Bitcoin: The Internet’s Money
The what, when, why, who & how of Money & Bitcoin
(Audio available by request @BTCjoedirtay on twitter)
Chapter 1: What is Money?
Every day, everywhere around the world, people swipe cards, stack paper of all colors and sizes, and spend their life force avidly attempting to accumulate ”money”. How often does the simple question “what is money?” occur to someone during one of these seemingly mundane transactions? For the majority of humans, the answer is likely never. To most, paper money is the equivalent of water to fish; it’s everywhere and impossible to live without, yet hardly a soul, or fin for that matter, could explain what properties good money requires or why modern civilization so desperately needs it.
Yet perhaps now more than ever, one should repeatedly ask, “What is money?” If you’re wondering why, take for example the US government’s $28 trillion in debt, not to mention its $100 trillion in unfunded liabilities covering the Baby Boomers’ upcoming retirement. But don’t stop there; also consider the federal government’s ability to pass a “bipartisan stimulus package,” printing $3 trillion out of thin air, equivalent to the yearly income of over 50,000,000 American families. As you may be starting to realize, it’s as good a time as ever to question the meaning of money. To truly understand its properties and purpose, we must first travel through time to a civilization before money.
Barter
Rather than money providing the dominant medium of exchange, old civilizations relied on the barter system for trade. Bartering can be effective on a small scale and given the right trading partners may even be more efficient than using money. Unfortunately for those among us that enjoy haggling, there are two dire flaws with bartering that limit its scalability and efficiency. Bartering’s first major flaw is the often conflicting presence of dual desires, commonly referred to as the “double coincidence of wants”. This “dual wants” problem is most easily understood through a basic example. When farmer Fred heads over to blacksmith Bob’s to stock up on tools, he better hope Bob wants some milk or vegetables or he is out of luck. As you can see, if both sides don’t happen to desire the other’s surplus good and have a similar value framework, there will be no trade. And as you may have guessed, a roadblock such as this seriously hinders the flow of economic goods and human to human interactions.
The second major flaw of the barter system comes down to a basic fact of human economic systems, which is the specialization of labor theory. Which put simply states, the warrior is better off focusing on getting stronger & learning better techniques, the master blacksmith should focus on swords & armor, & farmers should focus on increasing their yield. It is less productive on a civilization level to make everybody a Swiss army knife of trades. Working inside of a specific field for an extended period of times allow humans to learn from their mistakes and fine tune the best practices of their given field. The downside to intense specialization is the limited types of economic goods you produce. Within a barter system this can cause extreme volatility with the supply/demand & pricing powers of your business. Fortunately, after struggling with these problems for millennia, people became wise to a new solution, which today we call money.
What we commonly refer to as chedda, Benjamin’s, & cold hard cashhhh was not always a green piece of paper or a number on an app. “Money” has taken the form of glass beads, sea shells, cigarettes (see Shawshank Redemption, thank me later, it’s a classic), & rare shiny rocks through man’s journey. The one thing all of these have in common, is they are the most salable (AKA: Liquid) good in that system, but even the largest redwood starts as a seed. So for the case of glass beads, it was their extreme scarcity in Africa due to the lack of manufacturing capabilities and high portability that lead to their use as money. In Shawshank, it was the fact half came into the penitentiary with a smoking addiction, half of what’s left started smoking in the pen, & the remaining quarter have 75% of the prison to sell to. As for gold, that’s a bit of a longer story, and a much grander tale.
This shiny rock with fantastic electrical conductivity and beauty rose through the monetary ranks not due its elegance, but due to its unrelenting scarcity throughout time. In the never ending quest to dig up and hoard these pretty gold nuggets, we’ve managed to extract and accumulate less than 4 Olympic swimming pools of gold. That’s including yanking Grandpa Gerald’s teeth out, so let’s round down to 3.5 for his sake. This extreme, seemingly never ending level of scarcity combined with a long track history of humans accumulating & flaunting their shiny treasurers propelled gold to the king of the monetary mountain for the majority of modern history. By now you’re probably asking, “There has to be more than just scarcity & liquidity that make for a good money??” which is right. It’s more complicated than that, but not by too much. Below I will dive into the properties that make for good money.
PROPERTIES OF GOOD MONEY
(In descending order of importance in my opinion)
7. Privacy Persevering
The modern financial world is filled with digital money drowning in KYC (Know Your Customer) & AML (Anti Money Laundering) banking laws that treat everyone as Narco Drug lords until proved otherwise. Disregarding the debate of how well this is working (see HSBC cartel affiliations), all participants know the annoyance and overreach endured on a day to day basis by innocent civilians. For that reason, privacy preservation is new characteristic of good money that is taking center stage in the digital age. This characteristic historically was never included due to the physicality of gold. In a 1’s & 0’s world, the rails your money ride on can make a world of difference with how the system treats you AKA censorship resistance & personal data collection. For that reason, privacy preservation is taking the last spot as the 7th most important property of good money
6. Portability
Living in an extremely globalized and interconnected world, it is not hard to see how the ability to move value faster, farther, & cheaper is beneficial. This key feature of money ended up being the down fall of gold and what led to the eras of paper money representing gold, followed by paper notes backed by nothing but the decree of the king (fiat money). Upon the advent of digital money, fiat currencies became the first money that can travel close to the speed of light, only when disregarding the check valve filled financial system that is. This has now become what people expect of their money and seems impossible to live without. Thusly, Portability is the 6th most important property of good money.
5. Divisibility
The ability to subdivide a single unit into many parts increases the usefulness of the money for various types of economic encounters. This among many other properties is where precious metal shined & later Bitcoin shined even brighter. With gold and silver being squares on the periodic table, they are technically divisible down to the atomic level. More realistically, they can be consistently measured out to the gram or fraction of a gram. Bitcoin takes this to an entirely new level by being able to break down a single Bitcoin into 100 Million sub units (called satoshis)…… you read that write, 100,000,000 satoshis (commonly referred to as Sats) in a single bitcoin. Meaning, there will only ever be 2,100,000,000,000,000 satoshis (2.1 Quadrillion). Lucky for us, Bitcoin is just information, so if someone complains it’s not divisible enough, we can always break it up into smaller chunks. Alas, divisibility comes in as the 5th most important property of good money.
4. Fungibility
Fungibility can most easily be described as a group of goods where their relative characteristics are similar enough to call them roughly “the same”. Gold, being nothing more than a square on the periodic table, makes it perfectly fungible. Diamonds on the other hand are not fungible due to the differences in quality & the fact the atoms themselves (carbon) are not the scarce part; it’s how the atoms are structured that makes them rare, and thusly unique.
Commodities that very in quality hinder their ability to flow freely as money, leaving room for subjectivity to the “purity” of the good and thusly decreasing its value. This can be seen with Dollar Bills that were obtained illegally (laundering money) and even Bitcoin that has passed through the wrong hands is considered “tainted” by some. With new privacy preserving technologies emerging daily and some yet to emerge, this should become less of a problem as time goes on for bitcoin. As far as the Bitcoin network itself is concerned, the coins are completely fungible but have different ownership histories embedded within them to ensure auditability for all 21 million. For the reasons above, Fungibility is the 4th most important characteristic of money.
3. Verifiability
The saying “don’t trust, verify” is taken very seriously within the bitcoin world for a good reason. When you receive a 5 dollar bill as payment, how often do you check it’s real? It may seem like a joke now, but put yourself back 500 years. How are you supposed to know the weight and purity of gold is true when someone pays you for the leg of lamb in the busy market?? With modern technology its fairly straight forward measuring the weight, but the purity of gold is another story. Its takes expensive equipment, time, & a certain level of trust (assuming people don’t test every ounce of a multi ton purchase). The ability to Verify at all, and even better, cheaply verify the amount & purity of money is extremely powerful. It eases the flow of money and decreases the level of trust required between two trading partners. For example, if the Bitcoin payment you promised shows up in my wallet, it has already been tested for purity and precise down to the 1/100 millionth level. For these reasons, verifiability makes the podium as the 3rd most important property of good money.
2. Durability
Most of the information above has involved logistics around transferring value through space. Which id argue is one of the two main use cases for hard money. The second use case, which separates the decent money from the great, is the ability to store value throughout time. The two most important properties of money are durability & scarcity, which are the keys to making value withstand the test of time. Durability can be described as the ability to not rust, rot, decay, etc. throughout time and the various conditions an object can find itself in. This is where gold has historically taken the cake and a key property that cemented itself in the monetary hall of fame.
The ability to stand the test of time is virtually unmatched in the monetary world when compared to gold. Beginning life during neutron star collisions & super nova, every atom of gold has had a wild journey to make it to our pale blue dot, never ceasing to have the same number of electrons spinning around its nucleus. A level of durability and multi thousand year life span bitcoin only wishes to reach. With bitcoin (the asset) being nothing but information, it also is immortal in some ways, but fragile in others. If the whole world was nuked, gold would still have the same number of electrons swirling, where the bitcoin network could theoretically be wiped off the face of this earth. Where Bitcoin does shine is the ability to be antifragile on a system level (to non-world ending events). It has the ability to grow stronger after large attacks. Or put differently, every time it survives an attack, the fact it didn’t die gives more people faith to invest in the various parts of the project from the coins themselves to the mining rigs powering the network. This is commonly referred to as the Lindy Effect, which can be summarized as the longer something has lived, the longer it is expected to live. Early on, many detractors claimed various ways Bitcoin would die soon, ranging from mining death spirals to government bans, but it’s still alive and kicking. Honey Badger gives 0 F**KS and only gets stronger through time. Durability thusly comes in as the 2nd most important property to good money.
1. Scarcity
Now it’s time for the secret sauce to any good money that’s able to stand the test of time, Scarcity. The quick definition would be how much of something exists today, how much more is made every year, how much could be created every year given the right incentives, & lastly how much of it is for sale at any given time(less important). There are many different interpretations on how to try and measure the scarcity of a good within the economy. My preferred method is to look at the stock to flow of the commodity. Stock refers to the total supply of a good that exists, so for gold, it would be the 4 Olympic swimming pools mentioned above. The flow represents the new gold that is mined up every year. Historically, that number has been about 2%. AKA 2% of the entire gold stockpile in the world is dug up, and refined every year. The stock to flow variable for a given commodity is just the inverse of this %. So for gold that 2% equates to a stock to flow value of 50. This value is extremely high, mostly due to the difficulty of finding and mining new gold. Combined with the fact the majority of gold is used for monetary or jewelry purposes so it is never consumed like aluminum or steel. This leads to the stock of the money to only grow. Yet again, Bitcoin takes golds high stock to flow to the next level.
Bitcoin, much like gold, only has its stock increase throughout time; due to the fact a bitcoin is never consumed. Losing keys to access coins could possibly be considered as consumed, but we will ignore that for now. Unlike gold, bitcoin has a nifty feature called the halving or the halvening, depending on one’s tastes. This event causes the total number of bitcoin mined each day (I’ll go into what mining is later), to go down by 50% once every 4 years. We have now seen 3 halvings for BTC. The system started out producing 50 BTC every 10 minutes, then 25, then 12.5, & since May 11 of 2020, 6.25 BTC every 10 minutes. The latest halving has now increased Bitcoins stock to flow to almost par with gold. 2024 will be the year that humans finally have a money more scarce than gold (by a factor of two). It is impossible to know conclusively how the market will react to this in the months following the major event. If bitcoin is able to match golds value (which seems slightly pessimistic due to its superiority in virtually all properties of good money) each Bitcoin would be valued at over 400K$……
“It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy.”
Satoshi Nakamoto
At the end of the day, money can get an A+ on every other property, but if it fails the scarcity test, it will never be able to last. This includes factoring in extremely long time scales where engineering & technological breakthroughs may make many of the things we currently consider scarce, extremely abundant. See glass beads in Africa for a simple example, or dive into Jeff Booth’s “The Price of Tomorrow” if want a crash course on the effects of technologically induced deflation (Tech advancements lowering prices). For that reason, Scarcity gets first place, and the gold medal, for most important characteristic of good money.
Chapter 2: What is ฿itcoin??
The day was January 3rd 2009; the world was just coming to grips with the level of financial devastation that lied ahead. Previously unthinkably large stimulus packages, government debt monetization, & toxic debt purchasing by central banks was on the horizon. The bureaucrats in Washington, Brussels, & Beijing gathered around to find the way out of this mess. Eventually hatching a plan to rescue the people like fireman going into a burning building, little did the people know the fireman had worked with the Federal Reserve to start the blaze; but that’s a story for a different day.
In a world drowning in politics & dysfunction, a small block of orderly data began propagating around the internet, forever preserving the bold statement held within across the entire planet; “Chancellor on brink of second bailout for banks”. Bitcoin was born, starting its journey that would eventually lead its orderly blocks of data from the natural gas rich Texas plains, to remote hydro powered mining farms in the Chinese mountains. From that moment forward, Bitcoin would continue making new blocks approximately every 10 minutes. At time of writing, the bitcoin blockchain is just days away from creating its 660,000 Block, with an uptime of 99.98%, far greater than any of it internet brethren. The Bitcoin blockchain has become an encrypted, unstoppable, & distributed power house from sea to sea.
Which is when you may start asking yourself; what is a blockchain? Why is Bitcoin Good Money? Who created Bitcoin? Why did the person or group named “Satoshi Nakamoto” create Bitcoin? Why Bitcoin can’t bitcoin be copied?? And lastly, what’s the difference between bitcoin the digital asset and the bitcoin network?!?!? (Let’s just assume all of these questions came to your mind in this order)
What is a Blockchain?
A blockchain on the simplest level is a list that keeps track of the proper owner of digital assets. Bitcoin for example, process a new block of transactions approximately every 10 minutes, updating the list with the movement of coins around the network. This block of transactions is added to the previous block, making a chain of blocks, or blockchain for short. New coins are created when the miners process a batch of transactions as long as they followed the rules of the protocol. Bitcoin utilizes a Proof of Work algorithm that forces the miners to dedicate computational power & thusly consume electricity to earn the reward. The miners provide cryptographic security proportional to the amount of work done. AKA twice as much hash rate (typical measurement of computer work spent mining) provides twice as much security for the network. A reward of newly minted coins (+ Transaction fees, will elaborate later) incentives the miners to tell the truth and follow the rules of the protocol. In the early days of Bitcoin, this reward was virtually worthless($ wise), relying on the altruism of cypher punks, people that thought it was a silly collectible, & the rare polymath that was blinded by bitcoins potential to protect & secure the network. At current market prices, that little bit of altruism, silly pet project, & crazy vision, works out to just under 1 million dollars….. every 10 minutes…… costing 5 cents of electrical power or less. Pretty good ROI in just over 10 years if you ask me.
Today, it’s a totally different ball game. Only 6.25 bitcoin are produced every 10 minutes (12.5 % of the original block reward), but the bitcoin network consumes more electricity than the country of Switzerland. It has become highly commoditized and not practical for the average person to jump in today. (Back to that whole specialization of labor theory again). Before I open myself up to attacks from environmentalist, it’s important to know the majority of BTC power is renewable or would have been wasted due to the fact BTC miners are very portable and chase the cheapest energy on earth. Back to the subject at hand, with the block rewards being halved every 4 years the last bitcoin will be created in the early decades of the 2100’s. Which begs the question “once all the bitcoin are mined, how will the network sustain itself if it consumes so much electricity??”.
While the long term sustainability is inherently unknowable, bitcoin to this point has navigated itself to a position where it has a legitimate second source of mining revenue, transaction fees. Early on this was totally negligible. With hardly anyone using the network, the block rewards being 50 bitcoin, & bitcoin having 0$ market price, it was hardly a thought in the miners head. With every continued halving it will become a higher % of the miners total revenue. With a limited amount of transactions fitting in one block, the space goes to the highest bidder. This funding source has grown to just under 1 million dollars per day. Since all fees are denominated in bitcoin, this number could easily 10X or more with a larger bitcoin price & increased adoption.
This has the downfall of creating short term spikes in the price to move your coins around the network. Unfortunately, it’s a price that we should all be willing to pay considering the antifragility and robustness it adds to the network. Much like how the internet scaled, people all around the globe are working on 2nd and 3rd layer scaling solutions to make bitcoin usage economically feasible for all types of transactions. Importantly, using layered scaling solutions as to not sacrifice the transaction fees that are vital to keeping the bitcoin blockchain cranking out new blocks until the chancellor ultimately gets no bail out from the bitcoiners.
Why is Bitcoin good money??
Bitcoin the digital asset is the tool, invention, commodity, network, etc. (Pick the word that fits best in your mind) that mostly closely matches the characteristics of perfect money. Historically, gold was the king of monetary mountain. Referencing back to the properties of a good money list, it preforms exceptional or marginally well on the majority of the characteristic of money. In the grand scheme of things, its ascent to the peak of monetary mountain was mostly due to its extremely high stock to flow. That is the one property that has allowed it to store value, and thusly be good money for millennia. Another way to rephrase the term high stock to flow is the commodities resistance to debasement. Gold miners act as the agents of debasement in the gold economy, loggers act as agents of debasement for the lumber industry, & bitcoin miner’s act as agents of debasement for the bitcoin network. Where Bitcoin is different than any other commodity in the history of the earth is its finite scarcity. Another way of phrasing this is there will only ever be 21 million bitcoin….. Ever….. No matter how fast humans try to pull bitcoin from the universe. This is humanities first brush in with true, unrelenting, finite scarcity. We are very early on this curve, considering just one or two average human lifetimes from now there will be no more bitcoin created ever again.
I will now give a quick summary of how BTC preforms on every key property of money.
7. Privacy Preserving: This new characteristic of money, unique to the digital age, can be split into two main parts, how the network treats addresses, & what data can be obtained from the public record that is the blockchain. The bitcoin networks public addressing system, think about bank account # equivalents, does not require you to provide a name, birthday, &/or social security to open an account. All that’s required is for the user to have a unique pairing of 12 or 24 words they keep secret. In that sense, the bitcoin network has great privacy preserving & freedom rich rails for the coins to ride on.
Unfortunately, the bitcoin blockchain when married with the KYC & AML rich fiat financial rails, leads to indisputable ownership (beyond a boating accident, wink wink) for many of the bitcoin owned around the world. With that said, the majority of the bitcoin in the world were created during the Wild West days (50 & 25 BTC block rewards), and all coins originate from miners in a decentralized manner outside of the financial system. These facts combined with technological advancements (lightning network, coin joins, 2nd layer scaling, etc.) mean privacy preservation will only improve over the extended horizon. Thusly, earning bitcoin a final grade of B+ on privacy preservation, with A & A+ grades likely in the coming decades.
6. Portability: “As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: — boring grey in color — not a good conductor of electricity — not particularly strong, but not ductile or easily malleable either — not useful for any practical or ornamental purpose and one special, magical property: — can be transported over a communications channel” Satoshi Nakamoto.
Upon solving the double spend & byzantine general’s problem over distributed data bases, Satoshi Nakamoto created the most portable free market money the world has ever seen. This magic feature of being able to send value across a communication channel without interference has the ability to unlock an entirely new topology of economic interactions on a civilization level. No longer does the peasant need approval to move value in, out, and around their current king’s economic moats.
To be fair, (and as impartial as one can be this deep down the rabbit hole), Bitcoin cannot be given a 100% perfect score on portability at the moment. For certain types of economic transactions, let’s use the classic coffee example; bitcoin does not make economic sense on the base layer at all times. This is even when one disregards the tax implication under the fiat panopticon & 10 minute block times. Fortunately for everyone, tools are being crafted & improved upon every day through 2nd layer, open source scaling solutions & corporate innovation to make bitcoin more accessible and portable for all types of economic interactions & participants. So to keep things moving, I’ll give bitcoin an A on portability, with an A+ not far away.
5. Divisibility: This section will be short and sweet. The bitcoin network is currently accurate down to the 1/100 millionth of a bitcoin level, AKA one satoshi. Given the fact bitcoin the digital asset is nothing more than information representing finite space on a digital ledger, it can be broken down smaller if one desires. This shouldn’t be an issue until bitcoin is much larger part of the global economy. For this reason bitcoin gets an A++ for divisibility and is by far the most divisible (practically speaking) money in human history.
4. Fungibility: As discussed previously, bitcoin on a network level treats every bitcoin the same, besides each coin having a different ownership history and current owner. Only when filtered through a humans eyes can there be “tainted coins” that have touched the vile hands of drug dealers or dictators. As far as the network is concerned, every bitcoin has the same “purity” of the others. Making the grading for Fungibility an inherently biased one considering I’m a human. On a bitcoin network level it is either an A or A+. Through a humans eyes it can vary from failing to complete success. I prefer to ignore the errors caused by humans and stick to what the code tells you, all satoshis are the same purity.
3. Verifiability: The fork wars of 2017 (bitcoins version of civil war AKA chain split) ended in a decisive victory for bitcoin. Additionally, the network may have proved its most important feature yet; the nodes control the networks consensus rules. Never had it been proved on the grand stage in such a manner. Nodes are computers spread all around the world that VERIFY every single block that gets added to the chain followed the correct consensus rules, in real time. If a miner attempts to add a non-true entry into the ledger, the nodes will reject the block. This causes the miner to lose the bitcoin they had earned from their proof of work & the associated transaction fees of that block. At today’s prices, this works out to losing upwards of $150,000 for 10 minutes of work. This in turn makes the bitcoin nodes all around the world the scales & purity testers for the entire network. These nodes ensure that every bitcoin on the network is pure and precise down to the satoshi level. Therefore, bitcoin gets an A++ as the most easily & cheaply verifiable hard money the human race has encountered.
2. Durability: Given that bitcoin is just information, it won’t succumb to the forces that decay the majority of physical goods. With that said, every node around the world & its associated data ensure the survival of the bitcoin network. Beyond cataclysmic world ending events such as asteroids, or all out nuclear warfare that destroys us all, it’s safe to say BTC will continue spitting out new blocks every 10 minutes. While it is not quite to the level of golds ability to withstand entire global destruction and still have the same number of electrons circling its nucleus, it’s safe to say bitcoin gets a solid A to A+ on durability due to the immortality and ethereal nature of information.
1. Scarcity: As unbelievable as this may be to some, bitcoin is the first instantiation of a finitely scarce commodity that also displays the various other important properties of money. For example, the Mona Lisa is as scarce as possible, with only one in circulation. This among many other factors leads to a large amount of value stored within her mesmerizing eyes, but the fact it receives a failing grade on the majority of important properties of money would make the Mona Lisa a horrible choice for the world’s monetary base layer.
Around the year 2100 there will be around 1 new bitcoin created….PER YEAR. This makes the current block reward of 6.25 BTC every 10 minutes feel like a gusher, and the original 50 bitcoin per block feel like digital el-delorodo, never to exist again. The stock to flow for bitcoin grows exponentially over time, Doubling every 4 years. Eventually trending towards infinity, when the human race has finally hit the event horizon of 21 million bitcoin. Never to have new satoshis forged in the entropic filled furnace of one directional time. For the reasons above, Bitcoin gets an A++ on scarcity, the most important property of good money. That combined with its exceptional performance on the remaining properties of money make bitcoin a clear favorite for digital gold if you are a bear / pessimist and the next monetary standard for the human race if you are a bull, optimist, or bitcoiner.
Who created Bitcoin?
It’s the year 2020, the worlds largest bank just had its 11 birthday, a true success story. Would you believe me if I told you nobody knows who the founder is, and there is no CEO?? I would hope not, that reeks of a shitcoin or scam. In our current timeline, a decentralized protocol, with no single individual or group in charge, has managed to grow larger than any publicly traded bank in the world. (JP Morgan Approx. 350 Billion) Which begs the question…..Does it matter who created bitcoin?? I have very mixed emotions on this undeniably subjective matter of bitcoin. For that reason, I will give you both side of my opinion on this topic.
To start, I don’t want the legend of Bitcoins Immaculate Conception to die or fade into lost history, so therefore, it does matter who Satoshi is. It is an engineering accomplishment that deserves to be applauded, rewarded, & eventually commemorated with a noble prize in a variety of fields. Never has mankind been able to wield a tool of such concentrated monetary force, let alone in a nonphysical seizure resistant form. Not to mention the absolute miracle it even made it off the launchpad & managed to avoid burning up in the atmosphere; largely due to nailing the difficultly adjustment, game theory, and human psychology involved with bitcoin. With many of the key underlying technologies having existed for decades, was it dumb luck that it was dropped onto humanities lap right as the world needed it most? I prefer to not rely on luck, but count on human ingenuity and purist of freedom & abundance to guide our species through trying times. This is where I’d like to give a nod to unarguably, the group of individuals most closely associated with Satoshi during the time of its inception, the cypher punk mailing list.
This group of techno libertarians were light years ahead of the surrounding civilization on the monetary path that lied ahead. This email list included many of the original E-Cash founders & big names including Adam Back (Hash Cash), Hal Finney (forever optimist), Julian Assange (WikiLeaks), Nick Szabo (O.G cryptographer), Wei Dai (B. Money), & last but not least (and not nearly all of this epic list) Satoshi Nakamoto. On Halloween 2008, Satoshi sent an email to this illustrious crew of misfits, containing within a white paper describing a new version of E-Money named “Bitcoin”. Little did this group of individuals understand the monetary black hole that this idea would leave in its wake. So in conclusion, any/all/ none (besides Satoshi of course) of the people on this mailing list could have created bitcoin or been involved in its creation. Regardless of whom it was, THANK YOU, from the entire civilization.
(Fun facts: Hal Finney received the first ever bitcoin transaction from satoshi, Hal lived a few blocks away from someone named Satoshi Nakamoto, and he predicted million dollar + Bitcoin before it was a dollar, a true legend, RIP Hal)
This leads perfectly into my other point of view on this, IT DOESN’T MATTER! Unlike a traditional corporation filled with talking heads in suits, bitcoin has nobody in charge and an army of equally powerful nodes from Singapore to Texas making sure the rules of the protocol are followed. Never has the decentralized cryptographically fortified wall surrounding bitcoin been higher. With millions of specially manufactured computers with only one possible use, bitcoin has never been more antifrgile & decentralized than today. Even if Satoshi is a bad actor, it wouldn’t even matter at this point in time. The system is fully decentralized and designed to hold this as its most precious engineering tradeoff. In that sense, we are all Satoshi. Everyone that runs a node, sources stranded natural gas to mine, or just breaths mother earths air is accepted on and within the bitcoin network.
Why did Satoshi create Bitcoin?
Although this is not possible to answer from my perspective, the following quote inside of Satoshis white paper shines a light on what their true motives may have been.
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve”
History books are riddled with stories of empires collapsing due to their own weight and overwhelming sense of greed, control, & power. Often this creates innocent civilian collateral damage, total loss of monetary powers from currency debasement, and warfare that is unavoidable for the masses. Upon the creation of bitcoin, there was finally a monetary force that was capable of holding value in a decentralized, unstoppable, non-physical manner. This will end up being the most liberating technology in human history. Never in the history of man has an individual been able to memorize 12 to 24 words, escape an authoritarian nightmare, and still have the majority of their life savings intact, keeping the fire that is hope ablaze during the most testing times. In that sense, Satoshi created one of the most powerful forces this world has seen for preserving & generating hope, graciously gifting it to the human race in a no strings attached manner. There are many different tangents on why Satoshi may have created bitcoin, but I’ll leave the rest for your rabbit hole journey.
Why Bitcoin can’t be copied?
Since bitcoin is nothing more than code running on computers all across the world, it may seem easy to copy, paste, and thusly make your own “bitcoin”. While it is true you can make your own “bitcoin” with very similar properties and maybe even improvements from your perspective, bitcoin can’t be copied. Unfortunately for all of the humans across the world desiring their own printing press like Uncle Sam, what makes bitcoin valuable cannot be replicated via copy & paste. The networks security is provided by specially designed computers across the globe that cannot simply be replicated by decree. There is some grain of truth to the idea of a “superior version” of bitcoin theoretically emerging and beginning to steal the security (computer power) of the original chain. In practice, the free market has had a very clear message from day one, BTC is king. The amount of computer work spent on securing the Bitcoin network is upwards of 100X larger than its closest competitor. Additionally, it is not possible to make more scarce money than bitcoin. As we discussed above, the 0% terminal inflation rate of BTC (AKA 21 million coins) means that no money will be able to beat out bitcoins scarcity, which is the most important property of good money. Even deflationary currencies may not be scarcer due to the politics involved in destroying coins on a protocol level.
Even disregarding the physical & engineering aspects of bitcoin, the social side of bitcoin is even harder to replicate. As seen by the Bitcoin Cash hard fork of 2017, the majority of the evangelical, long term supporters of bitcoin didn’t fall for the illusions of grandeur and tradeoff less engineering promised by the big block charlatans of the time. So the “dilutive” hard fork ended up being a windfall dividend around 1 free BTC for every 5–20 owned by convicted hodlers, fleeing the sinking ship that was BCash while the doomed maiden voyage was still in the harbor. The utter dominance post bitcoin cash hard fork solidified the digital store of wealth narrative, proved bitcoin could not have its scarcity destroyed due to hard forks, & displayed why “slightly decentralized PayPal” was not the future for bitcoin.
What’s the difference between bitcoin & the bitcoin network??
It is easy to be confused on why there would be a difference between the two and what the difference is. The bitcoin network in the physical sense comprises all of the miners and nodes that secure, verify, and move the blockchain forward ensuring the rules of the protocol are followed. The bitcoin network in the social sense comprises all of the bitcoin developers, bitcoiners, & the companies built around bitcoin. Bitcoin the asset is the reward payed out to miners for securing the network. New issuance of bitcoin the digital asset has secured the game theory around the network since day one, the incentives only becoming stronger over time. Not due to increased printing like the fiat world, but increased value of each coin due to their scarcity. Eventually, the new issuance rate trends to zero and the network becomes self-sustaining through transaction fees. As undeniably impressive as the physical bitcoin network & digital asset are, the social network of bitcoin is incredibly rich with talent, knowledge, & hope. There is much to be learned from bitcoin twitter & the brilliant sneak peaks into bitcoiners minds held within. With the helping hand of Robert Breedlove’s history rich monetary tales, Giga Chad Saylor’s macro strategies, Max Keiser rants to get you fired up, TFTC to make you a true bitcoiner, John Vallis to get cosmic, Vijay to show you the bullish case or Guy Swan to read it all to you during your daily commute, there is no excuse to not jump down the bitcoin rabbit hole head first.
