“ A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system. ”
- Satoshi Nakamoto
The greatest mystery in the tech world today is not how bitcoin works, but who is the creator of bitcoin. On October 31, 2008, someone under the name of Satoshi Nakamoto published a nine-page whitepaper on a cryptography mailing list (metzdowd.com). That event changed the history of money and left us all wondering about the mastermind behind it. On January 3, 2009, Satoshi mined the first Bitcoin block, known as the “genesis block”. This particular event ushered in the era of a decentralised finance system. There is a hotly debated topic on the actual identity of the presumed pseudonymous person or persons. Earlier investigations on Bitcointalk suggested that this mysterious individual (or group) was an eloquent british figure, as seen throughout the conversation logs found within the forum. However, apart from the remnants of Satoshi’s online communication, little is yet known about the founder of Bitcoin (BTC).
Uncovering Satoshi Nakamoto
Satoshi Nakamoto’s last interaction in the forum was last seen in April 2011, two years after the network came into existence. Throughout the years that follow, there were numerous conspiracy theories and claims about the real Satoshi Nakamoto. As Bitcoin gained its traction worldwide, multiple mainstream and cryptocurrency media outlets have picked out various individuals as the Bitcoin founder. These alleged or self-proclaimed individuals include, but not limited to, Dorian Nakamoto, Craig Wright, Nick Szabo, the late Hal Finney, CIA and even, the Reptilians.
Perhaps there is a good reason Satoshi Nakamoto preferred his/her identity to be kept as a secret. After all, this invention could potentially disrupt the global financial system and hinder the government’s surveillance of its people. Satoshi’s personal safety might be compromised by those entities who felt threatened by the creation of the cryptocurrency. Regardless of how the big reveal of Satoshi Nakamoto may unfold in the future, the vision of Satoshi will likely greatly revolutionise the concept of money in the years to come.
Remedy for the ill economy
The original intent of Bitcoin was to abolish quantitative easing, create a more stable currency with a finite supply (21,000,000 BTC) and to eradicate government’s surveillance through an individual’s fiat asset. Based on the whitepaper written by Satoshi Nakamoto, it was evident that the creator wanted to experiment with the theory of a cryptographic chain mechanism and how it could create a better and more secure form for exchange of unique tokens that could potentially be used as a currency. The purpose of Bitcoin is to create a global currency that allows people to take more control over their assets and to unite the world at a deeper level. Fiat currencies are susceptible to artificial inflation and an unlimited supply, which could result in hyperinflation as seen in countries like Zimbabwe and Venezuela.
Political instability and mismanagement of a country could adversely affect the nation’s economy and its national currency, and a relatable example would be that of Zimbabwe’s hyperinflation. In September 2019, the Zimbabwean dollar collapsed against the United States dollar (USD) on the country's black market, as confidence in the local currency hit rock bottom, pushing many Zimbabweans towards Bitcoin as a form of ‘liberation tool’. Remarkably, Bitcoin saved both the people and for the country from the collapsing national dollar.
The importance of a decentralised money
As described in the previous paragraph, the traditional standard of a centralised system may not work in an ever changing world that is plagued by numerous political and socio-economic issues. A lot of trust is required based on the standard centralised system in the financial world today, wherein the people’s money is handled through a third party entity such as the government or a financial institution, people would have no control over their own financial assets.
Equifax, one of the world’s largest consumer credit reporting agencies, faced a massive data breach in September 2017, affecting millions of banking users as their banks had shared their data with Equifax with no opportunity to opt out in the middle of the crisis. Such scenarios have revealed a major flaw in the current system, that a centralised system would not only exploit users of unnecessary fees and charges for the storage of their funds, but also exposed its users to risks such as the data breach incident back in 2017.
The standard system could also result in a central point of failure, since transactions are processed and stored in a centralised cluster of data centers. The entire financial system could be at stake if these data centers are infiltrated online or offline, adding to the security concerns of the existing financial system.
On the contrary, Bitcoin is a trustless and decentralised solution which does not have an accounted single point of failure. Transactions are distributed across a decentralised network that prevents foul-play and security compromises to these transactions . This makes Bitcoin more robust as a financial asset, freeing the people’s money from the control of an unpredictable central authority. Along with other cryptocurrencies, Bitcoin was designed as an asset that shifts the power of control back to the hands of the people, offering a truly transparent and free economy for the people as a result.
Use cases of Bitcoin
During a product presentation at MIT Bitcoin Expo in 2019, Abra CEO Bill Barhydt shared with his audience that “the single best use case for Bitcoin over the next five years is the collateralization of real world assets to facilitate banking”. It will likely remain as a banking tool until the blockchain technology is ready to enable real-world payments where it is accepted as a new form of mainstream payment. Today, Bitcoin is mainly used for remittances, limiting exchange rate risk, inflation protection and as a new form of currency.
According to a 2017 Global FIndex Report by the World Bank, there are about 1.7 billion unbanked adults globally. Most of the unbanked came from low to medium-income economies and they do not fulfill the banking criteria for account openings, with China having the highest unbanked population in the world. More often than not, there is a significant number of immigrants who work overseas and therefore require a remittance service (such as Western Union) instead to facilitate the transfer of money to their loved ones in the native country. However, these remittance providers often charge an exorbitant fee and could take up to 5 business days to successfully process the transfer. The long processing time not only brought inconvenience to the recipient, but also the risk of exchange rate volatility in the time period. Up until recently, the unbanked population were introduced to a better alternative - Bitcoin. They realised that with Bitcoin as the new mode of payment transfer, users will no longer be susceptible to exchange rate risk.
Aside from Bitcoin being the alternative option in place of remittance services, the cryptocurrency could also protect users from inflation. As mentioned in earlier paragraphs, a failed economy could trigger high inflation and volatile currency swings, as seen from countries like Zimbabwe and Venezuela. Another country that suffered a similar fate is Argentina. Based on a projected econometric data by TradingEconomics, the Argentina inflation rate is projected to trend around 31.00 percent in 2021 and 27.00 percent in 2022. Currency fluctuations could happen in a matter of days, weeks and months, wiping out a substantial amount of the people’s wealth and confidence in the country’s currency.
While Bitcoin prices do fluctuate as well in the speculative cryptocurrency market, Bitcoin could serve as an ideal alternative for countries that have far more volatile national currency in play. As the demand of Bitcoin grows on multiple spectrums in the market, the cryptocurrency will permeate through the world’s economy over time as the new asset class that could establish itself in favor of fiat currencies as the people’s choice.
Bitcoin as a driver for the new era
It is without a doubt that Satoshi Nakamoto has single-handedly introduced to the world a legacy that could potentially revolutionise the global financial system, and Satoshi’s anonymity only further enhances the level of faith in the system. If Bitcoin succeeds, it is going to shift the power from governments and institutions to the hands of the people. In a hyperconnected world today, the people’s right to privacy is ever more important than before. One can only hope that in the foreseeable future, Bitcoin could drive cryptocurrency growth and in turn accelerate the adoption of blockchain technology as the new standard - of a decentralised system.