If you have a $100 currency note in your hand, you can spend it as long as there exist someone who believes there is a market for $100 bills. Same as with a gold coin.
But if you have a $100 in your bank account, there is an additional constraint – you can spend it only if your bank is alive and functioning correctly and lets you specifically (you are not sanctioned/banned) to spend it.
Same is the case with bitcoin for those who store their private key on exchanges.
First there should exist a market for it (others who also believe bitcoin has value). Then, just like banks, the bitcoin exchanges where you escrowed your key have to let you spend it through them.
If all exchanges you have access to in your country decide to ban you (because your govt told them to) then you cannot spend your bitcoin.
In this way, bitcoin and your bank account balance are similar and they both are different from hard cash in hand or gold coin in hand.
If you hold your private key yourself and run your own bitcoin lightweight node to connect to bitcoin network and submit your transactions, then you don't need exchanges. Even then, others who use exchanges maybe blocked from transacting with you through govt sanctions etc.
> But if you have a $100 in your bank account, there is an additional constraint – you can spend it only if your bank is alive and functioning correctly and lets you specifically (you are not sanctioned/banned) to spend it.
Given my bank is on the list of "systemically important banks", if it goes under/down there's probably more going on in the world such that I probably won't be worrying about my proverbial $100 too much:
(And I do have accounts at multiple banks in case of IT problems at one bank.)
> If all exchanges you have access to in your country decide to ban you (because your govt told them to) then you cannot spend your bitcoin.
Of all the things that I could worry about going wrong in my life, these doomsday scenarios are not even in the Top 1000. I'm more worried about stubbing my toe than some of these currency collapse scenarios that some Bitcoin fans come up with.
But if you have a $100 in your bank account, there is an additional constraint – you can spend it only if your bank is alive and functioning correctly and lets you specifically (you are not sanctioned/banned) to spend it.
Same is the case with bitcoin for those who store their private key on exchanges.
First there should exist a market for it (others who also believe bitcoin has value). Then, just like banks, the bitcoin exchanges where you escrowed your key have to let you spend it through them.
If all exchanges you have access to in your country decide to ban you (because your govt told them to) then you cannot spend your bitcoin.
In this way, bitcoin and your bank account balance are similar and they both are different from hard cash in hand or gold coin in hand.
If you hold your private key yourself and run your own bitcoin lightweight node to connect to bitcoin network and submit your transactions, then you don't need exchanges. Even then, others who use exchanges maybe blocked from transacting with you through govt sanctions etc.