Apart from being the world's largest and most ambitious open source project, Bitcoin also has the potential to disrupt Global Banking. As if this isn't enough, Bitcoin is, as we speak, supplanting gold as the world's de facto safe haven long term store of value.

Those are some lofty trajectories. But, given Bitcoin's value's relentless appreciation of late, it appears as if this disruptive cryptocurrency is going to run the full course of these trajectories, and then some.

Bitcoin 101

Whilst Bitcoin seems to be in the media non-stop, it's safe to say that most people are still not quite sure what it is. Is it money, a coin, a precious metal? What's the big deal about Bitcoin and how come it is reaching all-time highs in its value again and again?

Actually, Bitcoin is somewhat of a misnomer, because Bitcoin is neither a coin, nor is it a bit of anything. The "bit" part is to indicate that Bitcoin is digital and the "coin" part is to attest to the fact that it's a kind of money.

Whilst Bitcoin and so-called fiat money are both systems to exchange value, in other words, to transact, the two have a number of critical differences. Arguably the most important difference is the fact that fiat money is centralized and Bitcoin isn't.

Bitcoin is fully decentralized. What this boils down to is that there's no central bank, no government, no authority at all, that issues Bitcoin or subsequently controls it, its interest rate and, by extension, it's inflation rate.

Bitcoin is wholly peer-to-peer, from giver to receiver, a straight line. Naturally, since there's no third party required, the cost of Bitcoin transactions is considerably lower. Not only that, but money transfers are faster too, for the same reason.

But hang on, of there's no bank or any other intermediary involved, how can we be so sure that we're not getting hustle? Who is going to monitor Bitcoin and/or police transactions in case of a dispute? This is not a who. This is a what. I.e. Bitcoin's security is ensured by the Blockchain, a digital ledger that's not only public, but resistant to hacking, as well as uncensorable and fully immutable.

How does this work? Well, since the Blockchain resides on thousands of computers in the Bitcoin network and all Bitcoin's transactions are recorded and propagated to each of these computers practically in real-time, fraudsters would need to hack into at least 51% of the network's computers. Given the processing power required to do this, hacking Bitcoin is considered extremely unlikely.

24 Carat Bitcoin

This iron-clad security is what's driving gold of its pedestal as the world number one store of value. Sure, gold has thousands of years of history in it's favor. But what happens when you need to move your gold? It's highly impractical, let alone feasible from a safety perspective. Want to move your Bitcoin? It's like sending an email.

Now, there are plenty of gold bugs that claim gold's superiority over Bitcoin, on account of the odds of a functioning internet being next to zero post-apocalypse. Whilst this is true, it probably makes more sense to realize that post-apocalypse, the last thing you need to concern yourself with is if you're better of holding gold or Bitcoin.

Anyway, back to reality. So there you have it, two scenarios the truly novel and pertinent blockchain technology is going to impact currently impacting the world of banking and investments.


By the way, given this huge potential as a disrupter, Jamie Dimon's hissie fit against Bitcoin probably makes all the more sense now. Of course Dimon hasn't been the only one demonizing Bitcoin; in fact, ask any banking incumbent his opinion on Bitcoin and you'll hear the gamut of disasters-in-waiting: from dark web to Tulipmania to lethal volatility. Clearly Legacy Finance would rather eat glass than to be objective about Bitcoin. And that's fair enough, since Bitcoin is coming to eat their lunch.

Incidentally, is it Singapore's relationship to Bitcoin you're interested in, along with Singapore's Smart Nation commitment? Then click on Bitcoin in Singapore or Singapore Bitcoin.

I am not an investment advisor and above article is for purely informational purposes and is not to be taken as investment advice. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.