Bitcoin & Blockchain 101 Why The Future Will Be Decentralized

Bitcoin & Blockchain 101 Why The Future Will Be Decentralized

Bitcoin & Blockchain 101: Why The Future Will Be Decentralized – Big Think

Bitcoin & Blockchain 101 Why The Future Will Be Decentralized it’s hard to have a rigorous discussion about Bitcoin without understanding money, and the best way to understand money is to understand the history of money. Anthropologists agree that there’s no tribe, much less a civilization, that ever base its commerce on barter.

And there’s no evidence barter never happened. And that’s counterintuitive to most of us because we are taught in school that we first barter and then made money. After all, the barter was too complicated, or the barter never happened. And that’s one of the key sorts of myths about money. So, you would ask the anthropologist, like, OK, how do we do commerce before money? There was no barter, and there was no commerce.

No, there was plenty of commerce. And the way that commerce would happen is that let’s say that someone in our tribe had killed a big buffalo. And I would go up to a person and say, hey, can I have a little bit of meat? And that person would say no or yes.

Bitcoin & BlockchainWell, here’s your meat. And then you would go up to the person and say, hey, can I have a little bit of meat? And that person said, yes, here is your meat. And basically, we all have to keep track in our heads of what we owe other people are what our people owed us. And then someone would come to me and say, hey, can I have a little bit of firewood? And I would say, sure, here’s your firewood.

I now have to remember that I owe that person a little bit, that this person owes me a little. And we all went on about our business with these ledgers in our minds of who owes us what do we owe them?

Very subjective system. Often this debt didn’t clear or clear in ways that were not satisfactory to both parties until about twenty-five thousand years ago. Someone very, very intelligent came up with a new technology that really took off, which came to me and said it could have a little bit of firewood.

And I said, Sure, here’s your firewood. And this person said this time, and we will try something different here, some beats for you. And I said I don’t want it. I don’t care for it; I need it. And I said it’s not about that. We’re going to use beets as the objective ledger of our tribe instead of each of us having to remember what we are owed; the beets will keep track for us an objective ledger to keep track of that.

digital currencyAnd it was such a successful technology that it took off. And in a couple of thousand years, it became impossible to find a tribe or a civilization that didn’t have some form of objective ledger. In some cases, it was one potential. Our places, it was sold in other places, rocks or beets.

But this form of keeping track of debt with an objective ledger took off. An anthropologist goes as far as saying that if you describe a tribe’s environment in detail, they can predict what’s going to emerge just as an objective ledger, like money, because it’s always something that has six qualities, the most important of which is that it be scarce. It makes sense because if it’s not scarce, we can if we were to use three leaves; for example, we could create debts are owed to us out of thin air.

And that wouldn’t be good. That wouldn’t be a good ledger, but it also has to be durable. If it’s something that dictates or corrodes, it doesn’t store the information. Well, it has to be divisively had to be transportable, recognizable, and fungible. And this system really worked until about five thousand years ago when trade began to extend a lot geographically. We began to trade with other tribes and different tribes using different ledgers to trade with each other.

And what happened then about five thousand years ago is that gold emerged as the first universal ledger to keep track of debts. And it was gold because it was universally scarce. That was the most important consideration. It was also very durable, fairly divisible, transportable, recognizable, and find you. And that’s why for five thousand years, gold has been the best dollar value we have ever seen. It’s incredible that today if you need to leave five thousand dollars for someone for your daughter, not your daughter or your granddaughter, but some great, great, great, great, great, great, great, great-granddaughter of yours.

bitcoinForty generations from now, nine hundred years from now, we don’t know how to do that. If you leave it in just dollars is not going to be worth very much. We know of no security that will last that long. The only thing that we know can carry value for that long is you need to buy five thousand dollars’ worth of gold, lock it in a vault and give the key to that person nine hundred years from now.

It’s incredible that in the twenty-first century, this is the best answer we have. This is why Bitcoin is so relevant because it’s the first time in five thousand years that we have something that is incredibly superior to gold in each one of the six characteristics is much scarcer than gold. There will never be more than twenty-one million bitcoins. It’s much more divisible than gold. And its Bitcoin is composed of a million pieces called Satoshi. It’s much more durable, divisible, transportable.

You can attach a bitcoin to an SMS message or an email and send it for free and in real-time across the world. And it’s straightforward to verify the second you get a bitcoin; you know it’s a good bitcoin. Bitcoin itself is what we call deflationary, which means that over time the amount of Bitcoin in circulation if you look at a chart, would actually approach a fixed value of twenty-one million, never quite approach it. But it will asymptotically, in math terms, approach that line of twenty-one million over time, and it does that by the amount of Bitcoin being mined or created being cut in half every so often.

Right now, it’s every few years and then will be every few months and then et cetera, et cetera. Right. And so, these happenings actually create a predictable rate at which Bitcoin is created, that rates, as I said, will asymptotically approach twenty-one million over several years. And at that point, though, if Bitcoin is being used for money transfer applications, institutional investors buy it like digital gold that will drive the price higher.

But if the price shoots up to, let’s say, a trillion dollars is really twenty-one million, it’s still not a problem because you can subdivide Bitcoin down to eight decimal places. So you can get to the point where one Satoshi, which is 0.000001 Bitcoin, could be worth a thousand dollars. So, the ability to subdivide Bitcoin into tiny amounts called Tosches, which are in today’s value fractions of a penny, could eventually be worth thousands of dollars in their own right.

So that’s that that gives the utility of Bitcoin a lot of legroom for the long term because even if the value goes up to trillions, you’ll be able to subdivide it into small amounts to make it useful for small payments. So, cryptocurrency is eventually will look like traditional commodities, in my opinion, whether it’s gold or platinum or other metals or is probably the best, but could look like oil and gas, things like that. And so, they are starting to trade in a fashion that’s more and more similar to traditional commodities.

But the difference right now is they’re not as a liquid yet. Right. So that means that the price is very inefficient for the markets, for cryptocurrencies are very inefficient. So, most people who are holding cryptocurrencies are long-term holders. They’re not selling. OK, so that actually means that the price of Bitcoin and ether, for example, is largely driven by the volume of buyers. So, if there are large volumes of buyers coming into the market, it drives the price higher because there are not many sellers.

But if the buyers dry up, right, then the price goes down regardless of whether there are still not many sellers. So that’ll change over time because if the price skyrockets, so, for example, if institutional money starts to come into the cryptocurrency market in large numbers, which I think it will, that will force the price higher because there’s not enough cryptocurrency to go around. OK, and that also caused some of the holders to loosen up their purse strings because they’re going to want to reap the profits that they’ve been waiting for 10, 15 years by the time that happens.

OK, and that’ll also create more liquidity in the system, which will create a really positive feedback loop, which should drive the price even higher. The other thing that I think is very relevant is you’re starting to see more traditional types of financial products being applied to cryptocurrencies, derivatives options, not deliverable forward contracts, or things like that. That actually will help make the cryptocurrency market more efficient over time. Close a lot of what we call arbitrage loopholes, which is like free money in the traders’ system.

And as those loopholes get closed, the market becomes more efficient, more liquid, and it becomes better for everyone. What Bitcoin creates is a ledger that needs no bank. And that’s actually pretty important, because if you think about what is a bank, at least as far as the money transfer and the checking, the savings, not the loan part, but then, you know, the financial the moving money part of a bank, it’s really, it’s a secure ledger.

The bank does not just have a little file that says your account is three thousand dollars in it. They insist that when you write something, they make a note in their ledger that one thousand dollars are transferred from your account, someone else’s account, and so on.

digital bitcoin

And that’s important to make it secure. Well, what the designers of Bitcoin created to make our ledger that secure and that everyone can trust, but that no one owns or controls. And this allows people to have money that can be free of governments’ influence, which is both bad if you’re a government and great if you don’t like what governments do with their monetary policies. It lets the policy be set by consensus and software. So, Bitcoin basically has found a way always to know what the majority thinks.

And by always doing what the majority thinks, you get something you hope you can trust. In theory, if someone controlled more than half of the world’s computers, they could take over Bitcoin. But that’s pretty unlikely.

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