When Bitcoin appeared, not many people were ready to recognize the true value a decentralized solution to cash could bring. It took years until the technology was met with recognizable levels of adoption and its creator(s) vanished shortly after Bitcoin began receiving significant mentions from major media, but that’s another story.
The vision Bitcoin created and the road it paved for cryptocurrency is something that’s still surrounded by a lot of nuances to many. It’s true that the initial supporters of Bitcoin, even prior to its widespread success in global markets, were libertarian in nature. This was, in part, due to Bitcoin posing as an alternative to government-issued money.
Of course, Bitcoin has come a very long way since its early days and the overall cryptocurrency economy has grown tremendously. What’s important to highlight, though, is the fact that cryptocurrency’s success in markets is firmly based on a handful of principles. And it is these principles introduced by Bitcoin that make cryptocurrency a viable alternative to government-issued cash.
The principles that make Bitcoin “trustless”
The term “trustless” is often thrown around when it comes to cryptocurrency. Understandably, it might not easy to grasp why or how this is even a feature. It is, however, crucial to understand why trustlessness is important for cryptocurrency. This might be the most important aspect of what crypto has to offer, and it is the result of a plethora of features based on Bitcoin’s principles.
Unlike government-backed money, Bitcoin not dependent on trust for central authorities. Its users do not have to trust any government or central bank for its integrity.
Bitcoin is decentralized, meaning that there is no central issuing authority. There also are no clearing houses that transactions must go through. New units of Bitcoin are minted into circulation through a deflationary process called mining. Other than an incentive structure that rewards miners with transaction fees and newly-generated coins, miners also contribute to verifying transactions by including them in blocks.
Moreover, participants in the network running full node software are broadcasting transactions compliant to the network rules, this way contributing to the ecosystem. Bitcoin’s system works in a peer-to-peer manner, with users also being contributors if they so choose.
Open source: “in code we trust”
The code of Bitcoin is always published. Its creator, Satoshi Nakamoto, released the Bitcoin very first client with the entirety of the codebase being made public. This allows for anyone to review the code, compile it and verify its functions without having to trust the issuer. Insofar, no one has been able to crack Bitcoin’s code to exploit its system and the code is continuously reviewed by the community before releases are made official. Crypto enthusiasts have been known to play on the phrase “in God we trust”, inscribed on US dollars, jokingly stating that they put their trust in [computer] code.
Cryptography or “backed by math”
Cryptocurrency might not be backed by a tangible store of value such as gold. However, Bitcoin and most cryptocurrencies are backed by cryptography: a codebase that has been through countless tests and found to be unbreakable, a large network of contributors and the largest computing network in the world making up its mining network. All those values are set in stone by mathematical properties other than physical attributes. It is thanks to math that cryptocurrencies have many of the characteristics of cash and that is why many people attribute value to it.