TECHNOLOGY Man Who’s Made Over $400,000 Investing in Bitcoin Reveals His Strategy Part 1

Ever since Nas Daily’s video came out about how I earned over $400,000 with less than $10,000 investing in Bitcoin and Ethereum, I’ve been getting hundreds of questions from people around the world about how to get started with cryptocurrency investment.

First: I’m super glad there’s so much interest in cryptocurrency right now. I firmly do believe that cryptocurrency and blockchain technology has the potential to fundamentally change much of the way our world currently operates for the better. It reminds me a lot of the internet in the 90s.

Second: Investment in cryptocurrency isn’t something to be taken lightly. It’s extremely risky, extremely speculative, and extremely early stage still at this point in time. Countless speculators and day traders have lost their entire fortunes trading cryptocurrency. I was no different when I first started investing in crypto. The first $5000 I put into crypto fell almost immediately to less than $500 — a net loss of over 90%.
Third: All of the following words are entirely and solely my own opinion, and do not reflect any objective truth in the world or the opinions or perspective of any other individual or entity. I write them here merely so people can know how I personally approach cryptocurrency, and what I have personally found helpful in my foray into this realm.

I’m firmly of the opinion that one should never invest in something one doesn’t thoroughly understand, so I’m going to split this article into three parts.

The first part will speak to a broad explanation of what bitcoin and cryptocurrency at large are. The second will discuss my personal investment philosophy as it pertains to crypto. The third will show you step by step how to actually begin investing in crypto, if you so choose. Each section will be clearly delineated, so feel free to skip parts if they’re already familiar to you.

PART I: WHAT IS BITCOIN? WHY IS IT USEFUL?

Great question. If you want the full story behind the advent of bitcoin, I highly recommend the book Digital Gold. It traces the entire history of bitcoin from its inception all the way up to 2015. It’s an engrossing read, and highly informative.

For now, let’s start with a quick history lesson about bitcoin. Bitcoin was officially unveiled to the public in a white paper published October 31st, 2008. The white paper is actually extremely readable, very short (just 8 pages), and incredibly elegantly written. If you want to understand why bitcoin is so compelling straight from the horse’s mouth, you must read this paper. It will explain everything better than I or anyone else likely ever could.

I won’t delve too much into the technical details of how bitcoin works (which are better elucidated in the white paper), but will instead focus on a broader exploration of its history and implications.

NextShark SHOP

TECHNOLOGY Man Who’s Made Over $400,000 Investing in Bitcoin Reveals His Strategy
ByBen YuPosted on June 28, 2017
Share Tweet
Ever since Nas Daily’s video came out about how I earned over $400,000 with less than $10,000 investing in Bitcoin and Ethereum, I’ve been getting hundreds of questions from people around the world about how to get started with cryptocurrency investment.

First: I’m super glad there’s so much interest in cryptocurrency right now. I firmly do believe that cryptocurrency and blockchain technology has the potential to fundamentally change much of the way our world currently operates for the better. It reminds me a lot of the internet in the 90s.

Second: Investment in cryptocurrency isn’t something to be taken lightly. It’s extremely risky, extremely speculative, and extremely early stage still at this point in time. Countless speculators and day traders have lost their entire fortunes trading cryptocurrency. I was no different when I first started investing in crypto. The first $5000 I put into crypto fell almost immediately to less than $500 — a net loss of over 90%.

Third: All of the following words are entirely and solely my own opinion, and do not reflect any objective truth in the world or the opinions or perspective of any other individual or entity. I write them here merely so people can know how I personally approach cryptocurrency, and what I have personally found helpful in my foray into this realm.

I’m firmly of the opinion that one should never invest in something one doesn’t thoroughly understand, so I’m going to split this article into three parts.

The first part will speak to a broad explanation of what bitcoin and cryptocurrency at large are. The second will discuss my personal investment philosophy as it pertains to crypto. The third will show you step by step how to actually begin investing in crypto, if you so choose. Each section will be clearly delineated, so feel free to skip parts if they’re already familiar to you.

PART I: WHAT IS BITCOIN? WHY IS IT USEFUL?

Great question. If you want the full story behind the advent of bitcoin, I highly recommend the book Digital Gold. It traces the entire history of bitcoin from its inception all the way up to 2015. It’s an engrossing read, and highly informative.

For now, let’s start with a quick history lesson about bitcoin. Bitcoin was officially unveiled to the public in a white paper published October 31st, 2008. The white paper is actually extremely readable, very short (just 8 pages), and incredibly elegantly written. If you want to understand why bitcoin is so compelling straight from the horse’s mouth, you must read this paper. It will explain everything better than I or anyone else likely ever could.

I won’t delve too much into the technical details of how bitcoin works (which are better elucidated in the white paper), but will instead focus on a broader exploration of its history and implications.

SUBPART: THE BACKGROUND CONTEXT OF BITCOIN

Bitcoin was invented in the aftermath of the 2008 financial crisis, and the crisis was a clear motivating factor for its creation.

Numerous banks and other financial institutions failed across the world, and had to be bailed out by governments at the expense of their taxpayers. This underscored the fragility of the modern financial system, where the health of our monetary system is reliant on banks and other financial institutions that we are forced to trust to make wise and prudent decisions with the money we give them. Too often for comfort, they fail to carry out this fiduciary responsibility to an adequate degree.

Of particular note is fractional reserve banking. When you give a bank $1,000, the bank doesn’t actually keep all that money for you. It goes out and is legally allowed to spend up to $900 of your money, and keep just $100 in the off chance that you ask for your money back.

NextShark SHOP

TECHNOLOGY Man Who’s Made Over $400,000 Investing in Bitcoin Reveals His Strategy
ByBen YuPosted on June 28, 2017
Share Tweet
Ever since Nas Daily’s video came out about how I earned over $400,000 with less than $10,000 investing in Bitcoin and Ethereum, I’ve been getting hundreds of questions from people around the world about how to get started with cryptocurrency investment.

First: I’m super glad there’s so much interest in cryptocurrency right now. I firmly do believe that cryptocurrency and blockchain technology has the potential to fundamentally change much of the way our world currently operates for the better. It reminds me a lot of the internet in the 90s.

Second: Investment in cryptocurrency isn’t something to be taken lightly. It’s extremely risky, extremely speculative, and extremely early stage still at this point in time. Countless speculators and day traders have lost their entire fortunes trading cryptocurrency. I was no different when I first started investing in crypto. The first $5000 I put into crypto fell almost immediately to less than $500 — a net loss of over 90%.

Third: All of the following words are entirely and solely my own opinion, and do not reflect any objective truth in the world or the opinions or perspective of any other individual or entity. I write them here merely so people can know how I personally approach cryptocurrency, and what I have personally found helpful in my foray into this realm.

I’m firmly of the opinion that one should never invest in something one doesn’t thoroughly understand, so I’m going to split this article into three parts.

The first part will speak to a broad explanation of what bitcoin and cryptocurrency at large are. The second will discuss my personal investment philosophy as it pertains to crypto. The third will show you step by step how to actually begin investing in crypto, if you so choose. Each section will be clearly delineated, so feel free to skip parts if they’re already familiar to you.

PART I: WHAT IS BITCOIN? WHY IS IT USEFUL?

Great question. If you want the full story behind the advent of bitcoin, I highly recommend the book Digital Gold. It traces the entire history of bitcoin from its inception all the way up to 2015. It’s an engrossing read, and highly informative.

For now, let’s start with a quick history lesson about bitcoin. Bitcoin was officially unveiled to the public in a white paper published October 31st, 2008. The white paper is actually extremely readable, very short (just 8 pages), and incredibly elegantly written. If you want to understand why bitcoin is so compelling straight from the horse’s mouth, you must read this paper. It will explain everything better than I or anyone else likely ever could.

I won’t delve too much into the technical details of how bitcoin works (which are better elucidated in the white paper), but will instead focus on a broader exploration of its history and implications.

SUBPART: THE BACKGROUND CONTEXT OF BITCOIN

Bitcoin was invented in the aftermath of the 2008 financial crisis, and the crisis was a clear motivating factor for its creation.

Numerous banks and other financial institutions failed across the world, and had to be bailed out by governments at the expense of their taxpayers. This underscored the fragility of the modern financial system, where the health of our monetary system is reliant on banks and other financial institutions that we are forced to trust to make wise and prudent decisions with the money we give them. Too often for comfort, they fail to carry out this fiduciary responsibility to an adequate degree.

Of particular note is fractional reserve banking. When you give a bank $1,000, the bank doesn’t actually keep all that money for you. It goes out and is legally allowed to spend up to $900 of your money, and keep just $100 in the off chance that you ask for your money back.

In the most simplistic case, if you are the only depositor at this bank, and you ask for more than $100 back at once, the bank won’t be able to give you your money, because it doesn’t have it any more.

Shockingly, this is actually how banks work in reality. In the United States, the reserve requirement, or the percentage of net deposits banks are actually required to keep in liquid financial instruments on hand, is generally 10% for most banks. This means that if a bank has net deposits of a billion dollars, it needs to only keep 100 million on hand at any given time.

This is fine most of the time, as generally the customers of that bank won’t all try to cash out at the same time, and the bank is able to stay liquid. However, the moment customers start to question the bank‘s financial stability, things can go south very quickly. If just a small number of customers begin asking for all their deposits back, a bank can rapidly become depleted of all its liquid funds.

NextShark SHOP

TECHNOLOGY Man Who’s Made Over $400,000 Investing in Bitcoin Reveals His Strategy
ByBen YuPosted on June 28, 2017
Share Tweet
Ever since Nas Daily’s video came out about how I earned over $400,000 with less than $10,000 investing in Bitcoin and Ethereum, I’ve been getting hundreds of questions from people around the world about how to get started with cryptocurrency investment.

First: I’m super glad there’s so much interest in cryptocurrency right now. I firmly do believe that cryptocurrency and blockchain technology has the potential to fundamentally change much of the way our world currently operates for the better. It reminds me a lot of the internet in the 90s.

Second: Investment in cryptocurrency isn’t something to be taken lightly. It’s extremely risky, extremely speculative, and extremely early stage still at this point in time. Countless speculators and day traders have lost their entire fortunes trading cryptocurrency. I was no different when I first started investing in crypto. The first $5000 I put into crypto fell almost immediately to less than $500 — a net loss of over 90%.

Third: All of the following words are entirely and solely my own opinion, and do not reflect any objective truth in the world or the opinions or perspective of any other individual or entity. I write them here merely so people can know how I personally approach cryptocurrency, and what I have personally found helpful in my foray into this realm.

I’m firmly of the opinion that one should never invest in something one doesn’t thoroughly understand, so I’m going to split this article into three parts.

The first part will speak to a broad explanation of what bitcoin and cryptocurrency at large are. The second will discuss my personal investment philosophy as it pertains to crypto. The third will show you step by step how to actually begin investing in crypto, if you so choose. Each section will be clearly delineated, so feel free to skip parts if they’re already familiar to you.

PART I: WHAT IS BITCOIN? WHY IS IT USEFUL?

Great question. If you want the full story behind the advent of bitcoin, I highly recommend the book Digital Gold. It traces the entire history of bitcoin from its inception all the way up to 2015. It’s an engrossing read, and highly informative.

For now, let’s start with a quick history lesson about bitcoin. Bitcoin was officially unveiled to the public in a white paper published October 31st, 2008. The white paper is actually extremely readable, very short (just 8 pages), and incredibly elegantly written. If you want to understand why bitcoin is so compelling straight from the horse’s mouth, you must read this paper. It will explain everything better than I or anyone else likely ever could.

I won’t delve too much into the technical details of how bitcoin works (which are better elucidated in the white paper), but will instead focus on a broader exploration of its history and implications.

SUBPART: THE BACKGROUND CONTEXT OF BITCOIN

Bitcoin was invented in the aftermath of the 2008 financial crisis, and the crisis was a clear motivating factor for its creation.

Numerous banks and other financial institutions failed across the world, and had to be bailed out by governments at the expense of their taxpayers. This underscored the fragility of the modern financial system, where the health of our monetary system is reliant on banks and other financial institutions that we are forced to trust to make wise and prudent decisions with the money we give them. Too often for comfort, they fail to carry out this fiduciary responsibility to an adequate degree.

Of particular note is fractional reserve banking. When you give a bank $1,000, the bank doesn’t actually keep all that money for you. It goes out and is legally allowed to spend up to $900 of your money, and keep just $100 in the off chance that you ask for your money back.

In the most simplistic case, if you are the only depositor at this bank, and you ask for more than $100 back at once, the bank won’t be able to give you your money, because it doesn’t have it any more.

Shockingly, this is actually how banks work in reality. In the United States, the reserve requirement, or the percentage of net deposits banks are actually required to keep in liquid financial instruments on hand, is generally 10% for most banks. This means that if a bank has net deposits of a billion dollars, it needs to only keep 100 million on hand at any given time.

This is fine most of the time, as generally the customers of that bank won’t all try to cash out at the same time, and the bank is able to stay liquid. However, the moment customers start to question the bank‘s financial stability, things can go south very quickly. If just a small number of customers begin asking for all their deposits back, a bank can rapidly become depleted of all its liquid funds.

This leads to what’s known as a bank run, where the bank fails because it is unable to fulfill all the withdrawals customers demand. This can escalate quickly into a systemic bank panic, where multiple banks begin to suffer the same fate. Each successive failure compounds the collective panic, and quite quickly, the whole system can begin to collapse like a house of cards.

This is what led in large part to the Great Depression, for instance. The whole system is fundamentally predicated on trust in the system, and the second that vanishes, everything can go south incredibly quickly.

The financial crisis of 2008 highlighted yet another risk of the modern banking system. When a bank goes out and spends the 90% of net deposits it holds in investments, it can often make very bad bets, and lose all that money. In the case of the 2008 crisis, banks in particular bet on high risk subprime mortgages. These were mortgages taken out by borrowers very likely to become delinquent, to purchase houses that were sharply inflated in value by the rampant ease of acquiring a mortgage.
NextShark SHOP

TECHNOLOGY Man Who’s Made Over $400,000 Investing in Bitcoin Reveals His Strategy
ByBen YuPosted on June 28, 2017
Share Tweet
Ever since Nas Daily’s video came out about how I earned over $400,000 with less than $10,000 investing in Bitcoin and Ethereum, I’ve been getting hundreds of questions from people around the world about how to get started with cryptocurrency investment.

First: I’m super glad there’s so much interest in cryptocurrency right now. I firmly do believe that cryptocurrency and blockchain technology has the potential to fundamentally change much of the way our world currently operates for the better. It reminds me a lot of the internet in the 90s.

Second: Investment in cryptocurrency isn’t something to be taken lightly. It’s extremely risky, extremely speculative, and extremely early stage still at this point in time. Countless speculators and day traders have lost their entire fortunes trading cryptocurrency. I was no different when I first started investing in crypto. The first $5000 I put into crypto fell almost immediately to less than $500 — a net loss of over 90%.

Third: All of the following words are entirely and solely my own opinion, and do not reflect any objective truth in the world or the opinions or perspective of any other individual or entity. I write them here merely so people can know how I personally approach cryptocurrency, and what I have personally found helpful in my foray into this realm.

I’m firmly of the opinion that one should never invest in something one doesn’t thoroughly understand, so I’m going to split this article into three parts.

The first part will speak to a broad explanation of what bitcoin and cryptocurrency at large are. The second will discuss my personal investment philosophy as it pertains to crypto. The third will show you step by step how to actually begin investing in crypto, if you so choose. Each section will be clearly delineated, so feel free to skip parts if they’re already familiar to you.

PART I: WHAT IS BITCOIN? WHY IS IT USEFUL?

Great question. If you want the full story behind the advent of bitcoin, I highly recommend the book Digital Gold. It traces the entire history of bitcoin from its inception all the way up to 2015. It’s an engrossing read, and highly informative.

For now, let’s start with a quick history lesson about bitcoin. Bitcoin was officially unveiled to the public in a white paper published October 31st, 2008. The white paper is actually extremely readable, very short (just 8 pages), and incredibly elegantly written. If you want to understand why bitcoin is so compelling straight from the horse’s mouth, you must read this paper. It will explain everything better than I or anyone else likely ever could.

I won’t delve too much into the technical details of how bitcoin works (which are better elucidated in the white paper), but will instead focus on a broader exploration of its history and implications.

SUBPART: THE BACKGROUND CONTEXT OF BITCOIN

Bitcoin was invented in the aftermath of the 2008 financial crisis, and the crisis was a clear motivating factor for its creation.

Numerous banks and other financial institutions failed across the world, and had to be bailed out by governments at the expense of their taxpayers. This underscored the fragility of the modern financial system, where the health of our monetary system is reliant on banks and other financial institutions that we are forced to trust to make wise and prudent decisions with the money we give them. Too often for comfort, they fail to carry out this fiduciary responsibility to an adequate degree.

Of particular note is fractional reserve banking. When you give a bank $1,000, the bank doesn’t actually keep all that money for you. It goes out and is legally allowed to spend up to $900 of your money, and keep just $100 in the off chance that you ask for your money back.

In the most simplistic case, if you are the only depositor at this bank, and you ask for more than $100 back at once, the bank won’t be able to give you your money, because it doesn’t have it any more.

Shockingly, this is actually how banks work in reality. In the United States, the reserve requirement, or the percentage of net deposits banks are actually required to keep in liquid financial instruments on hand, is generally 10% for most banks. This means that if a bank has net deposits of a billion dollars, it needs to only keep 100 million on hand at any given time.

This is fine most of the time, as generally the customers of that bank won’t all try to cash out at the same time, and the bank is able to stay liquid. However, the moment customers start to question the bank‘s financial stability, things can go south very quickly. If just a small number of customers begin asking for all their deposits back, a bank can rapidly become depleted of all its liquid funds.

This leads to what’s known as a bank run, where the bank fails because it is unable to fulfill all the withdrawals customers demand. This can escalate quickly into a systemic bank panic, where multiple banks begin to suffer the same fate. Each successive failure compounds the collective panic, and quite quickly, the whole system can begin to collapse like a house of cards.

This is what led in large part to the Great Depression, for instance. The whole system is fundamentally predicated on trust in the system, and the second that vanishes, everything can go south incredibly quickly.

The financial crisis of 2008 highlighted yet another risk of the modern banking system. When a bank goes out and spends the 90% of net deposits it holds in investments, it can often make very bad bets, and lose all that money. In the case of the 2008 crisis, banks in particular bet on high risk subprime mortgages. These were mortgages taken out by borrowers very likely to become delinquent, to purchase houses that were sharply inflated in value by the rampant ease of acquiring a mortgage.

When those mortgages were defaulted on, the artificially inflated values of the homes began to collapse, and banks were left holding assets worth far less than the amount they had lent out. As a consequence, they now had nowhere near the amount of money that customers had given them, and began experiencing liquidity crises that led to their ultimate bankruptcy and demise.

After the Great Depression occurred, the government attempted to address this issue by creating the Federal Deposit Insurance Corporation (FDIC), which technically guarantees all customer deposits in participating banks up to $250,000 per account.

Unfortunately, the FDIC is just as dramatically underfunded as banks are. As the FDIC itself acknowledges, it holds enough money to cover just over 1% of all the deposits it insures. In other words, if banks reneged on any more than 1% of all their deposits, the FDIC itself would also fail, and everyone would yet again be left in the dust without recourse.

In fact, this has already happened. The FDIC used to have a sister corporation that insured savings and loan institutions, as it itself at the time only insured bank deposits, and not savings and loan institution deposits. This was known as the Federal Savings and Loan Insurance Corporation, or FSLIC.

In the savings and loan crisis of the 1980s, over 1,000 of the 3,200 savings and loan institutions in the United States failed in rapid succession. The FSLIC almost immediately became insolvent itself, and had to be recapitalized several times with over $25 billion dollars of taxpayer money. Even this didn’t even come close to being sufficient to solve the crisis, and the FSLIC managed to only resolve the failure of less than 300 of the 1000 bankrupt institutions, even with all the handouts from taxpayers, before it just flat out gave up and dissolved itself.

For the most part, things generally work fine on a day to day basis. This belies, however, the true fragility of the system. It’s hard to anticipate these things before they happen, because it’s so easy to fall into the trap of assuming that things will always be as they mostly always have been. If things have been fine yesterday, and the day before, and the few years before that, or even the few decades before that, we just naturally assume that they will continue to be fine for the indefinite future.

History has proven this to be an often fatal assumptive error. The second things start to stop working, they tend to stop working in an extremely rapid, catastrophic fashion. There’s very little, if anything, stopping us from seeing another Great Depression sometime in the future, be it the near or longer term future. When that does happen — and it almost certainly will, sooner or later, if history is any good teacher — those who haven’t adequately prepared for it and taken appropriate prophylactic measures may very well find themselves in a bad spot.
SUBPART: FIAT CURRENCIES COMPOUND THE DILEMMA

Mistrust in fiat currencies, or currencies created and backed solely by faith in a government, both because of the modern banking system and because of the inherent nature of fiat currency, has in large part been why gold has been used as such a reliable store of value over millennia.

Fiat currencies are the world’s predominant form of currency today. The US dollar or the British pound, for instance, are fiat currencies. These are currencies that are entirely controlled in their supply and creation by a national government, and are backed by nothing but faith in that government.

This has proved a mistake countless times throughout history. Zimbabwe is a classic example, where the Zimbabwean dollar, thanks to an incompetent government among other factors, experienced enormous levels of hyperinflation. At one point, inflation was estimated at almost 80 billionpercent in just a single month.The following image gives an idea of just how rapidly and absurdly a fiat currency can spiral out of control, once it reaches the point of no return.
Lest we think this an isolated instance, Venezuela is experiencing incredibly similar hyperinflation in the present-day, right this moment. The Venezuelan Bolívar inflated over 800% in 2016, and shows no signs of stopping in 2017.

The US hasn’t been immune to these crises, either. The US began its foray into fiat currency with the issuance of Continental Currency in 1775. Just three years later, Continental Currency was worth less than 20% of its original value. 13 years later, hyperinflation entirely collapsed the currency, and the US had to pass a law guaranteeing that all future currencies would be backed by gold and silver, and that no unbacked currencies could be issued by any state.

In comparison, the early history of the US dollar makes the relative volatility of bitcoin in these first 9 years look like peanuts.

Once adopted out of necessity, the gold standard became part and parcel of US currency, just as it was with most other currencies from around the world. The gold standard removed some of the need to have pure faith in US dollars in of themselves, as it guaranteed that all paper money the US issued would be exchangeable at a fixed rate for gold upon demand.

Naturally, you still had to believe that the government would actually keep enough gold to fulfill all these demands (déjà vu and foreshadowing, anyone? Any flashbacks to fractional reserve banking yet?), but it was certainly better than nothing.

Gold, unlike fiat currencies, requires no trust and faith in a government to responsibly manage its money supply and other financial dealings in order to believe that it will retain its value well over time. This is because gold has no central authority that controls it and effectively dictates its supply and creation arbitrarily. Gold is fundamentally scarce, and only a small amount of it can be mined every year and added to the whole net supply. To date, the estimated total of all the gold ever mined in the history of humankind is only 165,000 metric tons. To put that in perspective, all that gold wouldn’t even fill up 3.5 Olympic sized swimming pools.

No government, no matter how much they wanted to or needed to, could simply conjure up more gold on demand. Fiat currencies, on the other hand, can and often have been printed on demand by governments whenever they happened to be short on cash and needed a quick infusion.

This printing of more money generally leads to inflation, as the total value of all the money in existence rationally should stay the same, no matter how many dollars are printed. Hence, if more dollars are printed, each dollar is worth fractionally less of the total money supply.

In fact, governments design their currencies and monetary policies to inflate intentionally. This is why $100 US dollars in 1913 (when the government officially started tracking inflation rates) is equivalent to $2,470 dollars today, just over 100 years later.

In fact, the average inflation rate of the US dollar over that time period was about 3.22%. This seems low, but in reality means that prices double just every twenty years. In other words, your money becomes half as valuable if you keep it in US dollars every twenty years. Doesn’t seem ultra cool to me.

Gold, on the other hand, doesn’t inflate like fiat currencies do. That’s because there’s an intrinsically limited supply, and consequently, things tend to cost the same in gold over long periods of time. In fact, 2,000 years ago, Roman centurions were paid about 38.58 ounces of gold. In US dollars today, this comes out to about $48,350. The base salary of a captain in the US army today comes out to just about the same at $48,500.

This makes gold, in many ways, a better store of value based on fundamental principles than fiat currencies over time. You don’t have to trust anyone to trust that your gold will retain its value relatively well across the sands of time.

Unfortunately, the gold standard collapsed multiple times during the 20th century and was ultimately abandoned altogether by almost every nation in the world, because governments effectively played fractional reserve banking with their gold reserves. Who could blame them? It must be irresistibly tempting, knowing that in all likelihood, the vast majority of the time, only a fraction of people will ever want to trade in their dollars for gold. Why hold all that gold when you could hold just a fraction of it and get to spend the rest with no consequences in the short term?

Inevitably, this caught up with each and every government over time. For the United States, the gold standard was suspended in the aftermath of the Great Depression. The Bretton Woods international agreement instituted in the aftermath of World War II restored the gold standard to the US dollar, but this was short lived.

Under the Bretton Woods system, numerous foreign governments held US dollars as an indirect and more convenient method of holding gold, as US dollars were supposedly directly exchangeable at a fixed rate for gold. However, by 1966, gold reserves actually held by the US were already pitifully low, with only $13.2 billion worth of gold being held by the government.

By 1971, other governments had caught on to this, and began demanding the exchange of all their US dollars for gold, as was promised to them. Naturally, the US had nowhere near enough gold to fulfill their promises, and this became a government version of the bank run, essentially.

The US chose instead to fully renege on their promised exchange rate, and announced in what was known as the Nixon shock that the US dollar would no longer be redeemable for gold, and would henceforth be backed solely by faith in the US government (very faith-inspiring, no?).

Almost every nation quickly followed suit, and since then, fiat currencies have been allowed free reign to grow as they please with no accountability whatsoever in how much a government chooses to expand their money supply.

This, thus, requires anyone holding fiat currencies to have extreme trust that their government will manage their money supply responsibly, and not make poor financial decisions that will severely devalue the currency they hold. This compounds with the trust one must hold in the banks in which one deposits their fiat currency, to create an ultimate monetary system that has multiple points of very real possible failure, as history has shown time and again.

Holding gold privately removes the need to trust either of these points of failure in the modern banking system, but comes with its own host of problems. Namely, while gold has proven to be an excellent store of value over time, it is incredibly poor for actual day to day use in the modern economy. To transact with gold is excessively cumbersome and inconvenient. No one would consider walking around with an ounce of gold on them, measuring and shaving off exact portions of gold to pay for a cup of coffee, groceries, or a bus ride. Worse, it’s even more difficult and time consuming to send gold to anyone who isn’t physically in the same exact location as you.

For these reasons among others, fiat currencies have traditionally been preferred for everyday use, despite their many shortcomings and associated inherent risks.

No solution to this tradeoff conundrum has heretofore been discovered, or even necessarily possible. Bitcoin, however, with the aid of recent technological advances (computers and the internet), solves all of these issues. It takes the best of both worlds, and puts it into one beautiful, elegant solution.
Source: netshark.com