been sitting on its draft for a little more than 14 months, i guess now is as good a time as any to hit publish on this thing – given that its bitcoin white paper’s 10th birthday!
bitcoin. everyone is talking about it because everyone is talking about it.
First time I ever heard of bitcoin was in 2013, but perhaps because my view of the financial world then was not as expansive, I failed to fully realize its significance. Moreover, bitcoin world then was full of drama: FBI raid/SilkRoad, Mt. Gox collapse, hacking/thefts, hard forks etc – so it never really captured my imagination and I stayed in the sidelines (a costly mistake, lesson learned – trust your gut and listen to ‘first thoughts’). Nevertheless, I kept hearing about it again and again. It wasn’t until early 2017, when I finally realized that I needed to suspend my disbelief and study this ‘bitcoin’ phenomena asap.
So I fell down the rabbit hole..slowly at first, then suddenly. I went back to school, literally; and enrolled in a three-month ‘Digital Currencies’ course through the University of Nicosia (now my ‘certificate of accomplishment’ is forever recorded in the bitcoin blockchain, see this transaction that made the verification). I also poured over Sathoshi’s original paper, browsed through the back and forth online discussions between Hal Finney and Satoshi, read history of fiat paper monies, watched limitless (90+, but who is counting…) bitcoin related interviews with Andreas Antonopoulos, Trace Mayer, Naval Ravikant, James D’Angelo, Ted Nelson, Chamath Palihapitiya, Roger Ver, Vitalik Buterin, Nick Szhabo, Adam Back, Jimmy Song, Elizabeth Stark to name a few. It went on and on; to the point where I would almost forget to eat or sleep – as one does.
a wonderful melody, in a technical sense:
Soon I realized Bitcoin gives different meaning to different people – perhaps due to its multidisciplinary reach. Some of the variations I heard: its a programmable currency, or its a store of value (e.g gold), or, its a protocol (like TCP/IP, HTTP) layer. Some even accused it of being speculative asset or a ponzi scheme. Others assumed it to be an open source monetary system, or a social experiment, or libertarianism meets Austrian economics meets cryptography? or may be its all of the above and/or combination of them. However, everyone agrees that bitcoin displays certain characteristics: its distributed (i.e mining is a distributed consensus system), its immutable (once a block is written to a blockchain, it cannot be changed or tampered with), its scarce (supply limit built in, ie. only 21 million coins can be ever created), its somewhat anonymous (transactions can be traced if needed), its divisible (it has one hundred million sub units), its open to public (i.e all transactions are public knowledge on a public ledger), it cant be modified or forged (mathematically derived from elliptic curve function which is not breakable, cannot be reverse-engineered, & is computationally expensive if anyone were to try), and its easily accessible from anywhere (you just need to remember its seed to unlock your coins from any device).
in trust less, we trust:
One theme that stands out: trust minimized network (as in ‘not needing to trust a particular entity, agency or system’, vs ‘without trust’). Bitcoin network (and blockchain) does not rely on or trust one person or third party to run its operations, it fact, it eliminates the need for trust. Instead, its predicated on cryptography, peer network consensus and mathematical functions, including Byzantine Generals problem and Elliptic Curve Cryptography. Each miner needs to solve computationally expensive puzzles in order to complete a transaction. And every node in the Bitcoin network stores exact replica of the ledger. So technically, any two untrusting strangers can do a transaction w/o any hesitation. Its as if Bitcoin is the first practical implementation of triple entry bookkeeping system. Whereas double entry book keeping typically consists of two entities – assets and liabilities, ledgers in bitcoin network include a third dimension – immutable proof of transaction that can be easily and publicly verified – and is impossible to fake or cheat the system.
Its interesting to note that the idea of trust-less network existed, although in its rudimentary form, long before the concept of bitcoin was created. For e.g. ~500 AD in Polynesian island – island of Yap, limestone that weighed ~200 kg was used as coin/money/currency -aka stone money. The coins were too big to frequently move it around, and as a result, they were placed so that its physically visible to everyone on the island. Since the island was tiny, everyone knew each other and, more importantly, remembered where they stored the Yap (lime) stone. It essentially handled the task of distributing the knowledge (of stone’s ownership) amongst the members of the island, thus a mental record was stored for each transaction. This could actually be the first recorded example of a decentralized ledger and the more people knew about a specific transaction, the more secure that transaction became. Such is the nature of a truly decentralized system.
I know I left out many other relevant details, but its amazing to see how elegantly Bitcoin pieces together multiple domains (mainly maths, computer science, security, economics, payments, law, finance, and cryptography). This thing is melodious in a technical sense :).
let the future show the truth:
My interest is in the future because I am going to spend the rest of my life there – Charles Kettering
I am not a bitcoin expert by any means but imo, the promise of bitcoin cannot be measured in its current state – instead, it allows a future to be born. To really understand bitcoin, one needs to abandon preconceived notions and be willing to be surprised (black swanned). It asks us to consider a different perspective, and to rethink what money will mean in the future. In doing so, we are bound to suffer a degree of cognitive dissonance, because the breadth and range of conversation that bitcoin expects us to have revolves around Information Theory, Quantum Cryptography, Proof of Work, Smart Contracts, Decentralized Applications, Distributed Systems, Hyperledgers, Blockchain, Financial Regulations, Fiat Currency, Bretton Woods system, Austrian Economics, Fractional Reserve banking, etc.
With bitcoin, anyone can now have access to global finance, irrespective of their background (age, sex, economic status, geographic location, etc). This transcends ethnicity, religion, geography, socio economics and levels the playing field for the 2+ billion people who do not have any access to monetary system. In addition, it reduces the cost of protection, meaning, violence cant stop a math problem. Bitcoin is global right out of the gate, and its going to disrupt a lot of institutions and entities, including Silicon Valley. Its like a tsunami is coming, and those who know how to ride this new wave will surely stake an asymmetric advantage. bitcoin does not need us, we need bitcoin!
To quote a Chinese axiom: The best time to plant a tree was 20 years ago. The second best time is now. Happy 10th birthday bitcoin, here’s to another 200 years!
More bitcoin info/resources:
https://www.youtube.com/watch?v=ZloHVKk7DHk (Quindecillions & The Amazing Math Of Bitcoin’s Private Keys)
https://www.youtube.com/watch?v=HAXPt58x7LI (Elliptic curves, SHA256, and RIPEMD160, its an excellent technical deep dive into the math behind Bitcoin)
https://www.youtube.com/watch?v=4QxOUwG8a2Y (Bitcoin difficulty, target, BITS)
https://www.youtube.com/watch?v=3CMucDjJQ4E (How Bitcoin Actually Works)
https://www.youtube.com/watch?v=xUNGFZDO8mM&t=16s (Andreas M. Antonopoulos educates Senate of Canada about Bitcoin)
https://www.youtube.com/watch?v=pQQkjwr9GG4&t=1964s (Andreas Antonopoulos – Hacktivist Village Stage @Symbiosis Gathering 2016)
and this by Jameson Lopp is also a good one: http://lopp.net/bitcoin.html