What is Bitcoin?




DEFINING BITCOIN



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Beyond Another PayPal 2.0 Payment System


Bitcoin is difficult to define because it has many useful attributes that will continue to grow and evolve in to practical worldwide use-cases. As a result, Bitcoin will have different definitions and use cases for different people.

Fast And Cheap Payments Does Not Define Bitcoin – It Is Just An Attribute


Bitcoin has fast and cheap payments and it will continue to improve as second layer technologies like the lightning network (see the lightning page) take everyday “coffee” transactions off-chain while anchoring to the security of Bitcoin. There are many uneducated users that believe fast and cheap payments are the only attributes that make Bitcoin relevant. But believing that is what defines Bitcoin misses the very important point of security, safe scalability and immutability.

What Defines Bitcoin At The Core – A Sound Money


There are four stages that all monetary goods pass through to become money – the collectible, store of value, medium of exchange and unit of account stage. In my opinion – first and foremost, Bitcoin is set to become a store of value. A sound money that cannot be inflated, counterfeited, confiscated, censored or controlled by any government, bank or company.

Bitcoin is currently at the end of the collectible stage and now beginning the store of value phase.

When the store of value market is more or less saturated and volatility is minimized, Bitcoin will move onto the medium of exchange stage, followed by the final stage; unit of account. Until the store of value phase is well off, there is simply not enough demand for Bitcoin as a payment system to pay for coffees today especially when the price of a bitcoin is so volatile and in 10 years a bitcoin could be worth hundreds of thousands or millions of dollars. Owners of Bitcoin are not ready to give up this future potential. Currently, there are working central payment systems like VISA that conduct every day payments “good enough”, for now.

A Simple Technical Definition


On a technical level, Bitcoin is a protocol that integrates different technologies to achieve an immutable database through the means of a decentralized network and an algorithm called Proof-of-Work.

The Key To A Useful BlockchainDecentralization:


Think of all blockchains as an inherently slower, less efficient, more expensive and a less scaleable database compared to central databases like MySQL. Now imagine a blockchain is being pitched to replace the job of a MySQL relational database in a start-up. Both databases are centralized and are required to perform the exact same tasks but the MySQL database performs the tasks much faster, cheaper, efficiently and can scale better. As you can see, a centralized blockchain has no use case for replacing existing central database solutions like MySQL – it simply cannot compete. Case in point, the only real world use case for a blockchain today is one that is decentralized and immutable and one must ask themselves, does my database need to be immutable? This is what separates Bitcoin from everything else, not just in the crypto space but in the world. A sound money that is not inflatable, censorable, confiscatable, etc. is the killer app of Bitcoin and it will not be the last.


Additional videos/readings:
(1.) Bitcoin is punk rock – deal with it! (Video)
(2.) Innovators, Disruptors, Misfits and Bitcoin (Video)
(3.) The 4 Stages of Becoming Money
(4.) Bitcoin Wikipedia
(5.) Why Blockchain is Hard
(6.) Alternatives to Blockchain

Core Utility Of Bitcoin


4 Broad and Distinct Functions of Bitcoin:

Money: Storing your wealth, buying and selling, micro payments, speculation, hedging, cross-border payments, machine to machine payments, etc.

A financial rail: Transferring some value around the world by attaching something of value to a bitcoin token such as an asset.

A ledger: Used as an immutable record to track ownership.

A protocol: Bitcoin is a protocol like TCP/IP is to the internet. It is the backbone of the infrastructure. It is a platform that enables permissionless innovation such as protocols, apps and layers that can be built on top of the Bitcoin protocol – like a blank canvas waiting for an artist to create their vision.

What Makes Bitcoin Tick


At a basic level, we’ll discuss how four important gears spin together to keep Bitcoin working.

bitcoin (the token): The native token of the protocol used to transfer value on the Bitcoin network. Miners get paid these tokens through something called the block reward to continue securing the network. Just to make things more confusing, factually, there aren’t really any tokens but rather records of what address owns what on the blockchain (but we’ll call it a token for simplification).

Bitcoin (the protocol): The code that enforces the rules of the Bitcoin network, for example: No more than 21, 000, 000 bitcoin can ever be created. Bitcoin is a “dumb” network that pushes innovation to the edge of the network on the end-user device. This allows anyone to innovate on top of Bitcoin without permission.

the blockchain: The public ledger that records ownership of digital data. These records are special in that they are digital yet they cannot be altered to trick the network.

the network: This is the global network of all the participants in the Bitcoin ecosystem – in particular the full bitcoin nodes and miners.

bitcoin, The Native Currency


Metaphorically, let us think of the bitcoin token as the metal copper. Copper is mined, it holds value, people speculate with it and it is traded on exchanges but it has very important utility far beyond just price. Just as how copper is used to transfer electricity and data such as packets, the bitcoin token carries value and data ownership.

The bitcoin token is a crucial part and the blockchain cannot work without it. It serves multiple functions:

Money: Storing your wealth, buying and selling, micro payments, speculation, hedging, cross-border payments, machine to machine payments, etc.

Financial rail: Transferring some value around the world by attaching something of value to a bitcoin token such as an asset.

Mining incentive: The value of the token(s) contribute to an incentive mechanism that encourages a miner to continue mining, thus, securing the network from attacks. The higher value a token has, the more lucrative it is for miners to continue mining and encourage new miners to join. The higher the network hashing power, the less lucrative it is for an attacker to try and cheat the network. Miners are paid every 10 minutes via a block reward.


Additional videos/readings:

(1.) Glenn Hutchins – ‘Think of Bitcoin as Copper’ Analogy (Video)

Bitcoin Is A “Dumb” Protocol


Bitcoin is a dumb network meaning it is not highly complex in nature. It pushes innovation to the end-user devices and changes at the edges do not require risky, disruptive changes at the core protocol level. This is a good thing. It is simple which translates to a stable, secure and reliable protocol – which is of utmost importance for a protocol handling money.

A dumb protocol means it does not care what you are transacting, what device is being used, who you are or where you are located. It will just do it. A dumb network is more robust than a complex protocol and accelerates the pace of permissionless innovation by putting it in the hands of the users.

The “Internet” (TCP/IP) Is A Dumb Network


The internet (TCP/IP) is a dumb network. It transfers data from A to B and it does not know or care what that data is or what the end device is. To add innovation to a dumb network, like the internet, all you had to do was add it from the edge without permission – outside of the protocol. This eliminates risky and unnecessary engineering changes at the base protocol level and enables complex applications to be built on top.

A “Smart” Protocol Is A Poorly Designed Architecture


In a smart network, if you want to increase the positive user experience, this must be done at the base protocol level – instead of pushing the innovation to the edge of the network where users control the pace of innovation without needing any permission. Smart networks have to be upgraded from the inside-out meaning innovation comes from the inside by a central actor and that means innovation is slow and changes are only applied when everyone in the network direly requires it.


Additional videos/readings:

(1.) Dumb Networks, Innovation and the Festival of the Commons (Video)
(2.) Why Dumb Networks Are Better (Article)

Bottom-up Innovation, Not Top-Down


Historically, the greatest innovation comes from the bottom-up – which means outside the banks and Fortune 500 companies. The greatest innovation comes from the bottom-up because it is where that innovation is needed most – so it must begin there. The banks never asked for Bitcoin, in fact they wish it never existed but they must adapt or they risk becoming artifacts in a museum for extinct entities that could not adapt. Bitcoin is a completely disruptive technology capable of massive disruption. Bitcoin is an organic, open-source innovation like many technologies including TCP/IP.

Why does Bitcoin’s bottom-up innovation outpace everything else?

Here are a few reasons:

Open-source: Bitcoin is open-source technology meaning the software’s code is public and freely available to re-distribute and modify by anyone in the world.

Global/ Borderless: Bitcoin has no geographical boundaries as to who can participate in the Bitcoin ecosystem.

Permissionless: There are absolutely no restrictions on who can participate in the Bitcoin ecosystem. The protocol does not care where you live, what your religion is, how old you are, how much wealth you have, if you have a bank account or drivers license, etc. You do not need permission to participate – just like the internet.

These characteristics summarize why bottom-up innovations almost always beats out top-down. A system that is developed in a highly regulated, permissioned, closed-source and a walled garden environment, simply cannot compete with an open, global and permissionless system.


Additional videos/readings:

(1.) Jeffrey Tucker – Monetary Systems: Top Down or Bottom Up (Video)

The Public Blockchain


Bitcoin’s blockchain is a public record of every single Bitcoin transaction and the amount of bitcoin that is associated with each bitcoin address.

Bitcoin’s blockchain is special because it is what we call a public blockchain. It is open to the world and a user does not need to ask for permission to participate. It truly is one of a kind because the records are also immutable – a cause and effect of the proof-of-work algorithm and decentralized network. It is the only blockchain in the world that is immutable and has a real world use-case.


Additional videos/readings:

(1.) Blockchain vs. Bullshit: Thoughts on the Future of Money (Video)

Decentralized


Bitcoin is decentralized meaning the network has no central point of control.

Ultimately, Bitcoin is controlled by all of us – the users that run the Bitcoin full node software. This means Bitcoin cannot be controlled or shutdown because it does not depend on any particular person, group, miner, company or central server to make a decision on behalf of the whole network. Something drastic would have to occur to temporarily disrupt Bitcoin such as turning off the internet or electricity for the entire planet! The decentralization of the network is achieved by the 100,000+ sovereign individuals, companies, miners. etc. running a Bitcoin full node client across the globe.


Additional videos/readings:

(1.) Decentralization and the Architecture of Power

Open


Bitcoin is open-source – allowing anyone to not only view and audit the code that makes up Bitcoin but developers can alter the code to improve the functionality of Bitcoin and potentially have the changes implemented into Bitcoin for users to download and run. Additionally, anyone can copy the code and create their own Bitcoin clone to experiment with.


Additional videos/readings:

(1.) Why Open blockchains Matter

Borderless


Bitcoin is global and knows no borders meaning a person or machine at any location can participate in the network. After connecting to the Bitcoin network, the global network is within your reach. This dramatically increases the speed at which innovation progresses by allowing the world to build on the network rather than one central company. Additionally, this gives people that normally don’t have access to global finance, access to a global financial system.

Permissionless


Bitcoin is permissionless meaning a person or machine at any location can participate in the network without permission from any government, bank, authority, regulatory body or company. It does not matter how old you are, where you live, who your leaders are, if you have legal documents, what gender, what religion or what color you are – Bitcoin is a protocol and it does not care.

Additionally, this enables a machine to be its own bank. As we all know, machines cannot have a bank account using our current banking system.

The permissionless state of Bitcoin increases the rate of innovation at unmatched levels and enables users under strict controls to break free without permission.

Immutable


Bitcoin’s blockchain is immutable because of its decentralized network and an algorithm called proof-of-work. This combination eliminates the ability to successfully alter what has already been recorded in the blockchain. Proof-of-work enforces an ecosystem where the attacker has to spend much greater resources to attack the network than it would get in return. Additionally, the attack(s) are temporary due to the nature of how a blockchain operates, the types of attacks and their severity are limited and the always watching “white blood cells” of the community are constantly observing the network status and statistics for malpractices. As a result, an attacker would be much more profitable by directing resources towards securing the network by mining and accumulating bitcoin.

Consensus


Altering Bitcoin’s code is easy and anyone can do that. But altering the code and convincing the network to come to consensus on adopting the new code (a.k.a. bitcoin client) is a whole other beast.

The consensus mechanism in Bitcoin is organic, genius and beautiful. Yet the process is full of debate, arguing, gridlock, constant explaining and bad actor detecting literally for 24 hours a day and can go on for years. But that is a feature and certainly not a bug. This is by design so that no bad actor(s) can ever waltz in and change Bitcoin’s consensus code willy-nilly. If consensus cannot be achieved, no change is adopted and the network continues as normal. The minority (whether legitimate or bad intentions) have the freedom to “fork off” and create their new version of Bitcoin that ultimately, almost no one will use and will trend towards zero. But if the network comes to consensus, everyone downloads and installs the new code / bitcoin client.

The Bitcoin ecosystem involves many different users that may have different needs such as everyday users, hodlers, traders, miners, full nodes, exchanges, merchants, financial institutions, wallet providers and developers. Changing Bitcoin code has been accomplished through mechanisms called a soft fork and hard fork.

Peer to Peer


Bitcoin utilizes a peer-to-peer broadcast network for any user or machine to send value across the globe without permission or risk of the transaction being tampered with.

Clone-Proof


Bitcoin solved the infamous computer science problem called “Byzantine Generals”. This puzzle plagued computer scientists since digital was a thing. That’s how important the invention of Bitcoin is.

In the digital realm, this problem enables a user to spend their same money twice – also known as double spending. To safeguard against double spending on the Bitcoin network, the receiver of a payment must not accept 0 confirmations as a successful payment. 0 confirmation transactions are instant but insecure for high value transactions. The higher the value being transacted, the higher the number of transaction confirmations you will want to wait for. Confirmations are part of the proof-of-work mining process that exponentially decreases the probability of an attacker from double spending their money.

A bitcoin can theoretically be double spent but the token itself cannot be cloned / duplicated.

Neutral


Bitcoin is a network that is not controlled by any person, group, company or organization. It is not created by or belong to any country or government. It cannot be controlled or shut down and it does not care who you are, where you are from or how powerful you think you are. It is neutral.

THE Blockchain


Bitcoin uses a public ledger called the blockchain. The blockchain is a list of every transaction ever made in the Bitcoin network and everyone can see and track each individual transaction real-time. The blockchain offers an un-matched level of transparency that was never available before. In addition, the blockchain allows Bitcoin to be used for other applications beyond transfer of value.

I Can Adapt


The functionality and rules that make up Bitcoin are just code. Thus, Bitcoin can adopt brilliant features or improvements from new discoveries or competitors if users come to a consensus that the improvements are necessary.

Are we going to start at square one again and throw away all of our time and money each time someone comes up with a new improvement or feature? If you think yes, then that would be an endless cycle of restarting the entire process from scratch every month/year – something that is impossible to fairly replicate in an organic and honest manner like Bitcoin did. People know too much now – restarting means the new system will be centralized, bound to the creator/leader, manipulated, gamed and the tokens will be grossly distributed to the creators / investors in a non-organic manner. The proof is in the thousands of altcoins that have already exploited this due to nothing less than pure greed.

Bitcoin has been claimed dead by established media and other prominent entities over 300 times – see here. Attacks on Bitcoin work to make it stronger. Bitcoin is known to be “anti-fragile”.


Additional videos/readings:

(1.) Bitcoin Security: Bubble Boy and the Sewer Rat (Video)

Bitcoin Cannot Be Endlessly Printed


Bitcoin has a hard capped supply of only 21,000,000 bitcoin. This is hard-coded into the DNA of Bitcoin and cannot be changed.

The system is designed so that everyone knows how often new Bitcoin are created (every mined block, every ~10 minutes), how many Bitcoin are created (currently 12.5 bitcoin per mined block), when the inflation rate will be cut in half a.k.a. the Bitcoin halving (Bitcoin’s inflation rate gets cut in half every 210,000 mined blocks (~4 years), next up is the year 2020 to 6.25 bitcoin) and when new Bitcoin stop being created (year ~2140).


Additional videos/readings:

(1.) Bitcoin Q&A: The 21 million supply cap (Video)
(2.) Controlled Supply (Wiki)
(3.) Bitcoin Q&A: What happens to transaction fees when the block reward is zero? (Video)
(4.) 80% of all Bitcoin that will ever exist have already entered circulation (Article)

Some More Facts:


1. A bitcoin is divisible up to the eighth decimal place: 0.00000001 is the smallest amount of bitcoin you can own. This is called a “satoshi”. 1 bitcoin can be broken down into 100, 000, 000 individual satoshi.

2. New bitcoin are created at a predictable rate, in fact we know how many bitcoin are generated every 10 minutes and that the last bitcoin will be mined in the year 2140.

3. Over 85% of the 21,000,000 bitcoin have already been mined. There is less than 15% left to mine.

4. A bitcoin cannot be deleted but access to them can be lost permanently.

5. Bitcoin is NOT anonymous by default. All transactions are public knowledge and can be tracked real-time. Bitcoin is pseudonymous. Remember, if you are trying to be anonymous, 1 mistake and those tracks are recorded on the internet FOREVER.

Self-Sovereign


Bitcoin empowers the individual by giving you complete and utter control of your own money. There is no one that can take your money or tell you what to do with it. Bitcoin is yours in a sense that is more pure than anything in this world.

Store of Value


Store your wealth in the new and vastly improved gold. Protect your money from inflation, counterfeiting, confiscation and censorship. Bitcoin is extremely volatile which is part of being young and in the price discovery phase but long term the price has only gone up and to the right – the proof is in the charts you can find online anywhere. The volatility and bull/bear cycles are a requirement for the success and on-boarding of new people and adoption for this brilliant young technology will continue for some time in the future. Bitcoin started at $0 USD and just 5 years after Bitcoin was created, it reached a price equal to a 1000+ year old store of value, gold. Now, the price of Bitcoin is many multiples higher than that of gold. Bitcoin already ranks in the top 30 currencies of the world. Think about that for a moment.

Hedging


God forbid another financial collapse presents itself – but some believe it is inevitable. Some countries already have failing currencies and some are in the process of failing. History shows that currencies have a shelf life of 70 years before getting replaced by something “better”. It is a natural part of evolution. It appears that Bitcoin is uncorrelated from everything else: the stock market bubble, real estate bubble, bond bubble, loan bubble, debt bubble, etc. – some intelligent and successful people believe in hedging 1-10% of your net-worth into Bitcoin. Everyone can afford to lose a small percentage of their wealth in the shrinking chance that Bitcoin dies but if 99% of everything else loses value, that 1% hedge may save you.

Money Transmission


Transfer money to anyone or anything with a bitcoin address across the world, at any time, on any day, instantaneously without a third party such as a PayPal or Western Union taking a huge cut of the value being transacted. Send bitcoin for cents (regardless of the value being transacted) with no restrictions or interference from third parties like corrupt governments. Soon, you can send bitcoin for fractions of one cent with second layer technologies such as the lightning network built on top of Bitcoin.

High-value Transfers


Banks send and receive high value transactions multiple times a day but behind the scenes the settlement or “verification” of the transaction details are not completed for days and sometimes weeks because of how archaic, obsolete and overly complicated the financial system is. Bitcoin is the only network in this space that is secure and liquid enough to settle high value transactions – in fact, there is no number 2 in this regard. Compared to banks, the settlements over the Bitcoin network are more secure, multitudes cheaper, unavoidably transparent and extremely fast. Transactions of certain value can be settled within an hour or less. In fact, if the bank is transparent with you – the settling can be tracked real-time on any bitcoin block explorer website or the wallet itself.

Payments


Tens of thousands of merchants accept Bitcoin including household names such as Microsoft, Dell, WordPress, NewEgg and Dish Network. Eventually, the plan is that every online merchant will accept Bitcoin. Even physical stores accept Bitcoin but at a much slower pace than the online world.

You can also send and receive payments to anyone at any location such as paying for a service or paying back a friend for dinner.

Donating


Support your favorite cause by sending them any amount of bitcoin at your convenience. They’ll receive the full amount without a third party taking a cut in your donation.

Micro-transactions


Send tiny amounts of value to your favorite content providers such as artists, YouTubers or article authors. True micro transactions unlock innovative possibilities not possible before the invention of Bitcoin. Imagine, IoT (internet of things), machine to machine payments or a pay per minute rate for using a service. Second layer technologies such as the lightning network allow us to send fractions of a bitcoin for fractions of a cent.

Self-Banking


Store bitcoin safely in a secure environment such as cold storage or a hardware wallet and create a hot wallet for day-to-day spending. Enjoy 100% control over your own money and 24/7 access from the comfort of your personal device no matter where you are in the world.

Trading


Buy and sell on the many available Bitcoin exchanges and apps all over the world to gain profits (or lose money). Eventually, you can start trading on established financial institutions as they continue to make Bitcoin products available. In the some countries such as the US, people can already trade on mainstream financial companies such as Bakkt, TD Ameritrade, CME, etc.

Investing


The easiest way to get involved in Bitcoin is by purchasing Bitcoin and holding it. Other methods include investing in Bitcoin start-ups and companies. Soon, established financial institutions will offer Bitcoin products to invest in – and some certainly do already. Bitcoin ETFs in the US have been on the radar for quite some time and expected to get approved in the coming years. CBOE, CME, Fidelity, JP Morgan, Goldman Sachs, ICE, NASDAQ, TD Ameritrade, Harvard, MIT (just to name a few) are getting into Bitcoin or already are; and this is just in the US.

Speculating


People can’t help but speculate in anything these days and many people speculate on the price of Bitcoin.

Much More


Many more things to come as Bitcoin develops! As adoption grows and innovation continues – you will be able to do much more. Some innovations will not be expected and other usecases are blatantly obvious. It is a bright and exciting new world!

People


You have complete control over your money. This allows us to avoid the human corruption, human error, and human greed factors in our current financial system. Bitcoin is the epitome of freedom for the people. It is cheaper, faster and more secure than conventional payment methods. Bitcoin eliminates credit card and identity fraud and the need to trust a 3rd party. Indisputably, the greatest benefits that Bitcoin currently offers the people is sound money that cannot be inflated, counterfeited, censored or confiscated. Especially in a time when confidence in banks and central authorities are at an all time low-because they have proven time after time to be untrustworthy due to the human tendencies of greed, power and corruption.

Merchants


Avoid fraudulent charge backs because Bitcoin payments are irreversible. Payment processor fees are eliminated or reduced significantly, therefore increasing profit margins. Bitcoin also protects customers if the database is hacked because it will not be storing customers’ private information such as credit card numbers. Accepting bitcoin opens your business to global opportunities.

Global


Bitcoin is not only a global and universal money but it is also neutral meaning it is not a biased towards a central entity. No country owns or controls the Bitcoin system. Imagine travelling and never encountering exchange rates if Bitcoin is globally adopted.

Companies


Add true transparency through the public ledger that is audited by anyone at any time. Companies can become accountable to provide proof of payments, reserves or ownership of their finances. Avoid risking customer’s personal information because the database will not be storing private information such as credit card numbers.

Greener


Minuscule resources are required to keep Bitcoin running compared to traditional systems such as fiat or gold. Think of all the accumulated resources that bank buildings, financial offices, entire skyscrapers, bank vaults, millions of ATMS, massive central servers, thousands of computers, fiat printing factories, millions of paper and plastic bills, millions of metal coins, armored vehicles, gold security, gold mining machinery, gold vaults, gold factories, gold transportation and gold storage consumes.

Gold mining and mining of any kind should be unacceptable. It destroys the habitat and digs up mountains, hillsides, and river banks to find mere ounces of gold.

Bitcoin mining does not dig into our planet and it has been proven that over 70% of the energy consumed for mining comes from renewable resources and surplus energy that would otherwise be wasted. Bitcoin does not require physical transportation or protection and most of the infrastructure for Bitcoin is pre-existing like the internet, personal computers and phones. There is no physical representation of bitcoin so there is no need for massive amounts of paper, plastic and metals for bills and coins like our current fiat system does. The only additional energy consuming infrastructure that Bitcoin requires are the miners and the electricity consumed provides global network security, immutability and sound money. Bitcoin will become more energy efficient as mining technology and technology in general advances. Perhaps solar powered bitcoin miners will be a thing in the future – if it is not already happening.


Additional videos/readings:

(1.) Bitcoin Doesn’t Waste Electricity (Article)
(2.) Bitcoin Q&A: Energy consumption (Video)
(3.) Bitcoin mining is efficient (Video)
(4.) Just how much energy is Bitcoin using? (Video)
(5.) POW is Efficient (Article)
(6.) Bitcoin doesn’t have an energy problem. It’s an energy solution (Twitter)
(7.) Op Ed: Bitcoin’s Energy Consumption Is Neither Frivolous Nor Excessive (Article)
(8.) SLP12 – Bitcoin Mining and Energy, with Hass McCook (Podcast)
(9.) Bitcoin mining is efficient (Twitter)
(10.) Effects of Gold Mining on the Environment (Article)

Careers


This new booming industry will continue to create new career opportunities to support the Bitcoin infrastructure. Tens of thousands of jobs have been created and it is only the beginning.

New jobs include the obvious software engineers, security professionals etc.

But this new ecosystem requires work and development in all areas such as law, finance, venture and business startups, adapting companies, education and other industries.

Bitcoin is global, so what may be occurring in your country, will be occurring in other countries. Bitcoin is the hottest, most talked about topic today. It brings together the brightest and most innovative minds to discuss this most exciting innovation that has ever been invented since the internet.




ADDITIONAL INFORMATION



Bitcoin Was Created


The Bitcoin whitepaper was published on Halloween day, October 31, 2008 by Satoshi Nakamoto on the cryptography mailing list at metzdowd.com. Intentional or not, the Bitcoin whitepaper was released to the world in the midst of the 2008 financial crisis. On January 9, 2009 – Satoshi released version 0.1.0 of the Bitcoin software on sourceforge.com. The first block a.k.a. “the genesis block”, was mined on January 03, 2009 – this day is considered Bitcoin’s birthday. On January 12, 2009 – Satoshi sent 10 bitcoin to Hal Finney which is the first bitcoin transaction in history. On may 22, 2010 – the first ever documented bitcoin purchase made its mark in history when Laszlo Hanyecz paid Jercos 10,000 bitcoin to purchase and deliver 2 Papa John’s pizzas his house. At Bitcoin’s 2017 peak, these pizzas cost just under $200,000,000 USD. From 2009-2012, Bitcoin was completely unknown to everyone – only to be accepted for payment by a handful of visionaries. Starting from 2013, Bitcoin slowly gained traction and legitimacy as more visionaries and entrepreneurs discovered Bitcoin’s advantages and it’s huge potential. Now, the world cannot go 1 day without talking about Bitcoin.


Additional videos/readings:

(1.) The History of Bitcoin by The Motley Fool (Article)
(2.) History of bitcoin (Wikipedia)
(3.) A Short History Of Bitcoin And Crypto Currency Everyone Should Read by Forbes (Article)

The Inventor


Bitcoin was created by a mysterious person or group that went by the pseudonym of Satoshi Nakamoto on bitcointalk.org and other communication means regarding Bitcoin. 2011 was the last time Satoshi communicated with anyone but before he disappeared he encouraged the former lead bitcoin core developer Gavin Andresen to continue working on Bitcoin. But now, there is no “leader” due to the radical decentralization that the network went through since then.

Fortunately for us, Bitcoin’s platform is open-source and decentralized which means anyone in the world can audit the code and it is not reliant on the trust of any central entity, rather in the trust of mathematics and cryptography.

P.S: In case you were wondering – no, you do not know who Satoshi is and anyone who claims to know or be Satoshi is lying, has a motive or craving for attention. Providing proof that you are Satoshi Nakamoto is straight-forward and easy to do. So, until that happens and the provided proof is verified as true by multiple qualified entities with explanations backing their reasonings – Satoshi’s identity remains unknown. Quite frankly, the identity has no significance and he/she/they no longer have influence on the Bitcoin protocol. Bitcoin has evolved far, far beyond Satoshi Nakamoto and that is a good thing.


Additional videos/readings:

(1.) Mystery Founder Of Bitcoin: Uncovering Satoshi Nakamoto’s Identity Of Bitcoin Matters (Video)
(2.) Satoshi Nakamoto (Bitcoin Wiki)
(3.) The Mysterious Disappearance of Satoshi Nakamoto, Founder & Creator of Bitcoin by Huffingtonpost (Article)
(4.) Satoshi Nakamoto (Wikipedia)
(5.) Bitcoin Q&A: Who is Satoshi Nakamoto?
(Video)

Transaction Validating


Bitcoin uses a process referred to as “mining” – this is an over-simplified term because the process is much more than mining for bitcoin. Bitcoin mining processes live transactions, builds and secures the immutable public ledger and brings newly created bitcoin into circulation.

Miners are ingeniously rewarded bitcoin for being the first to solve a work-intensive mathematical puzzle using specialized computer hardware – a process that both secures previous transactions and processes the current ones. Mining rewards newly created bitcoin in a predictable and controlled manner by an auto-adjusting algorithm embedded into Bitcoin. In fact, the rate of newly created bitcoin is so predictable that we know when new Bitcoin are created, how many are created, how many are supposed to be created and when the creation of new bitcoin will halt. Mining is a technically complicated process to explain, so let us leave it at this for now..


Additional videos/readings:

(1.) Everything you need to know about Bitcoin mining
(2.) Life Inside a Secret Chinese Bitcoin Mine
(3.) Mining (Bitcoin wiki)

Backing Of Bitcoin


Nothing physical backs Bitcoin – just like nothing backs the dollar or gold except faith. Instead, Bitcoin is backed by the laws of mathematics that 2+2 is always equal to 4. In this system, we go by the motto, “Verify, don’t trust” which means that the system runs on undeniable facts; the consistent reliability of mathematics and the proven security of cryptography. The system is not in control by the powerful few and equally so, by the human flaws and natural human tendencies of greed, corruption and human error.

Besides, the intrinsic value of anything is technically incalculable or non-existent. Intrinsic value is a fictional and subjective value that is created on the opinion of industry standard. For example, before people considered gold valuable, gold was worthless. In other words, something is worthless until it is not – nothing started off with value; it was eventually given a value by human subjectivity. If gold was not widely recognized by older generations as a store of value, the market value in dollars would be much less than it is today since it has no other valid use-case. But for those who want to argue that Bitcoin does in fact have intrinsic value – bitcoin is scarce, has real-world intrinsic utility and is the only unit used on the Bitcoin network.


Additional videos/readings:

(1.) What Is The Intrinsic Value of Bitcoin (BTC) (Video)
(2.) Bitcoin Q&A: Trust, promise of value, and intrinsic utility (Video)
(3.) Currency Scarcity and Intrinsic Value (Video)
(4.) Peer-to-Peer money in a historical context – Andreas M. Antonopoulos – Reinvent Money 2015 (Video)






EDUCATIONAL VIDEOS



“Bitcoin may be the TCP/IP of money.”
Paul Buchheit – Founder of Gmail


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