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The Case for the Bitcoin Cryptocurrency, by J. McG.
A major theorem of cryptography is that anything that be done with a trusted authority can be done without1 a trusted authority. This theorem can be applied to currencies, too. Anything that can be done by a central bank can be done without a central bank . The central bank for the United States of America, as you probably already know, is the US Federal Reserve. The stated dual mandate of the US Federal Reserve System is:
“The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
To state this in other words, the dual mandate is:
1. Stable prices
2. Maximum employment
However, the real dual mandate for the US Federal Reserve during the past five years has been :
1. Bail out the US Government.
2. Bail out the Big Banks.
The US Federal Reserve System is the trusted authority that is now losing the trust of the average American and people worldwide. The US Federal Reserve System has been monetizing the debt of the US Federal Government and buying the toxic mortgages being held by major US banks. Debt monetization, quantitative easing, discount window lending, or whatever new name that the Federal Reserve comes up with, it simply means more money printing. This results in price inflation for real things, such as food and gas. Debt monetization is advanced warning that a fiat currency is about to die or a government is about to go bankrupt and renege on its obligations. The US Dollar is a fiat currency just like all the other worldwide central reserve currencies. Fiat currencies have no intrinsic value except the value that is forced by the government upon the people. Sooner or later, all fiat currencies revert to their true value of zero.
Now, because of the Internet, there is an alternative currency called Bitcoin. Bitcoin takes the basic theorem that anything that be done with a trusted authority can be done without a trusted authority and applies the theorem to the combined fields of cryptography and currency, which is now known as cryptocurrency. Bitcoin is the most popular cryptocurrency that exists today. The best way to start learning about Bitcoin is to download the free application at the following link:
http://bitcoin.org/
A good definition of Bitcoin can be found in the Intro part of the readme file in the download.
Bitcoin is a free open source peer-to-peer electronic cash system that is completely decentralized, without the need for a central server or trusted parties. Users hold the crypto keys to their own money and transact directly with each other, with the help of a P2P network to check for double-spending.
The application costs nothing to download and it is available for the major operating systems (OS): Linux, Windows, and Mac OS.
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