What is it about bitcoin, really?
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By now, most of you have probably heard Bitcoin talked about in vague and mysterious terms in the news or online. What IS it? What does it actually DO? And HOW is it actually worth anything at all?
These are big questions that involve some big answers that (for the sake of this article) I am not entirely prepared to give you, and that you are likely (in all honesty) not entirely prepared to hear. Cryptographic Hash functions, verifiable ledger transactions, store of value, proof of work, custodial vs non-custodial wallets.
What are all these things? Why do they matter, and what is it that you really NEED to understand about bitcoin?
Here we go...
In my opinion, what you need to know to feel good about bitcoin is about as much as you NEED to know about how your car starts up in the morning when you need it to, or about what's happening inside your iPhone when you tap your fingers to that illustrious screen. At its base function, assuming the machine is well built and reliable, all you need is the key, or your passcode, and a basic level of intelligence for it to do what you need it to. Not many of us really obsess over what's actually happening behind the scenes of these daily and habitual items, and not many of us should really have to, either. As long as we can trust and verify the producers of the products we are agreeing to purchase, we should let them worry about the mechanics so that we can go about our lives as intended, and with the added benefits of these items.
And so it goes for bitcoin. “But what IS it?!” is the most common way I hear people discredit the mysterious “coin” that doesn't actually exist, and that doesn't actually give you anything to hold on to. It's true, the answer is not straightforward and not exactly simple, and it involves a fair amount of nerd-speak, but not more than I would argue than is necessary for even a basic explanation of the way our current market economics, Federal Reserve, and monetary policy are functioning behind the simple exchange of cash money, not to mention credit card transactions.
How quickly I would lose you, if I have not already, to the bore of technical details and regurgitated economic theories, and so I am going to try something new, and get you to understand not what Bitcoin is, but why Bitcoin is, and what that means for the security, wealth and financial independence of our collective future.
At its very very core, the fundamental concept to understand is this one of FULL OWNERSHIP. When you own your bitcoin, and we'll go a bit deeper into that in a minute, what you own is a 12 word phrase that when entered into the network to make a transaction is the only way for the network to identify who you are. No one else has that same private key, and no one else has any way to obtain it, unless they pry it from your very hands, or manage to extract it from you by way of trickery.
We've all heard the stories of the “lost bitcoin wallet”. That person who lost their passphrase claiming to hold what could now be millions of dollars worth of bitcoin. These stories are often posited as negative features of the bitcoin network, but there are words we use for these types of people in general; irresponsible, nearsighted and dumb.
The beauty, and the apparent pariah of bitcoin is this very feature:
SELF OWNERSHIP.
When done properly, you and only you can interact or interfere with your bitcoin identity. The network is verified 1000 times over every second by a network of contributors, and as long as you hold those keys, then your bitcoin balance on the ledger is always and forever linked to you. When you decide to send that bitcoin to someone else on the network; that transaction is listed, your private key transcribed (by an enormously complicated and involved amount of computational work) onto a unified public ledger that is then verified and trusted (again by a brilliantly devised and incredibly complex computer function) to be posted as the de-facto “true” balance sheet.
Unlike any bank or credit card company of today, where a portion of every transaction, and every nefariously collected fee is sanctioned off to some private network of profiteers, the bitcoin networks fees are directly paid to the “workers” (aka miners) who run the computers (and thus pay for the electricity) to keep the network functioning. These small independent to giant *mining farms* all over the globe are thus given an incentive to keep up the network. Even small-time *nodes* can generate income for their local operations. Well, generate bitcoin, and you can decide to call that income or not!
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What's happening today with bitcoin is what I fear will be the death of such a beautifully crafted and functioning system. Today you can buy bitcoin easily in many mobile apps (CashApp, Coinbase, Robinhood, Venmo, and more) and watch its value go up and down in excitement or dismay. What we don't realize when we buy bitcoin this way, is that we are treating it much like we treat the rest of the money in our bank. At some basic level, the bank holding your assets has legal and/or physical control of it while in their hands. Sure, they keep your name on it, but they can block your access to accounts at their discretion. They can charge unnecessary and unexplained fees, and they can use it to invest however they like while it's theirs.
The bottom line is; If you don't own your key, you don't own your bitcoin. When you hear of exchanges like FTX going down, which claimed to be holding your crypto while they flagrantly spent it, and millions of people lost their money. Well, those irresponsible (and nearsighted, and dumb) people entrusted their assets to an irresponsible, (and corrupt, and nearsighted, and incredibly dumb) unverifiable company.
What I am saying is, it is wrong to adopt Bitcoin without adopting the core principles behind it. Self-responsibility, full ownership, trust, verification, and value based on effort (aka proof-of-work) are essential features of bitcoin's operation. We have not even mentioned (nor will we in great detail) the mathematically verifiable finite amount of bitcoin that will exist over the next century. It is sure fact. It will become scarce with time, and its value will subsequently increase. Can we be so certain of any other markets you can think of?
Everything about the bitcoin network is transparent. The original white-paper is easily accessible. The 21 million coin limit, the self-supported and self sustained network principles, all of it. The entire verified ledger is a roughly 10 Gigabyte txt file of encrypted transactions, and its duplicated and replicated all over the world by a genius system of nodes. Nodes make a profit for providing the computer power, and there is no central command, CEO or shareholders outside the system able to profit or interfere.
Unless...and this is the clincher, unless big companies start stacking up their own coiffeurs of bitcoin with their enormous buying power and then offering it out at a premium (with added transaction fees) through their own proprietary banks and apps. Unless these whales – as we like to call them – have enough weight in the market to create their own influence, and they are able to buy it up before the plebs – as we also like to call them – are able to secure their hands on it without these 3rd parties.
So anyone who has jumped on the bitcoin bandwagon, and helped make Coinbase a billion dollar public company, and let them hold your assets behind an email login and an account with them, let me tell you something, “You've been duped!”. The only way to own bitcoin is to store your bitcoin in a wallet that you own the keys to. I'm not going to teach you any more about that here, but by now you should probably get the point.
Bitcoin represents a society that trusts its individuals to have the responsibility to handle themselves accordingly. The value you hold, and the value you contribute to your community, represents your worth, and is to be valued accordingly. Everything has a value. YOU have a value, and it is much greater than any amount of money can give you, but it is also something that can be scary to hold and to be responsible for all on your own. In a society where we offload every bit of our liability and personal holdings to insurance companies and banks, bitcoin represents a shift to a world without unnecessary and energy sucking intermediaries. It also offers a world we are not used to, in which we have to educate ourselves and trust ourselves enough not be fools and to take the proper precautions to secure our assets long-term for the future. Bitcoin will grow, and it will continue to be valued. That much should be apparent at this point.
So...do what you will. I'm not here to preach, I'm just here to inform. However, I do advise against being irresponsible, nearsighted, and dumb.
Just...don't believe in systems you can't verify. Don't trust money that you don't own, and don't put your future in anyone else's hands.
If you understand that fundamental shift, you understand enough about bitcoin to put your keys in the ignition and get started. You'll just have to take it upon yourself to figure out how.
Hodl On.
- §parrow
www.primal.net/sparrow
Send Sats to: sparrow@primal.net