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In case you are not up to speed with what Bitcoin is, this a great short explaination.
if you require that, try this page
Where is Bitcoin from?
It was made through the voluntary work of many, based on an over all design by Satoshi Nakamoto. You can still see some of the workings of its development back to 2009 here.
The system is open source which means, you do not have to pay to use it, and anyone who wants to can take a look at the source code.
The concept of Digital Currencies had been around since the late 70s, and many have been tried, with varying degrees of success but Bitcoin is the first one to gain a serious foothold.
Im discussing this as many I have spoken to are suspicious that such a complete, complex and disruptive system just appeared out of nowhere, and was suddenly making many people very wealthy.
What is the motivation?
1) Bitcoin enthusiasts are not into Bitcoin to get rich, they are into it to be free.
This sounds cheesy and trite, but it is true (at least the closest you will get to the truth in one sentence.).
Most people would love to be rich, but being free is more important than being rich, and people will risk and even sacrifice their lives to be free, and provide freedom for others.
If you agree that spending or keeping your wealth is an inherent right, and a key personal freedom, then you should be concerned by the amount of artificial limits, financial arbitrage and suppresion that is applied even to people in wealthy countries let alone people in countries with openly corrupt and heavily controlled financial systems.
These problems stem from the fact that most financial transactions require at least passive oversight from third parties. They are inevitably open to interference, price gouging and disruption whenever those third parties can get away with it.
With Bitcoin; the system has been created that allows anyone, anywhere, to setup and receive/send money anywhere in the world. Securely, anonymously and cheaply.
Bitcoin is a "Zero Trust" system. It does not require oversight from anyone to function.
Its rules are enforced mathematically,cannot be overridden and its transactions are protected using well established computer industry encryption techniques.
Bitcoin was designed to address and indeed solves the following issues;
You do not need a bank, or anyones permission to begin.
If you have a basic computer with an internet connection (or even just an android smartphone), you can set yourself with a wallet and begin receiving bitcoin almost instantly, just by installing the software. It does not require you to identify yourself and does not record any personally identifying information.
It is secure from any third party intervention
Payments cannot be stopped by a third party for any reason; either by a criminal, a corporation, or even a government.
Transactions cannot be subject to fee gouging by coordinated corporations. or by anyone else.
This is particularly important for ex-patriot workers from developing nations who pay on average 10% and in some cases up to 30% of their meager earnings in remittance fees, just to transfer money to their home..
There is no way to set up a "toll bridge" within the system.
To get money in or out of your (ie to dollars) you can get buy/sell them from a 3rd party exchange, or (my preference) buy Bitcoins direct from an ordinary person.
You can find those people on the site www.localbitcoins.com. It lists people who buy or sell Bitcoins directly, either through bank transfers etc and even for cash.
Of course I cannot vouch for anyone. Its up to you to work that out. Caviat emptor.
The important thing here is there not even a passive 3rd party involved. Access is not exclusively for financial institutions.
Internally, money is transferred directly from one address to another.
Transactions usually occur within a few seconds and confirmation is usually within 10 minutes.
This also means things like Gross manipulation of the Silver Market by JP Morgan is impossible with Bitcoin.
No-one has access to your wallet without its private key.
The key for a wallet is issued only to the creator of the wallet you.
It is never broadcast openly. It is ludicrously difficult deduce or infer mathematically (would take a supercomputer 33 quadrillion times the age of the universe to calculate).
Just don't lose that key, otherwise any coins inside the wallet..... gone baby gone!
"Printing/Minting extra currency" causing inflation, and forgery are impossible.
When a government prints large amounts of extra currency, ultimately the users of the currency pay for it as any currency they have devalues, effectively it is a tax via inflation.
This is mathematically impossible to do with Bitcoin. to insert more Bitcoin value into the system over and above what the algorithm already does, would be similar to naming seven prime integers between 2 and 6. Its outright impossible, the question itself is a contradiction.
So a government cannot print extra currency to balance its books
It cannot print money to fund war through either by outright printing currency,
or assigning more credit to its banks
2) You need no "stake" in Bitcoin to use it. It is not designed as a commodity.
Bitcoins are designed to be used; transferred between wallets and addresses, used to buy things, settle debts and be used by people for whatever the hell it is they do..
You do not need to have a significant stake in them any more than you need to have a stake in Pork Bellies to eat Bacon.
Bitcoins are not designed as a commodity.
But they can be (and are) used as a commodity (as can pretty much anything with a value).
Many people invest, trade, and speculate with them, and they happen to be a great way to securely store wealth at little or no cost.
The Market Value of a Bitcoin is decided by third party Exchanges based on their transactions (essentially market forces) with no more link, official or otherwise, with the actual Bitcoin system than anyone else.
There are entire reams of articles on the net dismissing (or praising) Bitcoin, entirely based solely on whether the market value is going up or down on various exchanges.
The market value affects pretty much only the seculators, and has no real affect on the system.
It ran fine when 1BTC was $5, it ran fine when 1BTC was $1200
When it goes up, everyone prances around proclaiming what a good time it is to get into Bitcoin (then continue the irony by getting every actual fact about it wrong - except the Market price which does not matter anyway).
When it goes down, all the boring curmudgeons from the silver/stock markets (etc etc) rant and moan, saying its a ponzi scheme, etc etc when its obvious they are just pissed off they did not get in early, all the while missing (and not informing their viewers) the point that when its down is when you buy.... assuming speculation is what is important about it.... which it is'nt.
And no-one who understands Bitcoin gives a hoot about the latest market price. Why?
The Bitcoin system does not care if a transaction is for currency, or currents or curried sausages.
As far as the Bitcoin system is concerned, the value of One Bitcoin is One Bitcoin (1BTC=1BTC), and a transaction is a transaction. nothing else.
If you got paid in Bitcoin and paid rent in Bitcoin, that would be ideal, you would never have to deal with exchanges or such. But we are not widely there yet (although Im sure some people are).
Market value of bitcoins is import only for the purposes of transferring other currencies into or out of it. and then only the daily fluctuations are the important point.
Its important that daily fluctuations are low so if you had to pay someone $100 worth of Bitcoin and had to transfer in $100, and send it would be nice if it was still worth close to that when the transaction occurred (this is unlikely in the main financial world - with fees etc).
According to this site http://bitcoinmagazine.com/6543/bitcoin-volatility-analysis/
When this chart was produced, the average daily fluctuation was 0.7%, which is fine.
There was alot of money to be made early on by people taking advantage of the skyrocketing value of Bitcoins from the Exchanges that convert them to other currencies,
3) Bitcoin is an incredibly precise and elegant solution.
The Satoshi whitepaper at 8 pages is deceptively short.
It really requires university level maths and computer science knowledge to fully understand.
But when you actually "see/understand" the different parts working together it has the beauty of a master crafted watch mechanism. It is more than just a "good solution" it is a symbiosis of very different technologies used in original and complex ways.
I have worked in the IT industry for 25 years and can think of no system as graceful, except possibly the base architecture of UNIX... almost. I do not say this lightly.
I could even go so far as to compare it to Euler's Identity In terms of its subtle complexity.
To paraphrase Andreas Antonopoulos "It is far more than an "online currency". It is a decentralised authentication platform - think TCP for secure applications"
Here is the erudite Andreas with an insightful talk from January this year.
98 minutes of insight and analysis from his vision of it. Definitely worth a watch.
Possibly this explains why many people get evangelical about it. It is genius.
"UNIX is very simple, it just needs a genius to understand its simplicity."
The only downside is that it is really difficult to explain to someone who does not have a professional level of understanding of the technology it uses, and is prepared to look ahead at the implications
I have given up trying to explain the esoteric parts of it on twitter
It would take an hour with a whiteboard to explain to someone with PKI and distributed networking qualifications.
4) There are many untruths and myths circulating about Bitcoin.
Strangely the more commercial the reporting,
the more likely and outrageous the mistrusts will be.
There is a strong and popular undercurrent of misinformation, supercilious dismissal of the technology and even open hostility from people who know little or nothing about it, and/or are otherwise unaffected by it.
Trying explain the intricacies of PKI to someone who is already adverse to the whole concept can definitely be a challenge; The logical fallacies and outright false facts flow thick and fast.
Even in the cold hard light of day it can get really confusing and intricate.
If I told you right now that;
"there is no such thing as an actual Bitcoin, its just Wallets and transactions."
Would you agree or disagree?
And where would you go to find out the truth? hopefully the Satoshi whitepaper. (good luck)
Well, to the best of my knowledge that statement is the truth, but I would not say that to most people as it would just confuse the hell out of them, and not help anything.
But Why all the hostility?
Heres all I can think of.
Most people don't understand it.
Many people are pissed off they "missed the boat" and didnt buy 10000 when they 50 cents each.
People are naturally suspicious and do not trust it out of hand, probably never would.
Its an easy target for lies and mistruths, especially since much of the truth of it borders on the magical (instant money transfers for free, would take more energy than a million galaxies to crack, made the early adopters millionaires overnight etc etc)
Why will Bitcoin prevail then?.
Because it works. Well.
Its been going for a while, although there have been issues, they have been mainly with 3rd parties (MtGox etc) there have been none directly affecting the main system.
And small improvements are being made in the background.
Because it provides a service that pretty much nothing else does or can.
The Software clients and the process for setting up a wallet are not as graceful or intuitive as would be ideal, but that is gradually working itself out. The client is geting easier to use, and the look and feel is improving.
Recently, multibit was given the nod to be listed on the Bitcoin site as a basic starting point for casual/new users.
Because it has a strong grass roots movements.
Many people have "skin in the game", and many of the hardcore were having fun with it when BTC was worth 5 cents and will continue to do even if the exchange rate falls back down there.
Because its reach and infrastructure is so extensive now, it cannot be switched off, it would effectively require the Internet to be shut off in order to stop it.
If even two Miners remain anywhere in the world, the system will continue (I doubt it will ever come to that).
5) "Bitcoin currency" is the first service of many on the "Bitcoin platform"
The Bitcoin core transport layer is distinct from the Bitcoin currency.
It is required for the currency, but is capable of supporting multiple other applications simultaneously.
They are all able to plug straight into the security, authentication, encryption and decentralised networking modules without any problem. They are also be able to link directly with the Bitcoin currency system so payments (received and sent) could be done automatically.
Each Bitcoin core transport block can hold up to 350 bytes of data which can contain script instructions.
They can perform quite advanced procedures.
When used in a massively distributed way, this can create very complex systems.
|Leaf Cutter ants|
They cannot eat the leaves or the algea. They have effectively only 2 or 3000 "neuron blocks" in their brains, but they are able to perform these quite advanced and intricate tasks, (it appears an ant does not understand what an aphid is, it only reacts to simuli) and yet it can do all this based on low level simple rules.
If a number of "smart blocks" are combined with even simple client software, this allows incredibly intricate behavior think of each coin in a bank as being as smart as an ant, except it is able to sense any other coin, or message from a coin, anywhere in the world, react to it immediately, jumping to an address anywhere in the world, and then be back confirmed within 20 minutes. It could pass money to and receive money from anywhere. It could also trigger actions on the client PC software (send emails, make bookings, etc etc).
It could make financial traders obsolete,and by extension it could make coprorate execs obsolete.
Partly based on Andreas talking around @ around 1:32:00 onwards in the video above.
All of these are possible on the technology there now, Some are available now, and some have not been created yet.
Better Stock certificates - redeemable by the bearer completely anonymously and completely transferable, that allow the bearer of the certificate to vote in elections, as well as receive direct dividends to that coin.
Also, the stock market cannot be taken offline, works 24/7, and the system cannot be gamed with systems such as microtrades.
Distributed fair verifiable elections - Used to vote on a global or very local basis.
Votes can be tallied automatically, each voter can confirm secretly what his vote was counted as,
but that is not available to others, it cannot even be confirmed that any particular account voted.
But the total will tally correctly
Global Lotteries - Automatically paid, automatically distributed profits, with the rules setup in advance, with each step traceable and verifiable.
Crowd Funding - Global and immediate, or with automatic payment when a threshold is reached. Payment received and verified immediately by recipient (no corrupt banks pretending the money did not arrive)
Conveyancing - A company in Argentina has been using the blockchain to indelibly record and time stamp the ownership of land. Some corrupt local government people had been taking peoples land by simply altering the official records and kicking them off.. This creates indelible ownership records.
Bond (and advanced escrow) systems
Automatic Last will and testament actions.
Financial products that up till now have been impossible either due to inflexible technologies, or artificial financial borders. Such as direct lending to anyone.
Financial systems that are guaranteed free of corruption.
Flexible ticketing and booking systems able to watch for vacancies and pay instantly, or cancel and recieve refunds instantly (rather than have Visa hold it for 2 weeks).
Payment systems that react automatically to external input
for example payment when a certain code is recieved in an email, or possibly when a tracked phone enters a certain area, as reported by its GPS