This was a re-read from last year; it is a great introduction to Bitcoin and why it is important.
Bitcoin is the "internet of money". Let's make a distinction between the capital-I Internet and an internet. An internet is an interconnected, decentralized network of computers that allow data to pass along through the nodes in the network without concern for the source, destination, or content. What the Internet is, is the internet of information. Information can pass instantaneously and at minimal cost across borders, and I don't have to ask anyone for permission to do that. I can put up a blog post and it can be read by someone in India almost instantly.
We haven't yet had an internet of money. In 2008, that is what Satoshi Nakamoto, the pseudonymous creator of bitcoin, gave us. It is money as a content-type. Only 1 billion people have access to credit and international finance. I can open a bank account and in 24 hours be trading on any stock exchange in the world. That is a privilege. Bitcoin isn't really about those 1 billion. It's about the other 6.5 billion. It's an amazing fact that in the remotest areas of the Amazon, people don't have running water but will have a solar panel to charge their Nokia 1000, the most mass-produced device in history. They use it to check the weather, grain prices at their local market, etc. But what if that phone became a bank?
The architecture of our financial system is currently set up such that centralized authorities decide which transactions and which people are allowed into the system. That may seem hunky-dory in richer countries, but as Greeks, Venezuelans, and others realized, one day you can go to the ATM and it can decide not to give you your money. Because it effectively isn't your money.
- Saying bitcoin is digital money is like saying the internet is a fancy telephone.
- Bitcoin is more than just a currency, it is a protocol and a decentralized network that can achieve consensus, without any central controlling authority. Currency is just the first app that you can build on a system but by opening up this system to innovation without permission, we are going to see things that we could have never thought of before (by nature of the internet being open and decentralized people could build things at the edges that could have never been imagined prior)
- Only 2 billion people are on the internet.
- Money is older than writing → the first writing was ledgers of transactions
Characteristics of money:
- easy to divide
- universally valued
- easy to verify
- Progression of money: barter → precious metals → paper (this transition took 400 years) → plastic → cryptocurrency
- Given the decentralized nature of the internet, if I have an IP address, my packets are treated no differently than the packers of anybody else on the network (that gives a voice to everyone on the internet). This isn't the case in the modern financial system without cryptocurrency.
- Similar to how the printing press made the written word global, Bitcoin gives the power of banking on a global scale.
- DeFi (decentralized finance): The freedom to create complex financial instruments and systems without asking for permission (the only new consumer innovations that we got from our current system in the last half-century were ATMs and credit cards). Bitcoin is the first financial network with net neutrality.
- Totalitarian control on the financial system means that government can just exclude organizations from participating (WikiLeaks).
- Bitcoin grows stronger when attacked (antifragile); it's the biggest bug bounty the world has ever seen.
Many great analogies with cars and electricity:
- Infrastructure inversion: cars don't work as well on roads made for horses, electricity doesn't work as well when you have to manually wire it through your house. The infrastructure has to catch up to the applications.
- U.K., 1865: Red Flag Act. Driving a car required someone to run 100 yards ahead of a car with a red flag, warning people. Made driving a car pointless, and the US won the automotive manufacturing race. They tried to take the car and understand it in the context of horses. Thinking about Bitcoin requires thinking about money completely differently.
- Edison was not acclaimed to be a hero initially. Electricity killed a bunch of people and they were like "why do we need this, gas keeps our lights on just fine." Innovations are not (as a rule) lauded at inception.
- Bitcoin creates a system of incentives where it's far better to play within the rules (mining, proof of work).
- Dumb networks move data around without knowing what it is, allowing innovation at the edges (unlike smart networks that, for example, define the range of possible message types).
- Another great analogy: People thought the internet was going to ruin the press because anybody could say anything. Before, merit was based on who it came from (NYTimes). Now, we have to judge for ourselves the merit of information that comes to us. The same will be true with the thousands of cryptocurrencies. Merit is given to those with users.
Skeuomorphic design: when terms or interfaces describe objects that mimic older designs
- Cryptocurrency wallets should technically be called keychains (they don't hold anything)
- The Apple Watch has an analog option
- The Phone app on iPhones has an old-timey phone symbol on it
- Almost 5 billion people have access to cell phones; 3 billion of those don't have access to clean water.