Money does possess different qualities and characteristics for which we are using an entire system each:
1) Cash (Medium of Exchange) – it’s a person-to-person (Peer-to-Peer) system without an institution in the middle of it
2) Store of Value – if one would see FIAT currencies (€uro, Dollar, Renminbi…) as a store of value, one would usually deposit it on a bank account. There needs to be trust in the institution and the government, that one would always be able to withdraw the money
3) System of payment – here system as Paypal, VISA, Swift, bank trasfers come to mind… and again, trust is absolute necessary to make use of these institutions
Bitcoin is the first monetary system which combines all 3 properties. It’s a peer-to-peer network, in which everyone is able to send money to anyone else who has a Bitcoin address, without the need for an institution to make the payment. It works as a digital cash system, which works global, across borders. It’s payment system like paypal in which everyone is a able to make a payment, directly and almost instant. It’s a store of value, as it’s not inflationary, similar to gold. There won’t ever be more than 21 Mio bitcoins in circulation.
Because this system works on the basis of a decentralized blockchain technology, is open for everyone to participate, works globally across borders, is cryptographically secured, censorship resistant and functions without trust, it is absolutely new and very unfamiliar.
All known systems are using big and relatively well secured data centers, which are vulnerable to attacks. Security experts always point out, that it is not possible to secure these data silos in an absolute way. Not a single week passes by in there another leakage is discovered. Even if they were secure and safe, these silos still require trust which, since 2008, cannot be unfettered justified.
Bitcoin and blockchain applications are different. Instead requiring trust, they only build on cryptography and mathematics (so called trusless systems – no trust needed). No person oder group of persons do have control over the system. It’s a decentralized system, which constantly controls itself, incentivizes the ones who insert valid transactions and punishes the ones (exclusion from the system and loss of the massive invested worth in form of energy) which try to trick the system, which has no data silos and therefore no one point of failure and instead is being distributed on thousands of computers around the world. Data which is inserted into system is irrevocable and inextinguishable. For that reason, invalid transactions are directly recognizable and deceptive players are excluded from the system.
In contrary to well known systems, bitcoin and blockchain technologies haven’t been hacked so far. To compromise the system long lastingly one would need such a massive computer (hashing) power which currently does not only not exist, it does even exceed our imagination. And unlike our present systems does bitcoin get the more secure the more people using it.
The solution for online security lies in the decentralized nature and in the openness. Closed systems, which are centralized, are much more vulnerable to attacks.