What is Bitcoin and NFTs and all that stuff?

So many of you replied to my last email asking for an explanation of Bitcoin, cryptocurrency, and non-fungible tokens (NFT) that I thought I would send my explanation to everyone. There is no politics here, just an explanation of how a certain technology (blockchain) works. More politics to come on Sunday.

Shortly after I sent Sunday’s email mentioning NFTs and decentralized finance, Jack Dorsey (founder of Twitter) announced that he is selling his very first tweet ever as an NFT. The current high bid is $2.5 million. All of which begs the question: what is an NFT? What does it have to do with Bitcoin? What the hell is going on?

The essential problem is that everything “digital” — everything on our screens, on our phones, on all our devices — get reduced down to just electricity or no electricity. That’s the only thing machines understand: is there power, or not? My emails, text messages, Zooms, Facetimes, Youtubes, Netflix… all of it gets broken down into tiny pulses of electricity. So to make a copy of something, all you have to do is have the exact same series of pulses of electricity.

This creates a challenge. If I have a twenty-dollar bill, no one else can have that twenty-dollar bill. You could photocopy it with a color copier, but the Treasury goes through great lengths to make that not work. The money doesn’t physically feel the same. So my $20 is my $20. This becomes a real issue when we translate that money into pulses of electricity. It gets hard to figure out who owns it…