Revised Bitcoin summary and brief comparison with government currency

Bitcoin is a worldwide ledger backed by open source code, cryptography and the most powerful and secure decentralized computational network on the planet. The Bitcoin network’s applicable computing power is orders of magnitude more than Google’s, Apple’s, Microsoft’s, Amazon’s and all the world’s governments’ combined applicable computing power.

The Bitcoin network’s computing power secures the ledger against any tampering whatsoever.

The Bitcoin ledger records ownership of ‘bitcoin’ tokens. There is a limit of 21 million bitcoins, and each is divisible into 100 million smaller units, or about 250000 units per human alive, enough for everyone to own some. A few new bitcoins are created at a fixed rate every 10 minutes on average until the maximum is eventually reached. Ownership of newly created bitcoins is assigned to miners, which can be anyone that contributes computing power to Bitcoin’s distributed network.

Ownership of bitcoins is possible solely by being the holder of the private key(s) to those bitcoins. A private key is a sequence of letters and numbers the owner has recorded somewhere, such as in a password-protected file, on paper, in an app on a smartphone, or even committed to memory. Bitcoin owners who keep their private keys secret cannot have their bitcoins taken away by any entity without their consent. Government currency can be seized or destroyed without the owner’s consent, either physically if it is in the form of cash, or electronically if it is in a bank account.

Dollars, Euros, Yen, and all other government currencies are not backed by gold or silver anymore, they are simply created as desired by central banks such as the Federal Reserve in the USA or the European Central Bank in Europe. Currency is also created out of nothing by regular banks in a process called fractional-reserve banking, whereby the banks legally lend out a multiple of the amount of currency deposited by customers.

As more government currency is created, the value of the currency already in circulation diminishes, causing indirect taxation known as inflation tax. Governments use this mechanism to stealthily finance activities such as war that would otherwise require directly taxing citizens. Direct taxes are far more noticeable and subject to cause dissension.

Holders of bitcoins cannot be subjected inflation tax because any attempt to change Bitcoin’s unit limit or structure automatically creates an altcoin. An altcoin may have a new ledger, or its ledger can be a copy of Bitcoin’s ledger, known as a fork, made the moment right before the unit limit or structure change was made. Either way, the original Bitcoin ledger, with its original unit limit and structure, continues to exist. Owners continue to own bitcoins on the original, as well as on any fork. The total value of the combined original and forked ledger remains the same, proportional to the distribution of computing power securing the ledgers.

As more citizens hold their savings in Bitcoin, the value of government currency is diminished, along with the government’s ability to indirectly tax citizens without their consent in order to finance questionable activities.


This summary is an elaborated version of this one I spotted on Reddit.

Pulling the string to see where it leads.

Try this experiment. Get your hands on your own bitcoin. 1 penny’s worth, a symbolic amount. I’ll send it to you myself to make it easy, just send me your deposit address.

Then ask yourself:

  • “Am I allowed to own this stuff? What can give others the right, or the power, to compel me to not use it? Who gives them this power?”

If you keep pulling on that string, it might lead you to a new awareness, it might not.

On April 30, 2013, I discovered Bitcoin, and those were the first questions I asked myself. This led me deep into the rabbit hole. I won’t tell you what I discovered in there. Unfortunately, no one can be told what’s in there, you have to see it for yourself.

Or, the story ends, you wake up in your bed…

Why should you use bitcoin?

Here’s why you would want to get your hands on some bitcoin and start using it now, while its fate is still uncertain:

Use bitcoin if you don’t like being told what you can and can’t do with your money.

Use bitcoin if you don’t like being told who and where you can send your money to.

Use bitcoin if you like the idea of being able to use services online without having to reveal your personal information or email.

Use bitcoin if you don’t like buying stuff and having to trust the merchant to keep your credit card information safe.

Use bitcoin if you think it is silly that a merchant can charge your credit card the wrong amount, or accidentally double charge, or worse.

Use bitcoin if you like the idea that nobody, for any reason, justified or not, can freeze or confiscate your assets.

Use bitcoin if you don’t like paying large fees when transferring money.

Use bitcoin if you are saving money for your retirement. Unlike government money it isn’t guaranteed to lose 95% or more of its value in your lifetime.

Use bitcoin if you want to help make sure it survives the battle with Visa, Western Union, JP Morgan, HSBC and friends.

Use bitcoin if you want to always have access to your money no matter where you are on earth.

Use bitcoin if you feel government has a bit too much power or abuses it. Take some of that power back into your own hands. If government currency has less of a monopoly, government can’t just print more money whenever it wants to, to pay for things citizens don’t agree with.

Use bitcoin if you want choice. Don’t let it die from neglect.

Use bitcoin if your life savings are all pegged to your government’s currency. Don’t keep your eggs all in one basket. Or buy some gold.

— Odi

Thoughts about what bitcoin is

Here are some not very organized thoughts about Bitcoin that won’t fit in tweets, but that I think are food for thought still worth publishing.

What is Bitcoin? It is the world’s most secure and fair way for storing and exchanging value.

Think about the money you make and any wealth you accumulate. Is it safe from bank fees, restrictions of various kinds, safe from being taken away from you unfairly by the government (not counting income taxes and sales taxes and other everyday government policies we typically participate in), being stolen by thieves, lost by bank errors, accidents, taken by unfair court order, seized, etc?

Bitcoin is like “the Internet of money”. It cannot be stopped, it is worldwide, it has real value, and it is not controlled by one or more governments and manipulated by banks, the nobility, politicians, intelligence agencies, organized crime, etc. It is a breakthrough in mathematics and computer science, and builds upon other amazing breakthroughs like public-key cryptography and peer-to-peer networking protocols.

Think of bitcoin as a new possession/wealth recognition system. There are 4 such systems I can think of today not including bitcoin:

  1. Fiat currency, which means money that is issued by government and also legal tender, which means legally it must be accepted by the citizens of the country for exchanging goods/services. This is what you get paid with by your employer, this is what you have in your wallet, bank account, etc. Every country uses one or more. The Euro, US$, Yen, Rupiahs, etc.
  2. Deeds to properties/land. You have one of these, it is recognized by your country and citizens, and this way everyone knows you own something. Of course, if your country is invaded, the invaders can ignore this.
  3. Legal agreements, promise documents, verbal promises to pay back, etc. between people.
  4. Precious metals.

Much of the above can fall apart when everything isn’t smoothly running.

Bitcoin is a new, 5th possession/wealth recognition system, not based on trust, but rather, mathematics and encryption (under the covers, you don’t need to know how it works) to assign value to you (in “bitcoins”). That value assigned to you cannot be taken from you by anyone. Governments, intelligence agencies, thieves, etc. When you send bitcoin to someone, the operation cannot be reversed. There are no banks involved, no fees necessary to make transactions, and your bitcoins exist worldwide as long as the internet exists. If you keep your private key in your mind, then only torture can extract it. Torture, blackmail, or a compromised device (such as a compromised Android phone you enter your private keys into).

With bitcoin, your wealth is not hanging by a thread which can be easily cut by the whim of courts, governments, thieves, banks, etc. It is international, it doesn’t depend on the value of the $US dollar, or the stability of a few countries. Solid stuff.

You can think of bitcoin as “digital gold”. Its value is based on supply/demand (purely, because supply cannot be manipulated artificially, like a country “printing more money” as needed). Gold, but with all the advantages of being digital… speed, micro-transactions, security, etc.