Nobody can print more. No government, no central bank, no tech company, no Satoshi. The supply is fixed. This then means that it’s deinflationary. No new money can be printed.
That alone makes it fundamentally different from every fiat currency in existence.
How Does It Work?
Bitcoin is a digital currency with no central authority, no bank, no company, no government controls it. Instead, thousands of computers around the world collectively keep track of who owns what. Every transaction is recorded on a shared software that anyone can see but nobody controls. This network is called the blockchain.
When you send Bitcoin, you’re broadcasting a message to this network: “I’m sending this amount to that wallet.” The network verifies you actually have the funds, and your transaction gets bundled with others and permanently recorded. Once it’s in, it’s in, the history can’t be altered without redoing an astronomical amount of computing work across the entire network simultaneously. In practice, that’s impossible. This means that it’s impossible to fake any transaction.
No one can stop your transaction from going through, no one can fake it.
The tradeoff is speed. Confirming a Bitcoin transaction takes time. The Lightning Network solves this by letting people transact off the main network and settle later, making payments essentially instant. So far, your transactions with Bitcoin are: not controlled by anyone, not faked, and fast.
Your Bitcoin is controlled by a private key. Think of it like a password so secure that no computer on Earth could ever guess it by brute force. If you have the key, you can spend the Bitcoin. If you don’t, you can’t. Nobody can take your Bitcoin without that key. Not a bank, not a government, not a hacker halfway across the world.
How Bitcoin Is The Escape From Usury
Here’s the connection.
Bitcoin is not a debt. When you hold Bitcoin, you hold something. It’s not a promise from an institution. It’s not a claim on someone else’s balance sheet. It just is what it is. You own it outright the way you own a gold coin in your hand. Your money is yours.
Because the supply is capped, nobody can inflate it away. Your savings don’t quietly erode while you sleep. If anything, as more people want Bitcoin and the supply stays fixed, each unit tends to become more valuable over time rather than less. That’s the opposite of what fiat does.
You also don’t need a bank. You don’t need anyone’s permission to hold it, send it, or receive it. There are no office hours. There is no loan officer deciding whether you’re worthy. There is no credit score. A random farmer in a village in Tanzania with no bank branch can hold Bitcoin on a basic phone and send value anywhere in the world instantly.
That’s not a small thing. Bitcoin is safe and secure from the grasp of central authorities, can’t be inflated, permission-less, censorship-resistant, and truly yours to own. Your Bitcoin stays safe with YOU, not with a bank.
Every financial transaction you make today goes through intermediaries. Your bank, PayPal, Visa, some payment processor. Each one of those intermediaries can decide not to process your transaction. They can freeze your account. They can close you out without explanation. In fact, that’s exactly what PayPal is doing to thousands of accounts, seizing their money without a need to explain. Governments can pressure companies to cut people off from the financial system entirely. This has happened to journalists, protesters, businesses, and individuals all over the world, including in wealthy democracies. Countries in Africa are heavily restricted from the financial system because central authorities in the west claim that “They’re untrustworthy, whole lotta scammers from there.” It’s all absolutely ridiculous, how can a small group of people control all the money that goes in and out, every transaction is controlled by their hands. Any random guy in his office can be having a bad day and close your account without needing to tell you why. It’s horrible, immoral, unsafe.
Bitcoin has no intermediary to pressure. When you send Bitcoin directly to another person, the only thing that matters is whether the transaction is valid, if you have the amount that you want to send, that’s all you need. The network doesn’t care who you are, where you live, what you believe, or what you’re buying. It just checks the math and processes it.
Nobody can stop a valid Bitcoin transaction from going through. Nobody can freeze your Bitcoin wallet. Nobody can reverse a payment once it’s confirmed. The network is open to anyone with internet access and nobody has an off switch.
This is what censorship resistance means. Your ability to transact doesn’t depend on anyone’s approval.
Now, we have to make a distinction between crypto and bitcoin.
You must note that Bitcoin should NOT be seen as an investment. Many people see Bitcoin as a way to get richer. Bitcoin is currency, it’s money. You don’t see the US Dollar as a way to get richer do you?
Some cryptocurrency IS notoriously an investment, people invest in cryptocurrencies like Ethereum and whatever other coins all the time expecting to get rich. But this is exactly why Bitcoin is different than crypto.
Cryptocurrencies also almost always have a central authority, defeating the purpose of using crypto as money in the first place. Even if they claim to be decentralized, there’s almost always someone pulling the strings. Some cryptocurrencies are similar to Bitcoin in that they are completely decentralized like Monero, but they still fail to achieve the monetary properties of Bitcoin
Bitcoin, not crypto.
Debunking Common Criticisms
First, you have to understand that Bitcoin isn’t absolutely perfect. It is the best form of money we have, much better than fiat, but it is not the perfect form of money.
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“Bitcoin is volatile”: It is, but so is every other currency in the world, in fact, Bitcoin in the long term will be the least volatile currency there is because of it’s fixed 21 million coins cap.
“While this might sound reasonable at first, it overlooks very basic insights into market behavior and how new forms of money gain adoption. Yes, Bitcoin is volatile. Its price in fiat terms rises and falls based on market demand. When demand increases, people buy, and the price goes up. When demand decreases, people sell, and the price goes down.
But this is not unique to Bitcoin. Every commodity in a free market behaves the same way. So why do critics hold Bitcoin to a different standard? Do they expect Satoshi to emerge from the shadows and magically stabilize the supply to match fluctuating demand, all so Bitcoin conforms to a so-called “stable” fiat price? We find the naivety here staggering.“
- Anti-Riba Money by Abdullah ibn Oda. Page 324
The risk that comes with Bitcoin is being compared to fiat. The entire system of fiat is built upon risk!
No form of money in the world can be truly 100% stable.
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“What is Bitcoin backed off of? What is Bitcoin’s value based off?”: First, define value. Value is what humans perceive is the worth of a certain item. Gold and silver have value because we collectively as a society decided that it has value. So essentially, value is subjective to what humans think an item’s worth is.
So what is Bitcoin backed off? Bitcoin doesn’t have to be backed off anything. What is gold backed off? What is the US Dollar backed off?
What makes Bitcoin valuable is it’s properties. A safe, deinflationary, permissionless, self-custodial currency. What made gold valuable was its scarcity and inability to be faked. Bitcoin takes this same standard and grounds it firmly into it’s source code. Bitcoin is absolutely scarce and can’t be faked. So Bitcoin’s value and basis is through it’s monetary properties.
Furthermore, Bitcoin is also based on energy in a way.
“Bitcoin’s proof-of-work mechanism also anchors it to the physical world.
Mining Bitcoin requires energy expenditure, essentially creating a tangible cost to its production. This energy-based system secures the network, prevents manipulation, and creates a voluntary-based system where participants must earn Bitcoin honestly by performing the computational work required. The connection between Bitcoin and energy creates a feedback loop that not only maintains security but also reinforces Bitcoin’s legitimacy as a sound monetary system.
These emergent properties of the Bitcoin network ultimately makes Bitcoin a bearer asset itself, unmatched by any other form of functionality.“
- Anti-Riba Money by Abdullah ibn Oda. Page 335
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“We don’t know who made Bitcoin.”: This isn’t even a criticism! Satoshi Nakamoto’s anonymity is more of a positive than a negative.
It reaffirms that Bitcoin has no central authority, truly decentralized. The fact Satoshi owns BILLIONS of dollars worth of Bitcoin and he hasn’t even moved a single coin in all these years proves that it is leaderless and secure.
So.. How Do I Use Bitcoin?
Getting started:
1. Getting a wallet:
Go on your phone and install Phoenix Wallet or AQUA Wallet or BlueWallet , mobile wallets are preferred because they’re generally more secure and private, but there’s also web/desktop wallets like Sparrow and Rizful that are less secure but still work.
However, some wallets can be very trustworthy but not self-custodial like Wallet of Satoshi and Rizful. It’s recommended to only keep small amounts in those wallets.
2. Learn about self custody:
After making your wallet, you’ll usually be prompted to save your “seed phrase”, it’s basically just writing down a 12 or 24 word phrase and keeping it safe. That phrase IS your wallet. Guard it like it’s cash, because it is. Your seed phrase is the password to your wallet.
Do NOT save your seed phrase on your phone’s notepad or a messaging app or something, because if a hacker gets a hold of your seed phrase it’s all downhill from there. Write your seed phrase on a paper.
3. Buy:
Now 1 bitcoin is worth tens of thousands of USD, but you dont deal with whole bitcoin. Every bitcoin is divided up into smaller units called “satoshis” or “sats” for short, think of them like cents. $1 is equal to around 1000-2000 sats usually.
It’s also not necessary to buy bitcoin to have it. It’s currency. You can get it by selling something or donations.
To buy bitcoin, use an exchange like Bisq or another low-KYC (verification) exchange. Then immediately send the bitcoin you bought to your wallet.
Bitcoin has a smaller learning curve than people claim, and it’s the only real decentralized currency we have today. Even if you don’t fully understand, you’ll get the hang of it pretty quick once you start using it.
Next Steps
This article is a Part 1 to an “article series” that I plan to write covering every part of self-sovereignty online, eventually being compiled into a book.
Your mindset towards your finances should scream privacy and self-custody. Letting a central authority have control over your money is always a bad idea.
This also ties into other technologies like social media, after all, social media platforms have control over your identity and can choose to wipe you off at any moment they choose, but that’ll be covered in the next article.
Read at https://digitalislamicate.com/
This article takes heavy inspiration from the Anti-Riba Money by Abdullah ibn Oda, great read.
Thanks for reading.
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