Bitcoin is a decentralized asset which has its security is enforced by cryptography. No central government supplies and removes Bitcoins: instead the maximum supply of Bitcoins is encoded in the protocol. No financial institutions are needed transfer Bitcoins, or indeed can censor such transfers. Bitcoin transfers occur over an Internet P2P decentralized network without a central point of censorship.
Knowledge of a short piece of private information is both necessary and sufficient to transfer Bitcoin. Necessary means that without the Private Information, you don’t control the coin. No institution can lose the Bitcoin, no physical force can seize the Bitcoin, without getting the Private Information. Sufficient means that if you have the Private Information and can access the Internet, you control the coin fully. If you want to transfer it to another address and know the Private Information, no one can stop you.
Does anything else in human history feel like Bitcoin? One asset that jumps immediately to mind is gold.
Gold is decentralized: no government can mint unlimited amounts of it or default on it. The laws of physics, practically determined by well by geography and economics, limit gold’s supply. Physical possession of the gold, assuming ability to make free exchanges in the world, is both necessary and sufficient for transferring gold.
That Bitcoin mimicks gold is a strong primary argument for the continued value of Bitcoins. Moreover, Bitcoin is better than gold in nearly all dimensions. A receiver of gold needs to test its purity: Bitcoin can be perfectly verified for free and transferred for cheap.
While both gold and Bitcoin can be stolen, Bitcoin arguably has a much lower risk profile. To keep gold extremely secure, you need a secure room, located in a secure building, in relatively stable city, in a relatively stable country, ideally with an armed guard somewhere in the equation. The security chain above follows an “AND” structure: if you have a stable country but the room is compromised, the gold is endangered. The above chain is also expensive to maintain even at an ambient level. To keep Bitcoin secure, all you need is a cold wallet and multisig with a group of trusted friends.
