What Is Bitcoin?
In order to answer that I’ll have to start with a short explanation of What Is Money?
*This text is nothing but me having fun explaining some ideas from my point of view. I might have some mistakes, and the explanation might be way to general. I’ll be glad to hear your opinion about it.
What Is Money?
Money in it’s modern days is nothing but social agreement. Not that it changes the individual meaning of money what so ever. It’s a social agreement that allows us 3 things :
- Medium of exchange — can be used to buy and sell goods and services.
- Measure of Value — standard numerical monetary unit of measurement.
- Store of value — so you can sell today, and buy tomorrow.
Basically today money is a big ledger or a database if you’d like of all the value we hold as a society, that allows us to securely communicate over value.
But as money is a Zero-sum game we have to trust that the game is played fairly, that no one is just duplicating money, no one is just printing money, and that the money you just got payed is real — and as long as you watch it safe it yours.
And that’s why we need banks (and some other third parties) , banks are the gate keepers, you can trust banks that they will keep your money safe, that the money the bank accepted is real, and that tomorrow when some one transfer money to you, he didn’t just keep it to himself.
OK, and then bitcoin is?
Bitcoin is a virtual currency based on Block-chain technology, We agreed that we need banks so we could trust the ledger us managed fairly.
Imagine that instead of a single institution checking that the ledger is managed fairly, every person who wants it can have it.
And every change in the ledger needs to be approved by the people holding the ledger (aka miners) — Blockchain is the technology that allows that decentralized ledger.
And like every other game Bitcoin has rules which was first written here The white paper of bitcoin — a pdf which explains the concept, need, and rules of bitcoin.
And the game goes like that:
- The total amount of bitcoin is 21,000,000 BTC
- every 10 minuets 50 bitcoins are created (1 Block) and divided by all the miners.
- Miners are people who let the network use their computer as a server that will write every transaction on the ledger — they get bitcoins for it.
- What the miners computer actually does is solving mathematical problems.
- The first block was created at 03/Jan/2009 and that what was written. “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
- transparent — every one can see every transaction
- anonymous — unlike in a bank that every account has an owner — bitcoin is anonymous
- trust-less — unlike normal money, here there’s no third party you need to trust that the the ledger is being managed fairly.
- Decentralized — no single institution holds the information — but all the people together
Ok so I understand how it works — what is the big difference if I buy on amazon using bitcoin?
There’s no difference, our social structure and economical structure goes hands in hands.
It’s clear that the difference between capitalism and socialism is not merely economical, it dictates how our daily life looks like, bitcoin for the first time is money the is created and managed by people.
bitcoin is not the answer for how we as a society should manage our money, but brings the question — If value could be rethought, and the way money “behave” can be changed, how should it be?
money to society is like blood to the human body, if it doesn’t flow right, the body will die.
- Miner — a person who chose to let the blockchain network use it’s servers.
- Block — It’s the ledger itself every block is showing all the transaction, each 10 minutes a new block is created (just imagine a huge print of X gave money to Y…)