Money is only worth what other people think it’s worth, an adage that forms the socioeconomic bedrock of Bitcoin. But while “strength in numbers” shields the cryptocurrency from outside influence, it also gives Bitcoin its notorious volatility.
Imagine if everyone in the entire world suddenly threw up their hands and said "alright, we don’t accept the US dollar (a fiat currency) as valid payment." The US government would still provide a good or service in exchange for that USD, which effectively gives it value.
Now imagine if everyone in the entire world suddenly threw up their hands and said "alright, we don’t accept Bitcoin as valid payment." There is no large body or entity that would continue to provide a good or service in exchange for a bitcoin, making the cryptocurrency effectively worthless.
Paradoxically, the only way Bitcoin can become mainstream is by gaining the support of a large, financially steady organization that will guarantee its value, much in the same way a government guarantees its own currency. But doing so would undermine its purpose as an unregulated, “pure” currency that can’t be influenced by any one entity. Its greatest strength is its own greatest weakness.
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Rewrite is the writing process in action, where old topics are revisited, taken apart, revised, and redrafted. Now rewritten is "A simple explanation of bitcoin", completed 28 September 2014.
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