What is Bitcoin?
Bitcoin is a decentralized digital currency that allows people to send and receive value directly to each other without needing a bank or other intermediary. Think of it as digital cash that works over the internet.
Key Concept
Bitcoin is both a payment network (like Visa or SWIFT) and a form of money (like dollars or gold). It was created in 2009 and has grown to a market capitalization exceeding $1.5 trillion.
How is Bitcoin Different from Regular Money?
US Dollar
Controlled by Federal Reserve. Supply can be increased. Value managed by policy.
Gold
Scarce, but hard to verify, store, and transport. Mining adds ~2% supply yearly.
Bitcoin
Fixed supply of 21 million. Easily verifiable. Can be sent anywhere instantly.
Bitcoin's supply is mathematically fixed at 21 million coins—a feature that cannot be changed. This scarcity is why some call it "digital gold" and see it as a hedge against inflation.
How Does Bitcoin Work?
Bitcoin operates on a technology called blockchain—a public ledger that records every transaction ever made. This ledger is maintained by thousands of computers around the world, making it virtually impossible to hack or manipulate.
The Basics
- Wallets: Software that stores your Bitcoin credentials (like a digital bank account you control)
- Private Keys: Secret codes that prove ownership and authorize transactions (like a PIN, but much more secure)
- Blockchain: The public record of all transactions—transparent, permanent, and tamper-proof
- Mining: The process by which transactions are verified and new Bitcoin are created
Why This Matters for Legislators
Bitcoin's transparent blockchain actually makes it easier to trace transactions than cash. Law enforcement agencies have solved major cases specifically because criminals used Bitcoin, which leaves a permanent public record.
A Simple Transaction Example
When Alice sends Bitcoin to Bob:
- Alice authorizes the transaction with her private key
- The transaction is broadcast to the network
- Miners verify the transaction is valid
- The transaction is recorded on the blockchain permanently
- Bob receives the Bitcoin—typically in under an hour, often in minutes
No bank, no intermediary, no business hours—just a direct transfer between two parties.
Why Does Bitcoin Matter?
Bitcoin represents a fundamental innovation in how value can be stored and transferred. Here's why states and nations are paying attention:
1. Inflation Hedge
With a fixed supply of 21 million, Bitcoin cannot be devalued through money printing. As governments worldwide have increased money supply, Bitcoin has served as a hedge—similar to gold, but more portable and verifiable.
2. Financial Inclusion
Anyone with a smartphone can access Bitcoin. This benefits the unbanked, immigrant communities sending remittances, and small businesses seeking lower-cost payment options.
3. Economic Development
States that adopt Bitcoin-friendly policies are attracting:
- Blockchain companies and startups
- High-paying tech jobs
- Investment capital
- Young, educated workforce
"Bitcoin presents the United States with a unique opportunity to reinforce its economic leadership, accelerate its energy dominance, counter its rivals, and promote core democratic values in the digital age."
— Bitcoin Policy Institute
4. Strategic Asset
Three U.S. states (Texas, New Hampshire, Arizona) have passed legislation allowing state treasuries to hold Bitcoin. The federal government is also exploring a Strategic Bitcoin Reserve.
Common Myths Debunked
Let's address the concerns legislators most frequently raise about Bitcoin:
❌ Myth: "Bitcoin is mainly used for crime"
Illicit activity represents less than 1% of Bitcoin transactions (Chainalysis). The US dollar remains the dominant currency for money laundering. Bitcoin's transparent ledger actually helps law enforcement.
✓ Reality
Bitcoin is primarily used for savings, investment, and legitimate commerce. Major corporations like Tesla, MicroStrategy, and Block hold Bitcoin on their balance sheets.
❌ Myth: "Bitcoin wastes energy"
Bitcoin mining uses energy, but over 50% comes from renewable sources. Miners often use stranded energy (flared gas, excess renewables) that would otherwise be wasted.
✓ Reality
Bitcoin mining can actually stabilize power grids. In Texas, miners participate in demand response programs, reducing consumption during peak demand. The global banking system uses 2-3x more energy.
❌ Myth: "Bitcoin is too volatile"
Bitcoin has short-term volatility, but over any 4-year period in its history, it has appreciated significantly. Strategic reserve legislation includes caps and safeguards.
✓ Reality
Volatility decreases as adoption increases. Major institutions (BlackRock, Fidelity) now offer Bitcoin products. Texas started with just $5M—a prudent, measured approach.
What Can Rhode Island Do?
Rhode Island has an opportunity to join leading states in embracing Bitcoin and blockchain technology. Here are the legislative options currently under consideration:
Current & Proposed Legislation
- S.2021 — Tax Exemption: Exempt small Bitcoin transactions from state taxes, encouraging everyday use
- H.6007 — Strategic Reserve: Allow state treasurer to invest up to 10% of uncommitted funds in digital assets
- H.5810 — Study Commission: Create a commission to study blockchain applications for government
- H.5564 — Regulatory Sandbox: Attract blockchain businesses with innovation-friendly regulations
- H.5868 — Private Key Protection: Protect citizens' digital property rights
Why Act Now?
Rhode Island ranks #50 in WalletHub's "Best States to Start a Business" report. Bitcoin-friendly policies could differentiate our state, attract innovation, and create high-paying jobs. Texas, New Hampshire, and Wyoming are already reaping these benefits.
Next Steps
The RI Bitcoin Policy Institute is available to provide:
- Briefings for legislators and staff
- Testimony at committee hearings
- Connections with experts from states that have implemented these policies
- Educational resources for constituents