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Saturday, August 1, 2015

BITCOIN FUNDAMENTALS



This has been re-edited by a very good friend of mine. Thank You R.T. I hope this helps all of you, but remember this, The Universal Language is math, and Bitcoin is backed by math.


BITCOIN FUNDAMENTALS



Bitcoin is one of the most awesome inventions to come out of the Internet. Bitcoin is an electronic currency that is securely generated and managed by computers. To understand why Bitcoins are so great, you need to understand a little background information about the value of money and the economics of Bitcoin.


THE VALUE OF MONEY
The value of your money has been historically determined by one of two things: 1) the amount of gold or silver backing it; 2) the amount printed by a government.

Historically, the US government backed all printed money by gold (or even silver). This meant that for every dollar bill printed by the US government, a dollar of gold would obtained by the government and stored in Fort Knox. This was referred to as keeping the US on the "Gold Standard." It's a simplified explanation, but it's good enough for an average person.

In 1971, the US went off the Gold Standard, so the value of your money is determined by the amount printed by the government. Suppose the government owes $100 billion to banks, so it decides to print $100 billion more in paper money overnight. The banks will be paid off, but there's a new problem: inflation. Bank employees know their banks have more cash, so they demand and get huge salary increases. Restaurants know those bank employees are earning more, so their raise their menu prices. Basically, prices go up everywhere because there is an additional $100 billion that everyone wants a part of. But in the end, your money actually buys less because the price of everything has gone up.

The Federal reserve has been printing money without backing for years. In fact, the Feds even admitted that there has been no gold in Fort Knox since 1933. So they keep printing dollars, but each dollar printed is attached a debt. Naturally, this inflation is caused by printing more dollars.


ECONOMICS OF BITCOIN

Bitcoin's value comes from the laws of supply and demand, and that law swings both ways. Suppose you are a retailer and you own a store with have 1,000 Pepsi bottles in stock. You notice that the line awaiting for you to open is 10,000 people long. The price will go up because the demand is too high and your supply is low. The same thing applies to printed money. People are demanding free money because it doesn't have value and they do not want their wages restricted. This keeps the demand high.

The amount of Bitcoins is determined by mathematically secure computer algorithms. They are complex algorithms that really can't be hacked. The limited supply of Bitcoins gives them value, because you cannot easily create more.

Another thing I want to add is money does not need value. Money is only a ledger so that you will not owe anything for the product or service you received. Let us go back to the time of the Indians, they traded pies for things or peanuts. However some were still allergic to peanuts or to certain fruits, so the chiefs used clay beads instead. The clay beads were used like money, but the clay beads had no


value. Wake up: value is a belief. All you need to do is satisfy the ledger of trade and the Bitcoin does this very well.



SUMMARY OF ADVANTAGES

* Bitcoin gets around the problem of printed currencies as well as backing printed currencies with gold.

* Bitcoin is not controlled by any government. Instead, the amount of Bitcoins available is determined by secure computer algorithms. Governments cannot simple create more Bitcoins. This makes it inflation-proof.

* Governments cannot simply say that your Bitcoin is worth less because they can't print Bitcoins.

* It is legal in most countries to some degree, although there are restrictions on where it can be used in each country.

* Earning Bitcoin is free. You can get control of your own money.

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