Bitcoin Is A Protocol
THE BITCOIN ESSAYS
Originally Published February 2023
5 Minute Read
Our world runs on protocols. Here’s a shortlist… Language. Sports. Speed limits. Stop lights. Medical procedures. Cooking instructions. Codes of conduct. Holiday celebrations. Religious ceremonies and traditions. Common and statutory law. HTTP. TCP/IP. Employee handbooks. Electoral processes. Natural laws of gravity, conservation of energy, and the speed of light. Genetic inheritance. Mathematical formulas of algebra, calculus, and geometry. As I write, I must obey common accepted grammar, punctuation, and spelling. Protocols are literally everywhere! And yes, ‘Bitcoin Is A Protocol’.
So what are protocols exactly? Simply, procedures. Or expounded; a system of rules governing action. Protocols are imbued in nature but can also be understood as emergent phenomena of human coordination. Some protocols are timeless, immutable, universal law; some are evolving and subjective. When protocols are well conceptualized, defined, and accepted, humans are enabled to live more harmoniously with creation and with one another. These protocols empower us to anticipate the future and provide a framework for how we should prepare, act, and respond to the perpetual chaos of life. Our multidimensional world is overwhelmingly complex; our protocols simplify this complexity by compressing and organizing these multimodal datums to make life appear elegant and simple.
Returning to my aforementioned shortlist; there is one obvious omission. Money. The money protocol is one of the most potent preconditions of human life. This precondition is as unnoticeable as language itself and our perceptions mislead us to believe these protocols are as immutable as natural law. This assumption is a great mistake, and every few hundred years (sometimes less depending on the language or monetary device) humans are dumbfounded to discover these foundational protocols are shifting beneath their feet.
The protocols of language and money are textbook, categorical examples of emergent human coordination. There is no inventor of language in the same way there is no inventor of money. Occasionally these protocols may be co-opted by authoritarian actors who act to steer these protocols via executive governance, but these privileges are always temporary, and in the long run the market weighs available options and drifts toward whichever protocol is best suited for the desired function.
We study language and trace its etymology because it is akin to an information based organism shape-shifting through time and history. Likewise, money is the language of value and exchange. One stands to gain great insight from intuiting the lessons of history and how these protocols evolve through time. Perhaps further, one may gain the asymmetric advantage of Wayne Gretzky and, “go where the puck is going.”
Here now, I will present the idea that ‘Bitcoin Is A Protocol’. And further, lest I waste my life-force on trivial matters, why I believe this is where the money protocol puck is going.
Bitcoin is the worlds first coinage forged in the digital domain, comprised exclusively as bits of information. The white paper codifies a rule set for decentralized, peer-to-peer digital money and then instantiates these parameters in unbreakable cryptographic code. This code can be understood as a hierarchical system of if-then statements that dictate how mathematical properties and ingredients may be used to forge a Bitcoin. In short, these instructions transform entropy into high order property. This code of conduct defines what actions must be performed by all participants and the result is an alignment of divergent human action and mechanic work for one common enterprise.
To put it another way, Bitcoin has introduced humanity to the invented discovery that one may generate an entropic seed, and then nurture that seed using deterministic hash functions to produce digital fruits in the form of public facing addresses. These public addresses may accumulate and dispense Bitcoins which net-accrue to the seeds from which the addresses were generated. Users are incentivized to get them while their hot. There will only ever be 21 million. This is what makes ‘Bitcoin, Magic Internet Money’.
Now that we understand ‘Bitcoin Is a Protocol’. Let’s play out a bit of game theory to see if we can get ahead of the money puck.
Think of everything you’ve ever purchased in your entire life. How scarce was it? Coffee – not scarce. That holiday overseas – expensive, a bit more scarce, but a temporal pleasure. What about something indestructible? Try telling your spouse you think you’ll settle for a plastic band. Of course we land on gold and diamonds for these special properties. Ever needed something divisible? That chocolate bar you shared with your best mates in second grade may suffice. Or maybe that dinner check you split with your colleague last week. Have you ever purchased something for its portability? There’s good reason the market favors smart phones that fit in your pocket instead of the old ones that comprised an entire briefcase. Alright, enough with the gimmicks, let’s get back to money.
You purchase money every single day. You don’t think of it because it’s not directly intuitive, but yes, you exchange your time, talents, and treasure for money every day. In this sense, you are buying money. And when you buy money, you desire it to have the properties we just covered. Money should be scarce, durable, divisible, portable, verifiable, fungible and censorship-resistant.
So back to our friend Wayne Gretzky. Where is the money puck likely to go? If we assume the market weighing machine will gravitate towards a money that meets these ideal properties and if we understand Bitcoin to have perfected these monetary properties in cyberspace, then perhaps, just maybe, the money puck is making a b-line for Bitcoin. See you there.
This is Jonathan David Kellogg – Writing for
That Bitcoin Blog.
These are The Bitcoin Essays.
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