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(NYSE - a symbol of the current financial system)

The current financial system is subject to third parties who enforce the law, monopolize the system, and allow users to exchange money without trusting each other.

In the past, people used to exchange money for goods in person. With the development of online payment, traditional value exchange methods are gradually disappearing, and how to gain mutual trust becomes particularly important at this time.

In the existing system, governments or financial institutions are actually some form of intermediaries. They exist to ensure that two or more people can exchange value without mutual trust. It can be said that without such third-party institutions, our financial system will collapse.

Although third parties bring transactional convenience, it comes at the expense of financial freedom.

In fact, the current financial system is limited in two ways:

1. The only payment medium recognized by each country is legal currency. When you want to exchange currency, you can only go through banks or other institutions, and the transaction fees and intermediary fees incurred will be borne by us.

2. Apart from cash, there is no privacy and freedom to speak of: all money flows must pass through a central system.

Since the digitization of money, our privacy is slowly disappearing as every transaction we make leaves a digital trace. Financial institutions can collect vast amounts of data that matches individuals, and that data ends up being used by them, whether through marketing campaigns or trying to tailor services to you that are right for them.

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Weaknesses in the current financial system

The current financial system has made a trade-off between the trust relationship and the freedom of individual property. Although it solves the problem of trust, this structure has great flaws:

1. Single point of failure

The current system is top-down and characterized as a third-party intermediary. This means that users are paying high intermediate costs because they cannot transact directly, and the system itself is centralized, with a single point of failure leading to overall failure. If the ZF that controls the current system collapses, the entire system will collapse with it.

2. Not open

Due to its centralized nature, no one is allowed to join in the system.

In fact, financial institutions at the top act as gatekeepers. Due to regulations, they are required to collect personal information from customers.

Therefore, the system is only open to those deemed "trustworthy". This inevitably excludes from the system all who lack the necessary conditions: the poor, the undocumented, the persecuted.

In short, the institutions that control the current financial system can arbitrarily decide who can or cannot enter the global economy.

3. Not Without Borders

While we live in a globalized world, the economic system does not exist for this.

In fact, money is still state-centric. Transactions across borders and across borders remain inconvenient and costly. Even though our payment is electronic, there is still an additional fee if we pay from another country.

4. Vulnerable to censorship

The current system allows for censorship, and while this is a good thing in some circumstances (for example against money launderers), this power can also be abused, for example when the US uses the dollar to impose sanctions on Iran and exclude it from the global economy hour.

Therefore, Bitcoin's white paper will say:

We cannot achieve completely irreversible transactions, because financial institutions will always inevitably come forward to mediate disputes.

The existence of financial intermediaries will also increase transaction costs, limit the practical minimum transaction size, and limit daily micropayment transactions.

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The Historical Significance of Bitcoin

Now that we've covered the current state of the financial system, let's discuss the historical significance of Bitcoin's creation.

The Bitcoin white paper was published in October 2008, at a time when the world was in financial crisis. The first deal, on Jan. 3, 2009, was embedded with a headline from The Times of the day that read: "Chancellor on brink of second bailout for banks on Jan. 3, 2009."

On the same day that Bitcoin was released, the U.S. government provided a $900 billion bailout to banks. The weaknesses of a trust-based financial system became especially apparent during the world financial crisis.

Now let's clarify the purpose of Bitcoin and why it was born, many people will confuse the answer to this question.

Many believe that Bitcoin was born with the idea of ​​world domination: the grand goal of replacing the current financial system.

However, this was never the goal of Bitcoin.

Rather, as anyone who has read the Bitcoin white paper knows, Bitcoin aims to provide a peer-to-peer alternative to the current financial system. An electronic cash that allows people to transact directly without financial institutions or any third parties.

It is built on the premise that the current trust-based system is flawed. In fact, even if banks and governments have some problems when dealing with value exchange, we still need to trust them.

We can only trust that they will not abuse their power, invade our privacy, or conduct dangerous operations with our funds, and we can only trust that they will act ethically and in good faith.

However, we have seen too many examples of untrustworthiness in the past, most notably the last economic crisis. Arguably, this is why Bitcoin was forced into existence: we have to trust existing institutions because there is no other alternative.

The emergence of Bitcoin has given us a lot of hope:

Become a peer-to-peer alternative to the current centralized system;

provide people with economic freedom;

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How Bitcoin Replaces Third Parties?

Now that we've figured out why Bitcoin was born, let's move on to the next step: how can it become an alternative to the traditional financial system?

As mentioned earlier, our current financial system relies on third parties to enforce trust between two or more users exchanging value.

Instead, Bitcoin relies on the principles of cryptography.

The main problem that must be solved is the "double spending" problem, that is, how does A verify that B did not reuse the money sent to him now?

Currently this problem is solved by a third party, checking each transaction for duplicate payments. However, this system has its own flaws, because the fate of the entire system depends on the entities running it, and every transaction must go through them.

Bitcoin is able to solve this problem:

1. Peer-to-peer, distributed system architecture: Any computer connected to the Bitcoin network is usually defined as a "node".

2. A timestamp service where every transaction that occurs is timestamped. It is shared with each node of the network in chronological order, and can prove that specific data must exist at a specific time.

3. Prove that the transaction is valid based on the calculation method of consumption: In order to prove that the transaction is valid, it is necessary to run node calculations, and at this time the CPU time and power consumption are the resources consumed.

Thus, the previous trust model was replaced by a new model in which the payee needs to prove that, at the time of making the transaction, a majority of nodes agree that it is valid, i.e. the money has not been reused before Pass. However, this process is performed automatically by the network: users do not need to self-certify.

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Bitcoin is the only alternative to the current financial system

It can be seen from the above:

1. Bitcoin was created to serve as an alternative (not replace it!) to the current financial system

2. It has a decentralized system and does not need to trust a third party;

3. In the underlying blockchain technology of Bitcoin, the third party is replaced by sound cryptography principles;

4. Allow peer-to-peer transactions, reduce intermediate costs, fraud and privacy disclosure;

5. Most importantly, it allows users to have full control over their funds.

The purpose of this article is by no means to simply explain the inner workings of Bitcoin, but to present a different perspective on Bitcoin. After all, Bitcoin has been misunderstood since its inception, and it has been exploited by the media and pundits to get what they want: more fame, more viewers, more clicks.

Bitcoin is not just a technology, it is an alternative to the current financial system. It's secure, decentralized, open, impossible to censor or shut down, our reliance on third parties makes the current system inefficient and vulnerable to abuse of power and manipulation, and full control over our money should be the people's Fundamental rights, which is why Bitcoin is so important.