Bitcoin and Blockchain technology using only the 1000 most common words
The following is an Up-Goer Five Challenge essay — an attempt at explaining a complex topic using only the 1000 most common English words. The topic is Blockchain Technology, and the full list of permitted words can be found here. Word restriction starts now:
Even if you don’t spend a lot of time on computers, or don’t have any weird friends who are into these things, you’ve probably, by now, been hearing some talk of a new type of money. This money, you’ve probably heard, is being seen as a way for people to make more money, and because of this, more people are spending more of their money on it. This money spending and money making is getting more people to pay more attention and want to spend/make money themselves.
There’s nothing new about people wanting to make money on things they don’t understand; in fact, that’s probably how most money is made. But what exactly is this new type of money, and how does it work?
The point of this here is to answer the question of “how”, but to answer the question of “how” we’ll first need to answer the question of “why”, and to do that, we’ll have to use the word “money” a lot more.
How Old Money Works
Ask yourself: why is it that you’re willing to give some person you don’t know some of your stuff in return for funny looking paper notes? The answer to this is actually pretty simple: you’re willing to do so because you feel sure that someone else will give you more stuff in return for the new paper notes you’re getting.
So why are you so sure that, later on, other people will still want your paper notes? That question is too hard for me to answer (no matter many words I’m allowed). But for now, just notice something much more obvious: for all this money-moving to keep working, you need to be really sure that after someone gives you money, you really do have the money they say they gave you.
One way to make it so you are sure of this is to use hard-to-find, pretty rocks for money; another is to use paper notes that only a Big Powerful Group is allowed to make. In both cases, you feel safe about having the money, because, for one thing, you know it’s hard to make money that isn’t real, and, more importantly, you know you have it because it’s made of actual stuff; you can see it, you can touch it, and being a person in the world, you know that things that are made of actual stuff can only be in one place at one time.
If you’ve ever spent money, however, you know things quickly get less simple: often, you want to spend money without having to move paper notes or pretty rocks around. One reason you might want to be able to do this is that it gets hard and annoying to have to move all of that actual stuff to and from different places. But more importantly, often times, you want to use money that you don’t actually have in the form of paper notes and pretty rocks; say, maybe, someone is supposed to give you money tomorrow, and someone else already wants to give you something for that money today, as if you already have it. Or maybe you have to give someone money tomorrow, and someone else is willing to give them that money instead if you give them some stuff. These cases show that “possible money” can be used, and it’s actually no less “real” than the money you can touch.
But having to deal with this “possible money” brings us back to the problem we started with; if you can’t touch and feel the money someone gives you, then it would seem that it becomes too easy to lie; if I were a liar, I could, say, spend the same money may times, or, for that matter, I could just pretend that I have money when I really don’t. This means that to do any business with me, you first have to trust me.
But this is very bad, because if you are like most people, there are only a few other people in the world that you trust, but there are a great many people in the world that you want to be able to take money from.
The way we’ve fixed this, over ten-hundred years ago, is to have another Big Powerful Group help us manage our money. Instead of us having to trust each other, we agree that we’ll both trust a Big Powerful Group that sits between us. When I want to give you possible money, first, the Big Powerful Group makes sure that I’m not lying about the money I have, and once they can be sure, they then take the money from me and give it to you. This means the Group has to keep track of all of the times I’ve given or gotten money, so that they can be sure that I actually have enough to give. The group also takes on the job of being sure that I really am the person I say I am.
Since you feel like the Group has a good way of keeping track of these things, once the Group says I’m not a lying person, you can take my money without us having to pretend like we actually trust each other. This makes both of us happy.
Why not keep doing things the old way?
…you might well ask. After all, if it’s been working for over ten-hundred years. Why change to some crazy new thing we barely understand yet?
I see three possible ways someone might answer this:
1. The old way is making us lose too much money
As time has gone on, we’ve found that we have to manage possible money, especially with computers, far more often than we do money we can touch. This means that we’ve had to give more and more power to Big Powerful Groups .
And in a lot of ways, even though we’ve given these groups all of this power, they still often don’t do a very good job at managing money. Take the following three things that happen:
- Someone makes money that isn’t real and then spends it, making us all have to trust money a little bit less and so making real money a little bit worse.
- Someone steals your money right from the Big Powerful Group that is holding it.
- Someone pretends to be you and spends your money.
These things happen a lot. In fact, chances are, at least one of them has happened to you. And even when these bad things aren’t happening, we are paying the Groups extra money just to fight them. The people that are excited about this new money (I may as well admit that I’m one of those people) believe that with the new money, we can handle these problems in much better ways, and maybe even fix them entirely.
2. The old way could totally break very soon
When you trust Big Powerful Groups, it usually means that those groups are going to keep very important things in one place. If a bad person finds a way to get into that place, it could mean that the whole thing breaks in ways that will be hard to ever fix.
But worse, we maybe shouldn’t be so quick to trust these Big Powerful Groups to begin with, because, as you may have noticed, when Big Powerful Groups become powerful enough, they seem to often turn into Big Bad Powerful Groups. In fact, you might say that some of the biggest of said Groups have given us good reason to not trust them at all; that they’re willing to promise people possible money even though they know that the that money will soon disappear, and that these deals will cause people to lose their houses and the money they were promised for when they get old, and will very much hurt the lives of many, many, people — and yet they’re willing to do all this just so they can have more money for themselves to use to buy new things like houses and cars and women and to make themselves even more big and powerful still.
Someone might say that not having to trust these people anymore would be a good thing.
3. It doesn’t matter why it’s happening; it’s happening
People like making new things and figuring out new ways of doing old things, even if the new ways aren’t exactly things we need. There’s already good reason to believe that this new money will be one of those things , so better to understand it now than be confused for a while later.
How New Money Works
So finally, this puts us in a position to understand how this new kind of money works. This new, completely computerized money needs to be able to do all the things old money does — let you trust that it’s working when you’re using it even if you don’t trust the person you’re using it with, be sure that no money is being spent many times, etc — only it has to do a better job (for anyone to care about it), and it has to do all of this without the use of anything you can touch –like paper notes and pretty rocks — and without a Big Powerful Group in the middle of it to manage everything!
If this sounds impossible, don’t leave yet.
Keeping track of how much money everyone has
This can be thought of as the most important thing, and the thing from which everything else will follow. In order to do it, we will do something that is kind of like what the Big Powerful Group does with old money; we’ll have a place where we keep track of every single time a payment is made. But, since we don’t have a Big Powerful Group to trust to keep this place hidden, we instead decide that this place will not be hidden; in fact, everyone who uses this money will have their own place where they store this very same stuff!
Since everyone has to have their own memory place, we need to try our best to make sure that everyone’s place is the same at all times; so, as soon as some new money gets spent, everyone’s computers talk to each other and all of the computers get the new stuff and make sure everything is always up to date . Since there are so many different places with the same stuff, it becomes harder for a bad person to lie and try to change stuff; in fact, once we store something in this place, it can never be changed.
But this opens up the biggest question of all: how do we finally decide that something should actually get written into the memory of this place? Or put another way: when can we say for sure that a payment can be made? Since the memory can’t ever be changed once it’s in the place, we really don’t want to get this wrong. So before we write down it for good, it has to pass some tests.
Tests that have to pass before somebody pays
When you want to spend money, your payment has to pass two main checks:
Check #1: You have to have enough money to spend.
Check #2: You have to really be who you say you are
Since we have a place with the full memory of every time anyone has spent money, Check #1 is easy; a computer simply has to look through the memory, add up all of the money you’ve ever gotten, take away all of the money you’ve ever spent, and make sure the final number is greater than (or the same as) the money you want to spend now. Check #2, making sure you really are who you say you are, will be explained in more words later, but for now, just know that it’s also easy.
Now of course, we don’t have any one computer that we trust more than any of the others, so one computer telling us that the checks have passed isn’t enough (after all, maybe the people who run that computer are liars.) So how many computers saying that the tests have passed is enough?
The first idea you might have is to say that maybe if, say, half of the computers say that the tests have passed, the tests have passed.
But here’s why that’s a problem: anyone who’s used computers knows that it’s very easy for one person to pretend to be tens of hundreds of people. So a liar only has to pretend to be many people, get his computer(s) to say that the checks have passed many times, and then he can force bad money payments into our memory.
So while it seemed nice that was so easy to pass these checks, that fact came back to bite us. It turns out, it was too easy.
The way to fix this is, one might say, where the real brains are behind making new money work : to fix the problem of passing checks being too easy, we simply force it to be harder! In other words, the work it takes for us to say that money can actually be spent doesn’t have to do with the number of people who say that the checks passed, but instead has to do with how much computer power that goes into it. So when you say that checks have passed, we know, for a fact, how much work your computer has done.
This makes it almost not possible for a group of liars to make everything not work; in fact, in order for them to do so, they would need as much computer power as everyone else using the newmoney put together. (And while, yes, this is possible, if this happens, it would probably mean something far worse is happening, like, the world is ending, in which case, your problems are probably much bigger than some weird new money.)
How we make the passing of tests harder
In short, we decide that in order to say that the checks have passed, your computer has to not only run the checks themselves, but also find the answer to a hard problem. (If you aren’t interested in the details of that hard problem, you can pass over the next two big group of words):
When somebody tries to give money, we first convert this payment into a group of numbers and letters that is different from the numbers and letters that make up any other payment (this isn’t as hard as it may sound; one way, say, is to take the name of person giving the money, put it next to the name of the person receiving the money, and put that next to the date at that moment the money is being spent.) Now, a computer will test numbers, one at a time (starting with one, then two, and so on), trying to find the “right number.” To see if it’s the right number, the computer puts the test number at the end of the group of letters/numbers, making a new group of letters/numbers. This new group of letters/numbers is taken through some steps which make it into a new group of letters/numbers; if this new group of letters/numbers looks the right way, we can say that the test number is the right number .
A few things about these steps make them the right steps to use: for one, bright people have shown that that it’s not possible to know what the new group of letters/numbers will be without actually going through the steps themselves; in other words, no computer can get the right number without actually doing the work. Also, once the right number is found, it’s easy for someone else to check that it really is the right number (checking this is much easier than finding the number to begin with.) So when you’ve done the work, we know you’ve done a lot of work, and we can know this without having to a lot of work ourselves.
So we can think of this work as third check that needs to pass; let’s call it Check #3:
Check #3: Find the answer to a really hard problem that we made up only because it’s hard.
The result of this is amazing, and should really be thought about carefully: instead of having money that makes us have to trust that a small group of people are good, we have money where we only have to trust that at least half of the people using aren’t trying to kill the whole. If this really works, it’s not like anything people have ever made
But as nice as that is, it hasn’t fixed all of our problems. Here’s how we handle the other things we need money to do.
Making New Money
Notice two things:
- Money doesn’t just get passed around between people; at some point, it has to come from somewhere.
- As we saw earlier, in order to make sure money gets spent the right way, people have to offer up their computers to do a lot of work. But computers doing work takes power (which takes time and money), so we need to give them a reason to do this work.
So here, we can kill two flying things with one rock: when someone’s computer is able to answer the hard problem (as we saw above), we give the that person some new money. We handle this payment the same way we handle a normal payment from one person to another, only now, the money is going to someone but isn’t coming from anyone; the money, is, you might say, being made from nothing.
(As a side note: talking about “making new money” like this brings something weird to light: with paper notes, it makes sense to talk about two different notes; “this” note over here can be said to be be different from “that” note over there. But with this new money, speaking that way has no meaning; there aren’t actually any single “pieces” of new money. Rather, there is simply the memory of all of the payments that have ever been done. But since this lets us do all of the things that we need to do, this is enough.)
The idea of making money like this is much like how with old money, a Big Powerful Group has the power to make money from nothing. But in a big way it’s different; the Big Powerful Group can (basically) decide to make however much money they want, and at any time they feel like it. But with new money, how quickly money gets made has an even relationship with with how many of the hard problems are being answered. This gives us all control; if we want money to be made quicker, we can make the problems harder, and if we want money to be made slower, we can make the problems easier. In this way, we can be sure that money will be made evenly over time .
Making sure you are who you say you are
This is actually the easiest piece to solve; everyone who uses this new type of money has two “keys” — groups of numbers and letters. One of these keys is kept hidden and only known by the person who owns it, and the other everybody can see.
Here’s how I determine you are who you say you are: using your key that everyone can see, I ask your computer a “question” that can be only be answered by the person with the hidden key. When I get the answer — which just looks like a group of other numbers — I can check it to see if it’s right.
The nice thing is, without the right key, it is hard (essentially not possible) to generate the right answer, but once the answer is given, it’s easy for anyone to check if it is indeed right. (This difference in work may remind you of the steps we used for Check #3, if you read that part.) In this way, I can be sure that you are who you say you are, but my being sure of this doesn’t make it any easier for me to act like I’m you later on.
More Than Just Money
All of this stuff that makes new money work, it turns out, can be used for other things too. Think of it this way; what our three “checks” eventually did was give you the power to ask computers to do something and have everybody agree on the result. With some even newer types of new money, you have more room to say what exactly it is you want to tell the computers to do. Like say you decide that for some people to give you money, more checks need to pass — say, a Check #4 and a Check #5 — checks that you yourself come up with. Or maybe, instead of letting money get spent, the computers do something else entirely that doesn’t even involve money. Once the relationship between computers we saw above is in place, there’s no end to what can be done .
Will there be a day when most people have an understanding of how new money works? Maybe not; when it comes to stuff on computers, it seems that for things to work, they need to get easy enough for most people to use without having to really understand them at all. If you are like most people, you probably can’t explain how it is you’re reading this right now, and yet here we are. It’s not possible to say whether new money will one day reach that point, but given the state of things, for better or for worse, it’s not crazy to say that the world of new money may continue to grow faster that most can imagine , and those who don’t even so much as know how to think about it could quickly get left behind.
If you made it this far, then you can, if nothing else, consider yourself warned.
1. So much power, in fact, that some Big Powerful Groups have said that they are too big to ever not be big anymore, which, or course, just makes them even more powerful.
2. This actually isn’t entirely true — without any Big Powerful Group, it’s not possible to know all of the people who are using the money at a certain time — but it’s close enough to true. What really happens is that computers have a special way of sending out a sign that other computers “near” them can pick up on, and those computers will pass this on to other computers “near” them. In other words, they aren’t all talking to each other at once, but we can safely say they will all get talked to soon enough.
3. It’s an amazing fact about new money that we still know nothing about the person (or people) who came up with all this, except for the (possibly unreal) name that he/she/they use.
4. These steps were invented by a Big Powerful Group in charge of dealing with important hidden stuff (though seem to be having some trouble keeping things hidden themselves.)
5. Some people who are very excited about this new money think that this control over making money will fix one of the problems that old money has — that as time goes on, the same money buys you fewer things.
6. “No end” is actually the case: a very, bright man showed us that once computers can do certain things, they can do anything that any other computer can do (he showed that this was true years before there were any computers.)
7. As of now,, the old money people were willing to pay for one piece of the biggest type of new money is more than two times what it was when I started writing this.
References / Further Reading
- Bitcoin Protocol:
- Blockchain tech: https://bitsonblocks.net/2015/09/09/a-gentle-introduction-to-blockchain-technology/
- Ethereum (“More Than Just Money”) https://medium.com/@preethikasireddy/how-does-ethereum-work-anyway-22d1df506369
- Feasibly non-invertible hash functions (i.e., Proof of Work mining, public/private key authentication): https://en.wikipedia.org/wiki/Cryptographic_hash_function
- Economic theories of currency & federal/private banking (chapter 1): https://www.amazon.com/Age-Cryptocurrency-Blockchain-Challenging-Economic/dp/1250081556
- More on the up-goer five challenge: https://blogs.scientificamerican.com/guest-blog/science-in-ten-hundred-words-the-up-goer-five-challenge/
- Up-goer five text editor: http://splasho.com/upgoer5/