On Satoshis and Bytes.
It’s a funny thing to notice that the minimum unit for Bitcoin is named after an anonymous genius. The ‘“bitcoin penny”, 0.00000001 BTC, is called a satoshi after the secret author of the original paper, Satoshi Nakamoto. Considering Bitcoin’s current ~$350 per unit price, the market value of a satoshi measured in US dollars is many times less than a US penny. At a first glance satoshis seem worthless.
The first generation of the 21 Bitcoin Computer led by Balaji Srinivasan recently made its debut. I was lucky to get mine and be able to tinker with it for a week now. And here’s the magic: it makes satoshis valuable.
The machine consists of a Raspberry Pi board with an ASIC miner attached to it. Once plugged in, do a quick setup and start mining your own bitcoin at an average of 50 GigaHashes per second. I mined 300,000 satoshis (0.003 bitcons or 1.05 dollars at today’s face value) in one week. The operating system is a Debian Linux with the Blockchain preloaded and a command line interface. Do 21 mine and you’ll see the fan of the miner speed up as the machine starts turning electricity into satoshi proof. The mining chip is specifically engineered to do the cryptographic work that rewards the bitcoin token to those who donate more computing power to make sure there are no fake transactions in the bitcoin network.
When you have satoshis to spend natively at the hardware level, it’s easier to start developing Bitcoin applications that make use of them. Most bitcoin apps these days still do pricing primarily in dollars since the biggest bitcoin markets so far are exchanges (transacting bitcoin for fiat money or viceversa). But when bitcoin gets mined at the core between two endpoints, trading can be done natively from machine to machine having satoshis as a legitimate piece of data for value. The satoshi is a different kind of byte that not only signals information but also cryptographic power: trust.
The tutorials of the 21 Bitcoin Computer aim to teach users create simple APIs that can natively do bitcoin trades. This means that rather than having to configure some kind of weird “client-server authentication” to get access for an API, a 21 Bitcoin Computer server can simply accept N satoshis per request. Completely permissionless. Examples include two APIs: pay 800 satoshis per search query and 1000 satoshis per SMS message. An interesting outcome of this is bitcoin-accelerated computing: applications that decide whether to run a local algorithm or spend some satoshi in a remote server if it’s faster. Distributed computing has more efficient financial incentives with bitcoin. And the community has already been very active. The 21 has full python support and new scripts appear every day. Justin Guy developed a very good one that lets you turn your endpoint into a retweet-for-satoshis server (I charge 1983 $atoshis per retweet in my account by the way).
Lawrence Lessig once wrote that only four things shape human behaviour: the law, norms, architecture and markets. With the 21 developers can start experiencing how software can look like once the paradigm of processor + memory + storage + networking that has made computing possible in our days now has a mining function too. This device reminds me of the modems we used to plug in our PCs to get access to the internet. The 21 aims to descentralize the remaining part that makes such connection possible: the transactions. Today, most monetary exchange online are simply hacks around credit cards (banks). Having markets run natively in code allocating satoshis without intermediaries could be the ultimate exit.
Another funny thing is that pennies in the fiat money world are in fact completely worthless: