Bitcoin, Why You Should Own A Bit

The crisis of 2008, which nearly crippled the financial world, was a loud and clear warning that our financial system had become a house of cards. Its integrity depended on the continued solvency of over-leveraged financial institutions.

At the time, I was working as a Senior Data Architect in the trading room of one of Germany’s biggest banks. It was there that we witnessed up close the freezing of accounts, ATMs shutting down and credit cards deactivated. It became clear that owning physical gold and silver – not gold derivatives – was one of the few ways to reliably protect one’s wealth in such a crisis.

After the 2008 experience, I could never fully trust this financial system again as there was no guarantee that the system could be bailed out again by governments in the next crisis.

Satoshi Nakamoto, the alias used by the anonymous developer of bitcoin, must have had a similar experience as it galvanized him/her to present a concept for a peer to peer payment model that could elegantly solve the dilemma of too big to fail banks.

Satoshi’s original bitcoin white paper made it clear that Satoshi was a superb system architect who had a financial risk modeling background with an interest in complexity theory and a drive to make the world a better place.

Satoshi had embedded the text, “Chancellor on brink of second bailout for banks”, in his bitcoin genesis block (the block that started the bitcoin blockchain). It was the headline of The Times back in 3 January 2009. This was a strong indication that Satoshi’s blockchain was indeed a response to the fragility of our financial system. His decision to remain anonymous made sense in light of the enormous special interest that his design could threaten if it ever were to be widely accepted.

Bitcoin could have easily been discarded and faded into obscurity. Yet almost nine years later, Satoshi’s theoretical alternative is published on all financial news channels and has surpassed 315 Billion USD in capitalization as of 18 December 2017. Needless to say, I feel a strong connection to Satoshi’s motives and I admire his work, the significance of which I will try to explain in this article.

Bitcoin – World’s First Trustless Ledger

In its essence, bitcoin is just a distributed ledger which allows bitcoin entries to be sent from one address (akin to an account) to another reliably without requiring a central bookkeeper. Satoshi’s key innovation was that he solved the “double spend problem” – essentially how to keep users from cheating by spending or copying the same bitcoins over and over in the absence of a central bookkeeper to prevent it.