NOTE: This post is meant to be a non-technical explanation of the capabilities of Bitcoin for those unfamiliar with the technology, and some technical details and caveats have been omitted for brevity. This post is not intended to be investment advice.

Bitcoin has experienced a meteoric rise in the public consciousness since late 2017, much of it driven by short-term speculation by newcomers who have no idea what Bitcoin actually is or does, but are simply hoping its price keeps going up so that they can make some quick and easy money.

At one point, worldwide Google searches for Bitcoin surpassed searches for Trump, which is no easy feat.

Despite this giant wave of new interest, it’s safe to assume that most people’s opinion of Bitcoin is still either really negative, mildly negative, or just plain apathetic.

That kind of skepticism is understandable. At first glance, Bitcoin seems like yet another silly, overhyped plaything for tech nerds, from the same industry that brought us dubious “innovations” like Google Glass, Yo, Soylent, and Juicero.

In fact, many of today’s most passionate Bitcoin enthusiasts will tell you that they, too, started out as doubters, and that the notion that something like Bitcoin could ever become a meaningful part of the global economy seemed delusional.

But it’s becoming harder to dismiss Bitcoin with each passing day. This thing that is endlessly compared to Dutch tulips and ridiculed as “digital Beanie Babies” has now been around for nearly 10 years and counting, has survived hundreds of premature obituaries, is owned by tens of millions of people, and has a market capitalization of nearly $200 billion. If Bitcoin were a company (which it isn’t), it would be one of the top 30 biggest in the world.

Bitcoin’s rise has been largely driven by speculation and greed, but there’s so much more to Bitcoin than just its price.

What newcomers may not realize is that Bitcoin’s technology is the foundation for a radically new type of financial system which is already challenging many of our long-held assumptions about what money is, and how it could change in the future.

You would never know this from reading the news, though. The more you learn the details of what Bitcoin is and how it works, the more you realize just how little most journalists actually know about it. With a few exceptions, most mainstream media stories about Bitcoin are embarrassingly bad. Many are poorly researched, while others only seem interested in using half-truths and misinformation to generate controversy (which brings in more clicks and ad revenue for news sites).

Whether due to dishonesty or just ignorance, the end result of all this low-quality Bitcoin journalism is that most newcomers never get to learn about all the new and exciting things made possible by Bitcoin’s core technology.

The #1 reason why Bitcoin is cool

Today, if you want to send money to a friend or family member in another country, making an international wire transfer via the existing global interbank payment network (SWIFT) could take anywhere from 2 to 10 days, with average total fees of up to $50. Believe it or not, wiring money internationally can be slower and more costly than sending that same amount as cash in a physical package.

And if you or the recipient don’t have a bank account — which is still the case for more than 2 billion adults worldwide — you would have to use a company like Western Union which can charge as much as $95 in fees to send $1,000. What’s worse, it’s generally poorer working-class people who are more likely to be unbanked and have to pay these extravagant fees to send their earnings to family members overseas.

With Bitcoin, for the first time in history it’s possible for anyone with an internet connection to quickly and securely send any amount of money to anyone else, anywhere in the world (or even Mars!), for low or zero fees.

And this isn’t just theoretical. It happens every day on the Bitcoin network.

The largest Bitcoin transaction in history was for more than 500,000 BTC on November 16, 2011. That amount was worth around $1 million at the time and at today’s prices is worth roughly $5 billion. This transaction was transmitted and processed instantly, for $0 in fees, and no government or corporation could have stopped the transaction or tried to add on extra fees even if they wanted to.

Why Bitcoin is different

Bitcoin’s most important property is arguably its censorship resistance, which means it can’t be controlled by any single government or corporation.

Bitcoin is able to be censorship-resistant because Bitcoin transactions are not processed by a bank or a credit card company. Instead, they are processed by independent bitcoin mining groups that are spread throughout the world and are continuously competing against each other to be the one to process your transaction first.

Companies like VISA, Bank of America, and PayPal are centralized corporations that are headquartered in the US, and thus they can be pressured, sued, subpoenaed, or even forcefully shut down by the US government at will.

On the contrary, Bitcoin operates as a global decentralized network of independent miners, and the more decentralized something is, the harder it is for any one person or group to control it or shut it down.

For example, even if the Chinese government were able to successfully shut down all bitcoin mining companies in China tomorrow, you would still be able to make bitcoin transactions as long as there are enough miners outside China who are willing to process your transaction.

What is mining? And how does it make bitcoin censorship-resistant?

It’s not out of the goodness of their hearts that those bitcoin miners are willing to process your transaction. Rather, processing your transaction is simply a means to an ends, and the ends they are after is the mining reward of 12.5 BTC (worth about US$125,000 at Feb 2018 prices) that accompanies every new block that is added to the blockchain.

The blockchain is the undisputed permanent record of every Bitcoin transaction that has ever happened, and at any given time more than 10,000 volunteers’ computers are maintaining an identical copy of the blockchain for even more security and censorship resistance. Each “block” in the blockchain is simply a collection of transactions (up to 1MB in size), and a new block of transactions (along with the 12.5 BTC reward) is “mined” and added to the blockchain once every 10 minutes, on average.

You can think of the mining of each block like a competitive lottery. The 12.5 BTC mining reward from each new block is a “jackpot”, and the more computing power and electricity a miner expends to process transactions for the bitcoin network, the higher their chances of winning each new block’s mining reward. This process of expending computing power and electricity to process transactions and secure the network is part of a system called “proof of work”.

The rising price of Bitcoin over the years has attracted more and more new miners, which in turn helps to make the Bitcoin network even more decentralized. As the number of independent mining groups increases and becomes more geographically dispersed, it becomes increasingly difficult and expensive for governments to shut them all down. As a result, to this day the Bitcoin blockchain has never been hacked.

A case study in censorship resistance: Wikileaks

Wikileaks is a highly controversial organization, which makes it a great case study for Bitcoin’s censorship resistance.

Supporters of Wikileaks argue that it keeps powerful institutions accountable by empowering less-powerful individuals to anonymously leak evidence of unethical behavior.

Meanwhile, critics of Wikileaks argue that it threatens national security and international relations, and that it’s often biased in terms of who it decides to target (e.g. the US) and not target (e.g. Russia) with its leaks.

As a result of this controversy, in 2010 several of the world’s biggest payment providers including Visa, Mastercard, Bank of America, PayPal, and Western Union started making it impossible for people to donate to Wikileaks through their payment networks.

This was a huge blow to Wikileaks, which is a non-profit that depends on donations to stay afloat. There was no legal basis for this kind of financial blockade, and Wikileaks had not been charged with or convicted of any crime at any level. The blockade seemed completely arbitrary and reactionary. After all, these same companies had never found it necessary to block donations to hate groups like the Ku Klux Klan (KKK). Even critics of Wikileaks had to begrudgingly agree that this financial blockade set a dangerous precedent for monetary freedom.

However, thanks to Bitcoin, which cannot be blocked by any government or corporation, Wikileaks was able to start accepting Bitcoin donations in 2011 to help cover their operating expenses. It was a victory for free speech, and a blow to governments and large corporations who want to be able to monitor and control how citizens spend their money.

Maybe you don’t care about Wikileaks, or even actively dislike them. But I’m sure you have a favorite non-profit organization that you have donated to in the past. Maybe it’s the National Rifle Association, or Black Lives Matter, or Freedom to Marry, or Planned Parenthood, or Scientology. Whatever it is, how would you feel if, one day, the government or some bank decided that they didn’t like what that non-profit stands for, and started preventing you and others from donating to that organization, causing it to go bankrupt?

That is what is at stake here, and while government censorship will always be a threat, Bitcoin makes financial censorship more difficult than it’s ever been.

How Bitcoin can help the poor and unbanked

If you are a middle- or upper-class person living in a developed country, it’s easy to take bank accounts for granted. Everyone you know probably has multiple bank accounts, which in turn enables you to use credit cards, buy and trade stocks, get a loan, and use payment apps like Venmo, Square Cash, and PayPal.

However, 2 billion adults worldwide are still completely “unbanked” and don’t even have a basic checking or savings account. Instead, they rely on physical cash for their day-to-day transactions, which is not only inconvenient but also means that they could be robbed of their entire life savings on any given day.

There are a lot of reasons why people wouldn’t use banks. It might be because they don’t trust banks in general; or because they want to avoid paying overdraft and minimum account balance fees; or a variety of other reasons.

In turn, banks have very little incentive to serve the unbanked. It’s much more profitable for them to serve “less risky” people with higher net worths living in higher-density urban areas. That ends up excluding poor people, people living in rural areas, and people who don’t qualify for a bank account due to past financial mistakes.

This shouldn’t be a surprise, and it’s something that we shouldn’t expect will ever change. It’s a fundamental limitation of our existing financial system that ensures that banking will never be for everyone — only the privileged.

The first breakthrough: Kenya’s M-Pesa

In that regard, one of the biggest innovations in money and “banking the unbanked” has come from a country that many might not expect: Kenya. Despite having a GDP per capita ($1,500) that is only 1/40th of that of the United States, Kenya has achieved something that no country has done before — become a pioneer and the worldwide leader in bank-less mobile payments.

In Kenya, there is a service called M-Pesa that is operated by the country’s largest telecom provider and allows anyone to deposit money into their mobile phone and then send that money via text message to anyone else in the same mobile network, without ever having to interact with a bank.

Since launching in 2007, M-Pesa has become ubiquitous in Kenya, with more than two-thirds of the adult population now using the service.

It also become a boon for Kenya’s underserved population. The share of the unbanked who use M-Pesa rose from about 21% in 2008 to 75% in 2011, while the prevalence of bank accounts in the same period stayed relatively flat. Access to mobile money services like M-Pesa helped lift 194,000 Kenyan households out of extreme poverty, with female-headed households seeing far greater increases in consumption than male-headed households. And another study found that income increased 5–30% for rural Kenyan households that adopted M-Pesa.

This was a breakthrough in financial inclusion and innovation, and there were high hopes early on that Kenya’s success could be quickly replicated in other countries and spread to the rest of the world’s unbanked population as well.

However, that hasn’t happened and mobile money services have struggled to gain similar traction outside of Kenya. In retrospect, it seems that Kenya had a perfect combination of government support, pent-up consumer demand, and skillful implementation that has been difficult to replicate in other countries.

While M-Pesa proved that it can reach and benefit millions of people that banks cannot (or will not), unfortunately, mobile money services like M-Pesa suffer from the same limitations and bottlenecks as the banks they aim to replace:

Profit Concerns: M-Pesa is operated by a for-profit telecom company, Vodafone, which means they have to charge fees for their service in order to make money, and will only expand to new areas if it is profitable for them to do so.

M-Pesa is operated by a for-profit telecom company, Vodafone, which means they have to charge fees for their service in order to make money, and will only expand to new areas if it is profitable for them to do so. Geographic Limitations: M-Pesa users can only send money to other people in the M-Pesa network, and within their own country.

M-Pesa users can only send money to other people in the M-Pesa network, and within their own country. Infrastructure Bottlenecks: Services like M-Pesa need to establish a new infrastructure in every country they hope to operate in, which includes partnering with banks and telecom companies, gaining regulatory approval from the government, building a large network of local “agents” to enable deposits and withdrawals, and so on.

Bitcoin, on the other hand, has none of the limitations of M-Pesa (or banks):

(No) Profit Concerns: Bitcoin is not a company. It doesn’t have any quarterly revenue targets, and it doesn’t have any shareholders who can pressure it into raising fees to improve its profit margins.

Bitcoin is not a company. It doesn’t have any quarterly revenue targets, and it doesn’t have any shareholders who can pressure it into raising fees to improve its profit margins. (No) Geographic Limitations: Bitcoin is inherently global, like the internet and like email. The process of sending Bitcoin to someone in Japan, or in Germany, or in the United States, is exactly the same.

Bitcoin is inherently global, like the internet and like email. The process of sending Bitcoin to someone in Japan, or in Germany, or in the United States, is exactly the same. (No) Infrastructure Bottlenecks: Bitcoin can be sent or received on any internet-connected device, so its global infrastructure is already built. No governments, banks, or telecoms necessary.

Bitcoin: Finishing what M-Pesa started

Bitcoin could do for money and financial inclusion what Wikipedia did for encyclopedias and access to knowledge.

For almost 2,000 years, encyclopedias were only available in print form. The most famous brand was Encyclopedia Brittanica, which cost a whopping $1,400 for a full 32-volume print edition.

Encyclopedia Britannica’s $1,400 print version was discontinued in 2010

Then, in the early 1990s, as home computers became more commonplace, encyclopedias became available on CD-ROMs as well. The most successful of these was Microsoft’s Encarta, which launched in 1993 and cost $99.

The move from print to digital made encyclopedia knowledge more accessible by a factor of more than 10x ($1,400 vs $99). Encyclopedias were now something that the middle class could afford to own as well.

Microsoft Encarta was discontinued in 2009

Finally, in 2001, Wikipedia came along and changed everything, with an idea that seemed absolutely ludicrous at the time: Instead of a for-profit company like Encyclopedia Brittanica that centrally employs hundreds of full-time editors, Wikipedia is a non-profit that relies on a decentralized community of millions of passionate volunteers across the world to edit its content for free.

Today, Wikipedia is the fifth most popular website in the world behind only Google, YouTube, Facebook, and Baidu. In the span of a few decades, the cost of access to the world’s knowledge has gone from $1,400 to completely free and universally accessible for anyone with an internet connection.

Whether you’re a software engineer in California on a $1,000 iPhone X, or a working-class person in India on a $40 Android smartphone, Wikipedia is the first place most people go to learn about a new topic.

In this metaphor, if the banks are Encyclopedia Brittanica (least accessible) and M-Pesa is Encarta (more accessible), then Bitcoin is Wikipedia (universally accessible). Like Wikipedia did for knowledge, Bitcoin represents a fundamentally different vision for how money should work, and it makes possible things that would never have been possible in the old system.

Imagine a jewelry maker in Mongolia being able to directly sell a handmade necklace to a hipster in San Francisco; a teacher in Ghana being able to directly purchase a subscription to the New York Times for their classroom; or a wealthy Japanese patron being able to directly fund an up-and-coming independent Argentinian filmmaker’s next project.

These kinds of things are all possible (and already happening) with Bitcoin — we just need to make it simpler and easier for anyone to get started.

Bitcoin is just a kid. It isn’t even 10 years old.

Bitcoin today is comparable to the internet in the mid-90s, back when we were still using AOL to check our email and using dial-up modems that sounded like this and were literally 1000x slower than today’s broadband speeds. At the time, the thought of one day being able to do things like instantly stream unlimited videos on your phone for free (i.e. Youtube), was unfathomable.

The way we use money in the next 10 and 20 years will probably look totally different from how we use it today, and it would be foolish to think that the same big banks and lending companies that caused the catastrophic 2008 global financial crisis are going to be the ones driving that change.

Following the 2008 crisis, people occupied Wall Street and the US Department of Justice (reluctantly) attempted to prosecute financial firms and executives, but nothing really changed. You can count on one finger the number of Wall Street executives who went to jail for helping cause the crisis.

Perhaps Bitcoin can succeed now, where activism and our political system failed. Not by protesting greedy executives or putting them in jail, but rather by slowly making their industry obsolete. And big banks are starting to take notice.

Bitcoin optimists think it can eventually become the world’s global currency — a borderless “money without rulers”. On the other hand, Bitcoin pessimists think that the same powerful institutions that control the world’s financial system today will simply co-opt Bitcoin’s ideas, and the end result will be the same groups remaining in power, just through different means.

My own views fall somewhere in the middle. I don’t expect Bitcoin to take over the world anytime soon, but I do love that it’s giving people (especially the underserved) more options, beyond what banks have been willing to provide.

Widespread change takes time, and there are few things in this world that will be harder to change than the world’s financial system. Even Amazon, which has been around for more than 23 years and has become one of the most dominant companies in the world, still accounts for only 4% of all retail sales in the US.

But for the first time in a long time, I’m excited for how things could change for the better. I believe that, for all its growing pains, Bitcoin’s greatest contribution to society so far has been in helping us see a different and better future, and making us realize that it’s a lot closer than we thought.

The only question now is how soon that future will arrive.

As you read this, many of the world’s smartest developers, entrepreneurs, and computer scientists are hard at work trying to help Bitcoin fulfill its massive potential even a day sooner, if possible.

You could be one of those people, too.