“Bitcoin is a digital, decentralized currency which was invented in 2009 by an anonymous inventor called Satoshi Nakamoto. The transactions happen peer-to-peer without a middleman using a public database called the blockchain and was designed to form an alternative to government-issued currencies.”
Bitcoin is a fascinating technology as it has the power to change your perspective on how our society works. Bitcoin lets you question things you would otherwise take for granted. Things such as:
Why can’t we send money globally just as easy as sending an email or text message?
Why is 1/3rd of the world population still excluded from financial services?
Why are governments allowed to print more money, causing inflation on the money we worked so hard to gather?
Today we consider it normal that governmental decisions aren’t based on the church's wishes. But 200 years ago, this was the norm. The separation of church and state was an important step towards a more democratic society. We could argue that maybe in a few years (or decades), we will say the same about the separation between money and state.
At Start2Bitcoin, it is our mission to find ways to educate and onboard people to Bitcoin. Not to convince you, but to give you the necessary background and information to form your own opinion.
In this blog post, we will explain through some general information about what Bitcoin is and why it lets us rethink us the way money is used and managed today. You can find more information on specific topics in the other articles in this blog.
In case you want a quick guide into this multi-faceted industry, we also offer the Bitcoin Starter Box. In order to make this giant bunk of information more accessible for a larger audience, we summarized all the basics in one simple box. See it as the first step before deciding whether or not to invest in Bitcoin. It lets you explore the technology through debunking classic newspaper headlines, geeky details, jokes, experiencing it by holding your hand when claiming the included Bitcoins and more. By tackling this technology from various angles, we hope to provide you insights on all the different areas it touches.
It is specific in its intentions, but global in its effect
Since the inception of Bitcoin, the goals were very clear. Sending and receiving value, from and to anyone in the world, using nothing more than a computer and an internet connection. It's revolutionary in design as it allows you to send money through the internet without having to put trust in an intermediary. The lack of central players in between means that Bitcoin is the first global and public - decentralized - payment infrastructure.
Public means that anybody can use it, in the same way, that anybody with an internet connection can send and receive emails. And the not only public in use, but Bitcoin is also open source so any developer can help to optimize the code base and thus the functionalities. Compared to other cryptocurrencies and blockchain projects, you could argue that Bitcoin is quite conservative in its approach to leverage this technology further than only money - as it does have the capabilities. But the simplicity and ambition of Bitcoin is its biggest strength, and it does it extremely well with an uptime of 99,98% since its inception. After numerous (failed) social, political and technical attacks it became more and more resilient. By now, it has attracted some of the brightest minds all over the world to improve and build on it.
Just as the internet gave everyone a voice, Bitcoin gave it value
We have an open, public infrastructure for spreading information. It’s called the internet. You don’t need to ask for permission when writing a blog or making a video. A lot of skeptics predicted the internet would never work as it would be full of terrorists, criminals, and pedophiles. But it went quite the opposite. Now we couldn’t imagine a world without the internet.
Its success didn’t come from keeping the technology in a closed environment but by throwing it in the open and see how it would develop so people could benefit from it. By removing the gatekeepers who used to decide what and when would be published, it empowered the people to chose which information they value and which they don’t. Now anybody with an internet connection can spread information at the cost of almost zero. The only piece that is still missing is transferring value across the internet. Just as the Internet belongs to nobody, this currency shouldn’t belong to anybody either. It shouldn’t have a flag or face on its coin.
Bitcoin can be broken down in 7 properties:
1. No central authority
With Bitcoin, you don’t rely on a government issuing the currency and banks keeping tracks of the records. Instead, Bitcoin uses a decentralized network to form a consensus under which rules the network should operate. One classic example of these rules is the fixed supply of 21 million bitcoins. This total supply is controlled by design and thus not regulated or controlled through an authority or government. Everybody in the network agrees that this rule should be verified by each.
Having a democratic model such as Bitcoin means that everybody in the network has a vote to decide in which truth they believe. And this can sometimes create doubts about how the future roadmap of Bitcoin should look like. Like any other software, Bitcoin also needs upgrades, and therefore decisions have to be made whether the participants agree or disagree with a certain change in the software. In case of a disagreement where a portion of the network decides not to upgrade, a fork may happen where two versions of the software are created. In this case, you won’t lose any value, the amount you had before the fork will be duplicated on both platforms.
Like in every democracy, it’s inevitable to have individuals who think they are in charge and like to push certain agenda points forward. If the network disagrees, they will find themselves sooner or later on the other side of the spectrum.
A lot more drama happens when you don’t have a central authority making the calls. As everybody thinks he in control, decision making is far less efficient compared to a hierarchical system. Compare it to how decisions are made in your country. Often the chamber of representatives has to come to an agreement with 50% of the votes + 1 vote to pass a new law. In Bitcoin, +95% is required to form an agreement. You can image decisions are extremely painful as every possible outcome has to be considered. But inefficiency is the price we have to pay for having a democracy.
In the case of money, an absolute democracy is fundamental as money means power. Numerous examples throughout history have shown us what happens when citizens lose faith in the currency issued by their country, the latest and most impactful example being Venezuela.
2. Electronic cash
So far, the only public payment infrastructure we had was cash. Unfortunately, it only works in face-to-face transactions and for relative “small” amounts. In case you would need to send money remotely, you would have to rely on private infrastructures such as a bank that open their books where they add a ledger entry. And in case you and the person you are paying using a different bank, then multiple banks will do multiple data entries.
With Bitcoin, there’s only one data-entry point, which is the public Bitcoin blockchain where anybody can add an entry and transfer their bitcoins regardless of their nationality, race, religion, gender or creditworthiness. When transferring bitcoins from one person to another, this happens in seconds and both parties can be reassured there will be no fraud or chargebacks involved.
With scaling solutions such as the Lightning network, the cost of transferring bitcoins from one party to another will be close to zero, regardless of the receiver is standing next to you or on the other side of the world.
Is it perfect? Hell no, neither was e-mail or the internet when it was invented. But it is working, and it is improving over time. Bitcoin now isn’t the same as Bitcoin was back in 2009.
3. Bitcoin doesn’t know borders
Ever wondered where the internet is located? It’s everywhere and nowhere. Bitcoin is similar. And unlike a bank, it doesn’t need a physical location or headquarters. The public ledger is stored on tens of thousands of computers around the world. This means you never have any money with you, but only the keys (aka Private keys) to access your bitcoins. This can provide a solution for those who are fleeing out of their country cause of war, political or economic instabilities. As Private keys are basically a few characters on a paper, it’s less obvious than carrying a bag full of money and theft is also much harder.
4. It’s censorship-resistant
For example, in 2010, the US government decided to put pressure on Paypal and other payment services to block payments that were meant for Wikileaks, because of obvious reasons. Some accounts that were related to the whistleblower website were frozen and as a result, account holders couldn’t gain access to their money. The same situation happened with protesters in Ukraine.
With Bitcoin, it’s very difficult to put pressure on the system as there isn’t a central authority to knock on the door. As a result, Wikileaks now accepts bitcoin donations and protesters in Ukraine showed up with a sign to ask for donations and help to fund their revolution.
5. Immutable transactions
Once a transaction has happened and is recorded on the blockchain, it’s permanent and set in stone forever. It cannot be reversed. Similar to doing a transaction in cash, it’s very difficult to reverse the transaction if there’s no mutual agreement. This is not a bug, but a feature as its fundamental for building trust in the network.
This brings a lot of responsibility to the user in case something goes wrong like, for example, paying the wrong person.
6. Accessible for everyone
On average, 2 billion people are unbanked, and close to 5 billion people do not have sufficient access to financial services, also known as underbanked. There are several reasons such as insufficient income, geographical problems, or lack of the right identity papers.
Imagine what happens when you give those 5 billion people access to the same financial services as the rest of the world, many people will be empowered to change their situation. I bet poverty will look different.
Barack Obama, former President of the United States, once mentioned during an interview that having a Bitcoin wallet in your pocket is the equivalent of having a Swiss bank account in your pocket. Although he was referring to the lack of tools the government would have for arresting criminals, he undervalued the properties of Bitcoin. When having a Bitcoin wallet, you have an entire Swiss bank in your pocket with the capabilities of opening millions of accounts and transferring all your wealth across borders in seconds.
7. Innovation through open-source software
The creator, Satoshi Nakamoto, released the software open-source in 2009 so anybody could improve on the code. According to Greg Maxwell, one of the core developers, the original code consisted of only 3.000 lines of code. Currently, the code contains more than 100.000 lines of code. That’s the power of an open-source project. This leads to more revisions, more transparency, more security, and more innovation.