Bitcoin Is An Idea

Metaphorical symbolism is everywhere if you know where to look for it. In the case of ideas, contemporary symbolism images them as “lightbulb moments.” The metaphor has implications for how we understand the nature of ideas and their role in human cognition and creativity. It suggests that ideas are something we can see and understand, like light, rather than something that is hidden and mysterious. It also implies ideas are something we can actively seek out and discover, like a switch we can turn on. This activity is the thing we spend much of our time doing when not attending to primal matters of survival; and the perpetual process of searching, discovering, and illuminating is revelatory in both the individual and global domains.

In this essay, I will aim to put forward the idea that ‘Bitcoin Is An Idea’, and further, that it is a good and true idea. But first, what exactly is the Bitcoin Idea? To answer this question, of all places one may begin, perhaps consultation with the Bitcoin white paper itself would be a logical starting point. Herein we have a description from Satoshi Nakamoto, the pseudonymous inventor, that Bitcoin is “a purely peer-to-peer version of electronic cash [which] would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.”

If you’re still with me, what you’ve just read is the Abstract, in its entirety, straight from the Bitcoin white paper. For those unfamiliar with a white paper, this is a document traditionally used in information technology which is written by a lead product designer to explain the philosophy and operation of a product in a marketplace or technology context. In the case of Bitcoin, Satoshi would be considered the lead product designer, and the product would be digital cash, or digital gold as many understand it today.

So what makes Bitcoin such a novel idea? Haven’t we been using digital cash for decades in the form of online banking, e-commerce, and credit cards? Sort of. This is the particular point where most fail to conceptualize the incredibly novel idea that is Bitcoin. If I could put this in layman’s terms, the genius Bitcoin idea is to not simply dematerialize middle-men, but remove them entirely from the process of issuing and exchanging money; in our case, digital money. For those familiar with a rough history of money, you know that precious metals functioned as bearer money for thousands of years of human history. I.e. Natural money has no issuers, and no middle-men involved in their exchange. Natural money, or God’s money if you like, is commodity money. Furthermore, to quote Satoshi, natural bearer money is “peer-to-peer.” Meaning the holder, or bearer, of the commodity is considered the owner by default, and the transactions with this form of money are censorship resistant and private.

Still not getting it? Let me put it to you crudely. The form of money you’ve been using your entire life is not natural. Don’t believe me? Ask yourself, who created gold? Who created dollars? Who created silver? Who created the ~180 fiat currencies in the world today? Who created any of the natural monies humans utilized for thousands of years? Obviously, two of the forms of money I listed are issued by humans, and the others are naturally occurring monies with no issuers. These monies are naturally occurring and have properties that enable them to ascend through a competitive darwinian process of market fitness. Their users land on them because they approximate the ideal properties their users desire of them. I.e. Transactability and store of value for future transactability.

So what are dollars then? This rabbit hole is beyond the scope of this essay and will be elaborated upon respectively. Suffice it to say, when humanity scales through technological globalization, the natural commodity based monies do not have the properties sufficient for desired scalability. I.e. Natural commodity monies like silver and gold are hardware and cannot be ported into the domain of software and cyberspace in an efficient and trustless manner. In other words, natural commodity monies become effectively intransactable in the digital domain, and to whatever extent they are transactable, there is always trust involved in an intermediary to oversee the digitization and securitization of the underlying natural commodity.

So back to Bitcoin. What is a way of understanding this? Think of it as an abstract form of natural money, like gold or silver, that has emerged in the digital domain. Here I mean digital specifically in terms of bits and bites, zeros and ones. Bitcoin is an emergent, natural, digitally-native form of bearer commodity money. In other words, Bitcoin gets us back to the form of money we’re used to as human beings. And better, because in the case of Bitcoin this form of money is finitely scarce, teleportable – if I may invent a word, and infinitely divisible which means whole new forms of micro-transactability are opened to us.

Forthcoming essays will seek to elaborate on many of the key observations I’ve made here, but I hope these realizations provide a teaser for why ‘Bitcoin Is An Idea’, and further, a good and true idea that has the potential to give humanity it’s money back so we can get back to being just that, human.