Bitcoin is a system for electronic transactions without relying on trustSatoshi Nakamoto
Why is Bitcoin Revolutionary?
Money at its core is a system of trust, a social construct if you will. But as we’ve seen time and time again, this trust has been betrayed.
In the wise words of Satoshi:
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.Satoshi Nakamoto
The truth is, the trust in our global monetary system is broken. Wherever you look you’ll find a slow erosion of faith in our institutions.
But for good reason.
Scandals have plagued our financial institutions throughout our modern history. From inflation and fractional reserve bank runs, to the 2008 global financial crisis, to money laundering and straight up fraud.
Money is used by authoritarian regimes as a tool of control, oppressing billions of the poorest people on earth. Wealth is extracted from society through monetary debasement and interest rate manipulation, and concentrated in the hands of the well-connected. And debt slavery is systematically leveraged to social engineer a permanent working class.
Not only are the poor and middle class of the western world trapped in this hamster wheel, but also entire sovereign nations, through IMF structural adjustment loans and China’s Belt and Road initiative.
Unfortunately none of this is new. Throughout history, trust in money has been abused and manipulated, leading to breakdowns and inefficiencies in society.
That’s where Bitcoin comes in.
Bitcoin is revolutionary because it’s a trust machine. Bitcoin manufactures trust because there are no humans that run it or rule over it. Instead you are trusting in math, physics, code, and probabilities.
Bitcoin’s trust is based on a globally decentralized network of tens of thousands of computers that maintain the integrity of the system. Bitcoin is the largest and most secure supercomputer on earth by many magnitudes. Transactions are recorded on an immutable ledger, a record that can’t be changed or destroyed and is constantly being audited. Bitcoin is money which is held in the most secure vaults in human history, money which can’t be controlled or debased, and money which can’t be unfairly counterfeited to insiders.
It’s kind of like putting a calculator in charge of a global financial and monetary system. A calculator that can’t be hacked and whose code is fully transparent, leading to a fully trustworthy and fully rules based economic system.
Unlike today’s currency which is maintained by banks, corporations, and governments, bitcoin is open source software, a banking system that is instead run on top of the internet.
Bitcoin is a global economic project maintained by developers all over the world, permissionlessly built on by entrepreneurs and academics, and run by human rights groups, democracy protesters and money nerds.
Because of this decentralization and immutability, bitcoin is incredibly secure and resistant to fraud and corruption. Unlike traditional banking, where a single point of failure can bring down the entire system, and where assets are actually just a chain of debt based liabilities, bitcoin’s distributed network is virtually invincible. Bitcoin is digital gold, a barer asset with no debt or counterparty risk.
Bitcoin is truth because all transactions are made without trust. All disputes are solved through physics and all ownership is enforced by cryptography. This is an automated justice system programmed into software, software that’s incorruptible, secure, and eternal.
The entire point of bitcoin is to remove the distribution, production, and control over money from humanity. And the corruption that comes with it.
This is trust in math, trust in code, not in humans.
The trust machine is a revolutionary new technology that has the potential to completely upend our existing financial system.
While traditional banking and payment systems heavily rely on trust, Bitcoin offers a way out of this system…Such a framework allowed the creation and implementation of a system effectively disjoined from government control, delivering a revolutionary separation of money and state for the first time in history.Bitcoin Magazine
Bitcoin’s breakthrough was solving the byzantine generals problem, a computer science problem once thought impossible to solve. Satoshi discovered a way for people to coordinate with digital money without needing to trust each other. Instead of blindly believing the benevolence of third parties like banks or corporations, bitcoin manufactures truth through a global competition, leveraging the physical laws of nature and energy to keep the system incorruptible.
You can trust that bitcoin won’t cheat you, because bitcoin is code. Bitcoin’s neutrality as computer software means it holds no national, political or institutional allegiance. Bitcoin doesn’t know your economic status, age, religion, gender, ethnicity, or political views. Bitcoin doesn’t know who you are, or what you are. It doesn’t know if you’re a car, a refrigerator, or a drone. All it knows is code. It has simple rules. If you want to unlock the vault and send a unit of bitcoin, you have to provide the keys.
Bitcoin is a whole new monetary and financial system that’s based on uncontrollable money. The temptation of unlimited wealth has been taken away from human beings and because of that society will flourish.
The Byzantine Generals Problem
How can I trust that when I send you a bitcoin, you won’t cheat me and just spend it twice? How can I trust that you will follow the rules? How can we both agree on how much bitcoin each of us owns? Information can just be copied over and over on the internet, in fact that’s the point.
If you have an apple, and I have an apple, and we exchange apples, then you and I will still each have one apple.
But if you have an idea, and I have an idea, and we exchange these ideas, then each of us will have two ideas.George Bernard Shaw
In order to solve this problem, Satoshi had to invent digital scarcity. He had to put physics into the internet. She had to recreate the law of conservation of energy, within cyberspace.
To accomplish this task, he created a decentralized ledger, the first accounting innovation in over 700 years. Decentralized ledger just means that everyone is checking every transaction at all times, and everyone has access to the entire history of the ledger, for a fully transparent and fully secure money system.
And to secure this ledger, she had to program a global game theoretic competition, a lottery where players inadvertently help create a force field around the network, protecting it from bad actors.
Bitcoin is special because this had never been done before, and has yet to be replicated since. Every other blockchain can be changed by some powerful special interests. Bitcoin is unique in the cryptocurrency space because it’s the only immutable unchanging immortal and invincible network in the world.
Therefore, bitcoin has value because you can guarantee transactions are legitimate. You can trust that the ledger isn’t fraudulent. You can trust that the money is really yours. You can verify for yourself that you are in possession, and that no one can change the rules. Bitcoin is property rights codified.
A common motto of bitcoiners is “don’t trust, verify”. For the first time, we have a system of money where anyone can verify for themselves their money is real, and the rules of the monetary system are being followed. When it comes to money, people are incentivized to cheat. To take the easiest path possible. And for thousands of years humanity has faced this wealth confiscation dilemma, where we had to trust someone else with our savings.
When designing bitcoin Satoshi flipped the incentive structure on its head. Bitcoin ensures that everyone will follow the rules, because following the rules is what makes you the most money. Bitcoin was specifically designed with game theory to encourage fair play and participation, and make the cost to attack prohibitively expensive.
Bitcoin mining doesn’t just reward newly minted bitcoins, it creates a force field of computational power dedicated to supporting the honest chain of transactions. Fraudsters, hackers, sociopaths, and kings can’t change the rules, steal wealth, or cheat the system. In fact, they play along with the rest of us to acquire the soundest money in human history.
The Golden Tablet
I think it’s helpful to picture bitcoin as “The great excel spreadsheet in the sky”. Think of it like the ultimate global google doc. It’s a shared spreadsheet in the cloud, freely accessible to anyone, and is just a long list of transactions. That’s literally all bitcoin is, it’s a ledger, a list of who sent money to who.
Ok that’s all well and good, but this great excel spreadsheet in the sky, why is that revolutionary?
Ok well let’s spice up the metaphor a bit – bitcoin is digital gold right? So instead of the excel sheet in the sky, think of it more like a golden tablet in the clouds, or on cyberspace mountain. This is some Moses shit. Carved into the enormous golden tablet is a list of all of the bitcoin in the world, who sent it to who and who owns it now.
Once you send some bitcoin to someone, a new line is magically carved into the tablet and it stays there forever. Anyone can see this golden tablet, it’s open and transparent and visible to all, but no one can undo transactions once they’re carved. No one can actually touch this tablet and no one can change the rules. It exists beyond the clutches of humanity. We’ve created something we can’t stop.
This is the trust machine.
You can trust bitcoin because it’s secured by math and by code. You can trust the golden tablet because it’s not controlled by humans. You can trust the trust machine because it exists beyond trust.
Bitcoin is Physics in Cyberspace
Because the network exists beyond humanity, bitcoin can be compared to the unchanging and automatic laws of physics. This is the law of the conservation of energy written into computer software. When you send bitcoin to someone, it’s like physically handing them a piece of gold.
There is no third-party involved when you hand gold to someone. Gold is an element from nature, literally a rock, and physics governs the rules to hand a rock to someone else.
Bitcoin is the gold in this analogy, but it’s also the physics. Bitcoin is the money and the network. It’s both the matter and the gravity. bitcoin is the gold and Bitcoin facilitates the transfer.
Except of course this is all existing in cyberspace, a borderless and permissionless global network. A programmable and unstoppable money transfer protocol. The world’s most powerful supercomputer beaming value at the speed of light to anyone, anywhere, any time.
Bitcoin is a Revolution
Bitcoin was designed to be simple, have no loopholes, be incredibly secure, and do one job and do it better than anything else. It doesn’t have any bells or whistles and it doesn’t try to be anything that it’s not. Bitcoin is sound money, the best money humanity has ever had.
The purpose of bitcoin is to bring full sovereignty to the individual, and to remove all dependencies on trusted third parties. No rulers, no master, no hosts, only peersGiGi
Bitcoin removes humans from the control over money, it obsoletes the entire existing global monetary framework, it replaces a system of money that is manipulated, debased, and untrustworthy, to one that you can trust. A system where the rules can’t be changed to benefit the rich and powerful. A system where no matter how much bitcoin you have, you can’t alter the tablet. THAT is monetary revolution.