Whether or not you’re more enthusiastic about investing in tangible assets or cryptocurrency, one thing is for certain: government sanctioned fiat currency is in trouble.
Since early 2017, Bitcoin has risen in price from less than $1,000 to nearly $20,000.
Those returns would make any investor smile.
Many crypto supporters think gold is obsolete. Some gold bugs shun the crypto craze as the latest fad.
Mike Maloney thinks they’re both wrong.
As he points out in his new episode of Hidden Secrets of Money, which follows his three-year journey into investigating the cryptocurrency field, he expected to find nothing but a digital payment system. Instead…
“What I found is a technology that can revolutionize the planet.” -Mike Maloney, HSOM 8
But the crypto craze has raised some questions and concerns, especially as it relates to gold and silver. Here’s a brief Q&A to the most common topics we see come up…
Cryptocurrencies offer users another way to opt out of the current monetary and banking system, and that can be enticing. The technology is also exciting, especially for those that are more techno-savvy.
The more recent reason for their popularity, of course, has been the surge in prices. Some people have become millionaires from their early investments, and that has spurred others to get involved, driving up the price and the number of cryptos in existence.
Many people choose to invest in bitcoin for the same reasons they invest in gold and vice versa.
Bitcoin and precious metals share many of the same appealing characteristics:
As Mike says…
“The reason people buy bitcoin and cryptos is the same why people buy gold and silver. It’s an alternative to all the fiat currencies that are being printed into oblivion on this planet right now. And they eliminate the need for third party trust—you don’t have to trust somebody else with your bitcoin, you’ll only have to trust yourself. You don’t need to trust somebody else with your gold and silver, you have to trust yourself. So the reasons are the same.”
They’re also both outside the banking system (though that would change if banks adopt the technology).
In October of 2008, an unidentified person- or perhaps group of people- using the alias Satoshi Nakamoto published a whitepaper detailing a new form of currency. They called it Bitcoin.
Less than a year later, an open source software was released to the public in 2009.
Nakamoto’s whitepaper identifies a clear problem with the world’s current monetary system:
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
Satoshi makes the argument that:
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party
The Solution and How it Works:
Cryptocurrencies like Bitcoin allow people to transact with each other, using the internet, anywhere on earth.
When Nakamoto introduced the concept in his 2008 whitepaper, he wrote:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power.