With bitcoin you can transfer value as easily as sending email.
The fee is less than one cent, but the sender and recipient usually
needs to exchange back and forth to the local currency. This
adds a considerable cost. Bitcoin is safe if used correctly, but
some users lose their bitcoins due to bad habits or ignorance.
Bitcoin is nevertheless the payment system of choice in many
real world transactions. As more users adopt bitcoin the cost
declines. This causes a positive network effect. This also means
that an alternative digital currency cannot compete with bitcoin.
Bitcoin emulates gold in that it has a fixed supply. A fiat
currency works the opposite way. It has a central bank to adjust
supply. Some believe that the fiat system is about to come to an
end. If or when this happens, bitcoin will find a new use as a
safety haven. Under a new monetary system, prices are likely to
be quoted in units of gold while most transactions are made with
bitcoin.
If you enjoyed this book, please consider leaving a tip. It
encourages me to write more. My upcoming plan is to write
about Counterparty, a technology which enable decentralized
financial assets to be issued and traded on the bitcoin protocol.
