Before we get into the main topic we need to answer the question first, what is Bitcoin? To put it simply, Bitcoin is an electronic currency found on October, 31st 2008 by a mysterious user going by the name Satoshi Nakamoto. The proposal for Bitcoin was sent to an obscure online mailing list. The paper proposed a radically new form of electronic money and it would be distributed over a decentralized network. Bitcoin has no single entity that issues Bitcoin or is in charge of processing its transactions.
Before Bitcoin, it is not possible to make electronic payments without the help of a third-party like a bank or payment processor, hence, payments were often slow, expensive, and not accessible to everyone. To solve these issues, Bitcoin operates without a trusted third-party, instead, it works as purely as a peer-to-peer electronic currency, meaning that payments are sent directly from one person to another. Bitcoin became an encrypted communication and combined with an electronic accounting book called a ledger. This digital ledger is distributed to all the computers connected to the bitcoin network and the system was designed so that any new transactions of bitcoin needed first to be verified by a large computing power process known as Mining.
Computers that are plugged into the Bitcoin network compete with each other to answer highly complex cryptographic puzzles. Whichever miner does the most work to solve these puzzles has their block of transactions added to the ledger, each block itself contains a reference to the blocks which came before it creating an immutable log of accounts or Blockchain.
Now for the main topic, the term “dry powder” is an important term that you need to remember if you’re planning to invest in Bitcoin. Dry Powder can also refer to cash reserves kept on hand by a company, venture capital firm, or individual to cover future obligations, purchase assets or make acquisitions. If you have an asset that you can tap into to take advantage of those downdrafts in market prices that’s a dry powder, the most common one of course is cash. We all know that money printing is infinite so some people choose to shift some of that cash into gold because gold is a better store of value over time. The point here is if they’re printing tons of cash so you’re mining fewer nuggets of gold and they are printing cash, but the number of cash in the world is infinite, they will be virtually infinite, and there is no real limit on how many nuggets of gold can be mined out of the ground but Bitcoin there is. In fact, we’ve already mined 18.5 million of a cap of a total of 21 million Bitcoin so it is an asset that has a finite supply and that is one becoming more institutionalized. As a result that over the long term you’ll feel and see it hold its value much better than cash and even much better than gold.
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