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The Bitcoin blockchain is often referred to as a powerful monetary network. Large amounts of value are transferred across the blockchain daily and the Bitcoin tokens themselves are worth over $600 billion U.S. dollars at current prices. And just like the monetary networks we’re familiar with and use daily, like the networks managed by Visa and PayPal, the Bitcoin network facilitates hundreds of thousands of transactions.
Because of these similarities with the monetary networks that support banking and credit card infrastructure, it’s common to hear people compare Bitcoin directly to the companies that own and operate those networks. In fact, one of the most frequent disparagements against Bitcoin by its critics is that centralized networks like Visa’s and PayPal’s can facilitate thousands of transactions per second while the Bitcoin network can only handle about seven transactions per second on its layer one infrastructure (we’ll discuss in another article how Bitcoin companies and layer two protocols increase the Bitcoin network’s throughput exponentially).
There are a variety of important differences between the Bitcoin network and the centralized monetary networks we’ve mentioned above. However, perhaps the most important difference between them is one of the Bitcoin network’s most basic security features: Bitcoin is irreversible.
Money-Back Guarantee, Whether or Not You Want One
Anyone who has worked in retail will understand the hassle of working with credit card companies. Their primary goal (after making money, of course) is to keep their customers happy. After all, anyone using a credit card is as much a customer of the company supplying the credit card as they are your customer. If the customer disputes a transaction with your business, the credit card company has greater incentive to “do right” by the customer, not by you. The credit card company will enforce a chargeback and then refund the customer. You’ll be left with nothing.
An experience from my own life can help set the stage here. Several years ago, I was in the business of buying and selling used smartphones on eBay. It was a rather lucrative business as long as nothing went horribly wrong. At a certain point, I decided to try to increase my revenues by selling phones to international customers. eBay made me an offer that I thought I could count on by stating that they would handle all international shipping through one of their domestic shipping centers.
Trusting eBay was a mistake. Although I followed eBay’s requirements to the letter, I quickly found out that eBay was just as unable as I was to determine whether or not a package shipped internationally had actually been delivered to its intended recipient by the local postal service. Within a matter of weeks, I had chargebacks on half a dozen phone sales issued against me through PayPal, eBay’s payment processor at the time. Although I had entrusted eBay to get my package to its destination, since I could not produce a tracking number confirming final delivery PayPal sided with the buyer every time. My entire operating profit from months of work was wiped out and I lost thousands of dollars. My repeated calls to PayPal’s and eBay’s customer service departments did nothing to sway the decisions in my favor. My business failed, all because I couldn’t count on a centralized shopping network and a centralized monetary network to protect my rights, my products, or my money.
Bitcoin fixes this
The Bitcoin blockchain runs on a decentralized computer network. The network is unbiased in the sense that it doesn’t favor senders over receivers, or vice versa. The network exists simply to execute the underlying software code. If someone sends Bitcoin to you, that Bitcoin is yours no matter what. There is no prejudiced arbiter overseeing the network who can swoop in and steal your Bitcoin by reversing transactions. Merchants and others who transact directly on the Bitcoin network will never see chargebacks because the only way to refund a Bitcoin transaction is to consciously decide that you will send money back and then pay the network to confirm that return transaction.
There are some who will point out, with a certain degree of legitimacy, that Bitcoin’s irreversibility can be a double-edged sword. For example, it’s estimated that nearly 20% of Bitcoin’s circulating supply has already been lost by people who inadvertently sent their Bitcoin to the wrong address on the blockchain or who forgot their private keys altogether and have no way of recovering them. While this next comment will certainly be of little consolation to those who have irreversibly lost their Bitcoin, there are a pair of alternative viewpoints that may point to a silver lining.
The first comes directly from Bitcoin’s pseudonymous creator Satoshi Nakamoto:
Lost coins only make everyone else’s coins worth slightly more. Think of it as a donation to everyone.
The second was shared much more recently and may, at least in my opinion, describe even more eloquently how Bitcoin’s underlying value is never truly lost to the network as a whole:
Why Bitcoin’s Irreversibility Matters
If there’s one truth in the world these days that almost everyone can agree on, it’s that someone or something else has more control over you than you’d like. Social media companies control your online data and persona. Banks control your money and finances. And governments control every aspect of your life from the day you’re born until the day you die.
However, the reality is that those of us who are citizens of the United States and other first-world countries are rather privileged. Our governments don’t take too much of our money through taxes and inflation, at least not most of the time. And our banks usually don’t fail and leave us penniless. That said, history has shown that even stable societies can devolve into chaos over time. Just look at what happened to the Roman empire.
Those who live in third-world countries can perhaps see more immediate benefits from using cryptocurrency in their daily lives. They can protect their money more readily from the overreach of banks, governments, and other entities who seek to enrich themselves by taking from those who have less. And they can take back the power more firmly from those entities by not needing to route their money through their networks and have to pay related fees.
Bitcoin is an important tool in establishing your self-sovereignty. Because only you can control your Bitcoin, you have the inalienable right to retain your wealth and move it around however you’d like. You do not have to rely on a bank to manage your money and you do not have to rely on a government to let you keep your money. Take the power out of their hands and put it in your own hands by using Bitcoin, the first and perhaps most important blockchain in existence.
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