WTF Is Bitcoin?

Bitcoin: Peer-to-Peer Electronic Cash

The title of the Bitcoin whitepaper says it all: Bitcoin: A Peer-to-Peer Electronic Cash System.

Along Comes Bitcoin

In August 2008, a mysterious computer programmer named Satoshi Nakamoto released the Bitcoin Whitepaper on the cryptography mailing list. He claimed to have solved this “double spend” problem and created a working peer-to-peer electronic cash system.

Why Does the Price Keep Rising and Crashing?

That’s an excellent question, and it’s best to think of Bitcoin as an emerging currency. Today, there’s just over $1 trillion of value in Bitcoin, which is a tiny fraction of the total money in the world. That figure is somewhere in the hundreds of trillions if you consider all forms of money, from cash to derivatives. Of course, Bitcoin is going to be volatile!

Why Is Bitcoin Gaining Value?

To keep it simple, Bitcoin is rare, and other currencies are not. Just this year, 20% of all US dollars in existence were printed by the Federal Reserve and injected into the economy. Other major central banks are doing the same, but the Bitcoin protocol is not.

WTF is the Bitcoin Halving?

I’ll keep this simple because I’m not the sharpest technologist, and there are aspects of the Bitcoin network that still leave me befuddled after years of research.

A Few Other Important Features of Bitcoin

There are a few other things that are important about Bitcoin. I’ll summarize them here.

  • Bitcoin is permissionless. You don’t have to apply for a Bitcoin account like with a bank. You can just download a wallet and start sending and receiving Bitcoin today from your phone or computer. This could rapidly bank the unbanked and give people access to financial services.
  • Bitcoin is pseudonymous. It’s not totally anonymous. However, you don’t have to link your ID to your Bitcoin wallet. If you don’t broadcast your Bitcoin address publicly, there’s no way for anyone to know it’s yours. Just like a real wallet in which you keep cash, Bitcoin allows for financial privacy.
  • Bitcoin is a global ledger. It’s more than just a coin. Bitcoin is a global set of books. Every node on the network records every transaction every time a new block is mined. There are around 83,000 nodes today. None of them can change a single transaction record without consensus. I believe this global ledger is the real value of Bitcoin. It’s one set of books, and it gets audited every 10 minutes.
  • Bitcoin is decentralized. There’s no Bitcoin Corporation. There’s no one to call if you lose your Bitcoins. It’s electronic cash. Nodes keep a record of everything, and miners create new blocks to complete transactions. Again, nobody can change anything unless the majority agrees. This means Bitcoin can’t be changed by one corrupt party. It’s democratic money.
  • Bitcoin is censorship-resistant. A bank can stop you sending money to support a political cause. The American government can tell a grown adult he can’t place a sports bet online. With Bitcoin, you can spend your money on whatever you want and send it to whoever you want. However, despite propaganda, it’s terrible for committing crimes. Every transaction is logged in history forever and can’t be altered. Determined enough investigators can and will catch you if you use Bitcoin to sell drugs or fund terrorism.

Where Will Bitcoin Go From Here?

I have absolutely no idea. Everyone has an opinion on this. There are Bitcoin maximalists who believe it will become the new world reserve currency the way gold used to be. There are Bitcoin purists who claim it has lost its way and was meant to be used for small payments and is now a plaything of the wealthy. There’s even a guy who claims he invented it, and he’s going to wreck it and start again. Then there are ordinary people who just want to trade it the way you might trade any other currency to get more back.

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