What Bitcoin is used for
The Bitcoin network enables transactions between people via the Internet. In the course of these transactions, people exchange the virtual currency also called the same: Bitcoin.
The people involved in this transaction are represented only by the numbers of their wallets, between which Bitcoin is transferred (to be more specific, these are their public keys). Therefore, transactions of this kind are pseudo-anonymous, since both parties use pseudonyms (the names of the wallets represented by the public keys) instead of their names. This does not at all mean that the transactions are fully anonymous and that they allow the participants in the transaction to maintain complete privacy. It is simply difficult, but not impossible, to link specific wallets (public keys) to their owner, or owners.
The Bitcoin network can also be used to store information (e.g., ordinals) other than Bitcoin transaction history. However, it costs money to store any such information, which is why the vast majority of this information is simply transaction history, as it is the most valuable to users of the Bitcoin network.
The Bitcoin network is maintained for fees paid for storing information on data blocks. The contents of the data blocks are public, and everyone is encouraged to maintain a copy of them (known as a node). Fees are paid for disk space on the data block, and are auctioned between users who want to save it at the same time (usually just transaction records).
Data blocks can be saved by other valuable information that people like to misrepresent in the name of vested interests. An obvious case is the amount of Bitcoin owned that everyone is trying to change in their favor. But it can also be information as exotic as standardized questions for intelligence tests, since such sets of information are subject to frequent manipulation (to perform better on the test and, as a result, move up the social hierarchy). This is similar to a situation in which someone tries to enrich himself or herself through deception.
When there are many people willing to save information at a given time or a lot of transactions are made, there is not enough space on the block for everyone. When demand exceeds supply prices rise. That's why when more transfers are made than there is space on the data block at any given time, the fee for saving transactions increases until the winners of such an auction are determined.
This allows the highest-paid transactions to be saved first, and the lower-paid ones are saved later. When the fee is insufficient to save them for many days, then you can pay extra (bump the fee) for the transaction to go through in a reasonable amount of time. Generally, the higher the fee, the faster the Bitcoin transfer goes through, and the fastest it can be is part of the very first consecutive block created every 10 minutes or so.
The Bitcoin network is legal, decentralized and open. It is the world's first ever cryptographically converted energy, creating a digital commodity. This distinguishes Bitcoin from other digital currencies, which are securities that someone controls and can commit fraud with them (by advertising, driving willing buyers and stealing the value for which the tokens in question were bought). It takes minimal knowledge and sometimes as little as 27 seconds to bring a new cryptocurrency to life. That's why there are about 20,000 of them and they are a breeding ground for financial pyramids.
The Bitcoin network was the first, and it was modeled on it by others looking to replicate its success. However, no one has succeeded. The Bitcoin network is the oldest, objectively the safest and the largest of all, and by two orders of magnitude. Anyone can join it and send Bitcoins between them. In practice, in order to do this, we only need to set up a wallet. After that, we can immediately receive Bitcoins (generating our unique account number) and without anyone's permission.
The Bitcoin network has no governing institution. No one controls it, which does not mean that it is not characterized by internal order.
That's because everything that happens on the Bitcoin network depends on its users. Neither financial institutions nor governments control it. As long as the Internet operates on an open basis sending any data and not checking the contents of TCP/IP packets, no one can forbid the transfer of Bitcoin. Nor can anyone prohibit a transfer in Bitcoins, even to a person on the other side of the world. In practice, it is only necessary to know the account number assigned to a wallet in the Bitcoin network, so it must be transmitted in advance, for example, by email.
The responsibility for maintaining order in the Bitcoin network is taken by the users themselves, and this is both at the level of its management and use, as well as the security of the funds collected. Since the price of one Bitcoin exceeds the value of 40 thousand dollars (as of Jan 2024), it is immediately apparent that any amount can be stored in it. If we entrust the Bitcoin network with any funds, it will mean that we need to distinguish fraudulent practices from those that are normal and completely safe. This is why education should be the first step before deciding to buy Bitcoin.
Because of the need to take responsibility for the safety of one's own money in it, the use of Bitcoin becomes an avenue to remind the individual of his or her full decision-making role not only in the economy, but also in a democratic society. This sovereignty and control over one's own capital, will be ransomed by the lack of protection from any guarantees by the State over privately held Bitcoin. In exchange for this effort, we get property that is very difficult to lose if we take proper care of its security. Paradoxically, it is much harder to steal Bitcoin than gold.
That's why it will be a blessing for some, and a problematic situation for others, where everything that happens to private funds depends solely on knowledge and caution in handling this digital currency.
Some, unable to meet these demands, fall into predictable patterns of operation that fraudsters easily exploit. After all, Bitcoin is a completely new phenomenon, having only been on the market for just over 15 years (since January 3, 2009). Having learned that we need a trusted third party to handle money safely, we sometimes look for someone we can trust with this matter by force.
Paradoxically, it is much less safe to trust "specialists" with this technology. It is designed to increase the sovereignty of individuals, so that it is safest to secure one's own funds independently.
This role reversal represents a real revolution, and its consequences will probably change the general approach to humanity's financial organization, and thus to the social hierarchy, rather than simply redefining the understanding and handling of money itself.
Zbigniew Galar, PhD
Post Scriptum
This is not investment advice. The author does not encourage the purchase of Bitcoin, nor does he discourage the purchase of Bitcoin; instead, he encourages education about Bitcoin and strongly discourages the purchase of any other non-decentralized cryptocurrency.