Money: Basics of Bitcoin
Is bitcoin the world currency that is going to slam the jail-cell door on humankind for the next thousand years? Or is it the saving grace that is finally going to stop usurious lenders from carving out a slice of nearly every financial transaction on Earth? Perhaps it will just snap, crackle, pop and die. These questions are open for debate.
One thing is sure: the battleground is always money. On this field oppressors will ultimately be smashed.
Following are 10 things you may not know about bitcoin:
1. It is open source.
This means that anyone may look at the source code and check the algorithms to confirm that the system is fair and precisely what it claims to be; thousands have.
2. Bitcoin is NOT currently private.
Though the one you send bitcoin to may not be able to figure out who you are, those who have access to the vast databases of the internet likely can.
If you use the Tails operating system, you can purchases your coins in person or by using ‘cash by mail,’ and be 99.9% sure the transaction is indeed private. Even so, if your wallet is ever compromised by a single non-private transaction, the entire history of your coins may become as easy to read as a book.
3. Only a few people in the world, if any, understand the bitcoin protocol completely.
4. There are a finite number of bitcoins.
There will only ever be just less than 21,000,000 bitcoins. The first 50 coins were removed from the system along with the “genesis block,” and contrary to claims in the video below, the last coin will never actually be mined. Satoshi Nakamoto, the chimerical creator of bitcoin, is believed to own about 1,000,000 of the coins worth an astounding 2.6 billion USD. The “Satoshi wallets” remain dormant.
5. Many bitcoins have been lost.
Hardware failures, lost passwords and carelessness (back when one could pick up a few bitcoins for a quarter) take a toll. Estimates of coins that are “gone forever” range from 300,000 to 3,000,000. More bitcoin is lost every year. An educated guess is about 2,000,000 coins on the ledger can no longer be accessed.
6. Each bitcoin is divisible to the eighth decimal place.
.00000001 bitcoins is the smallest unit and it is called a “satoshi.” One satoshi is worth about twenty six millionths of a penny today. Just a few bitcoins could handle all world monetary needs nicely.
7. All other cryptocurrencies are a subset of bitcoin.
This topic, no doubt, is highly controversial. Bitcoin is only designed to do one thing; it is money. The protocol is very difficult to change and the network is designed primarily for security with a low surface area of attack. Bitcoin blockchain technology is what all “alt coins” rely on, and most of these other coins can only be purchased easily by using bitcoin. Any slick new idea that can be applied to an alt coin can in theory be applied to bitcoin itself.
Though beyond the scope of this post, the coming implementation of Segregated Witness, expected around August 7th, will allow for “side chains” and other enhancements. Developers will soon be able to attach many new technologies to the bitcoin blockchain. Look for rapid changes in the coming months.
8. Bitcoin technology is energy intensive.
This is one of the most complex topics to discuss about bitcoin and one of the most important. The bitcoin network by some estimates is currently using about as much power as the nation of Turkmenistan or about 14.7 TWh per year. This is approaching half the energy needs of the state of Denmark or about 2.7 more TWh per year than the city of San Jose, California.
9. Bitcoin relies on positive-sum game theory.
“Positive-sum game, in game theory, a term that refers to situations in which the total of gains and losses is greater than zero. A positive sum occurs when resources are somehow increased and an approach is formulated in which the desires and needs of all concerned are satisfied. One example would be when two parties both gain financially by participating in a contest, no matter who wins or loses. Positive-sum outcomes occur in instances of distributive bargaining where different interests are negotiated so that everyone’s needs are met.”
10. Bitcoin is a deflationary currency, ergo its value is expected to rise.
For the first time in 100 years we have a way to save money without paying the hidden tax of inflation to special interests. We may now become our own bank, so there is no way for an “account” to be tapped without our permission. Each of us becomes solely responsible for securing our own money. True responsibility is something most are not accustomed to these days, and perhaps this kind of thinking will snowball into other aspects of our lives.
The state of bitcoin is comparable to the state of the internet in 1998, give or take. Issues like privacy, transactions per second and intensive energy use will be solved over coming years. In fact, it is impossible to even imagine what creative folk will do with this technology as the current 88.2 billion dollar market cap of bitcoin, combined with the 1000 or so other cryptocurrencies, continues to grow.
The battleground is money; by learning about bitcoin and comparing it to traditional banking which is completely controlled by special interests and an instrument of theft, we can arm ourselves to the teeth.
Source: Renegade Tribune, , July 29, 2017