Bitcoin is a worldwide ledger backed by open source code, cryptography and the most powerful and secure decentralized computational network on the planet. The Bitcoin network’s applicable computing power is orders of magnitude more than Google’s, Apple’s, Microsoft’s, Amazon’s and all the world’s governments’ combined applicable computing power.
The Bitcoin network’s computing power secures the ledger against any tampering whatsoever.
The Bitcoin ledger records ownership of ‘bitcoin’ tokens. There is a limit of 21 million bitcoins, and each is divisible into 100 million smaller units, or about 250000 units per human alive, enough for everyone to own some. A few new bitcoins are created at a fixed rate every 10 minutes on average until the maximum is eventually reached. Ownership of newly created bitcoins is assigned to miners, which can be anyone that contributes computing power to Bitcoin’s distributed network.
Ownership of bitcoins is possible solely by being the holder of the private key(s) to those bitcoins. A private key is a sequence of letters and numbers the owner has recorded somewhere, such as in a password-protected file, on paper, in an app on a smartphone, or even committed to memory. Bitcoin owners who keep their private keys secret cannot have their bitcoins taken away by any entity without their consent. Government currency can be seized or destroyed without the owner’s consent, either physically if it is in the form of cash, or electronically if it is in a bank account.
Dollars, Euros, Yen, and all other government currencies are not backed by gold or silver anymore, they are simply created as desired by central banks such as the Federal Reserve in the USA or the European Central Bank in Europe. Currency is also created out of nothing by regular banks in a process called fractional-reserve banking, whereby the banks legally lend out a multiple of the amount of currency deposited by customers.
As more government currency is created, the value of the currency already in circulation diminishes, causing indirect taxation known as inflation tax. Governments use this mechanism to stealthily finance activities such as war that would otherwise require directly taxing citizens. Direct taxes are far more noticeable and subject to cause dissension.
Holders of bitcoins cannot be subjected inflation tax because any attempt to change Bitcoin’s unit limit or structure automatically creates an altcoin. An altcoin may have a new ledger, or its ledger can be a copy of Bitcoin’s ledger, known as a fork, made the moment right before the unit limit or structure change was made. Either way, the original Bitcoin ledger, with its original unit limit and structure, continues to exist. Owners continue to own bitcoins on the original, as well as on any fork. The total value of the combined original and forked ledger remains the same, proportional to the distribution of computing power securing the ledgers.
As more citizens hold their savings in Bitcoin, the value of government currency is diminished, along with the government’s ability to indirectly tax citizens without their consent in order to finance questionable activities.
This summary is an elaborated version of this one I spotted on Reddit.
Kosmatos on Tech 