Bitcoin flavoured Ice-cream
Bitcoin… nah… the money invented by computer geeks and nerds for their fun on the internet. You just put your money in and see how it doubles. It can never be something you can use. It was made for drug dealers and addicts. It’s too late to enter into this internet game, better luck on another gamble.
But wait for a second, a country adopting it as a legal tender. Ukraine accepts it as a donation. It is valued more than Facebook, Mastercard, and the famous American bank JPMorgan. It shows no signs of stopping to grow. It isn’t even dying as Peter Schiff predicted, who has been a prominent individual in pointing out flaws in the US economy.
As its proponents advertise, Bitcoin can become the ideal currency for the people. This is termed ‘hyperbitcoinization.’ Its fundamentals support this. Ever used what Bitcoin was meant for? No? You just thought to buy some and forget; you’ll get rich. As Andreas Antonopoulos points out, the people using Bitcoin for its actual purpose are amazed at the wonders of the technology. They are impacted beneficially by its use cases. People in North Korea, Palestine, and Argentina are a few examples where it has shown its true potential and has liberated people from the atrocities of the powerful.
“Bitcoin is the most universally desirable property in space and time.”
— Michael Saylor
Bitcoin is a technology. It is an immutable and distributed ledger. If you ignore Bitcoin, you ignore technology, and history has been cruel to the people who do not believe in technological progress. On January 3rd, 2009, an unknown programmer named Satoshi Nakamoto invented Bitcoin to empower people with their money and remove control from the banks and institutions dominating the financial space. It is the simplest and the most unique code ever written, symbolizing security, censorship resistance, and self-sovereignty. But how does the underlying mechanics work? We’ll explain this through our magical ice cream shop.
Consider George, our ice cream man. But this isn’t some ordinary ice cream shop. Every person coming here gets an ice cream that complements their personality traits. But to find out this perfect ice cream, George has to run flavour combinations to match the person. So let’s say you want the ideal ice cream for yourself. You’ll go to George, and he will run his ice cream machine to find out the exact flavour you want. This ice cream machine is unique in that the variety of flavours changes every second. Also, it can make a large number of possibilities in one second. But what if, in one second, the available flavors cannot come up with your desired ice cream? George will have to wait a whole second to try again, now that’s not resourceful for a ‘magical’ ice cream machine.
What George did was make a waiting area in the shop so that customers could sit there while waiting. Every time he gets an order, and the combinations do not make up that flavour, he receives the order from someone in the waiting area and tries to make his flavour. There are many people in the waiting area, so he chooses the person based on the money he’ll give in exchange for the ice cream. Also, George is an exceptional employee, so he gets a reward for every ice cream he sells from his boss and the money paid by the customer.
Now, let’s integrate this concept into Bitcoin. George is our miner, and the number of combinations he makes is the number of hashes he generates by changing a random number called the nonce. The ice cream made is the transaction included on the blockchain, and the amount received by the boss is the block reward in addition to the transaction fees paid by the customer. The waiting room is analogous to the mempool.
When you go to the ice cream shop and place an order, it is similar to submitting your transaction to the miner. In our case, George, the miner, finds out the exact hash of your transaction by changing the nonce based on Bitcoin’s target history (your unique personality traits). An average machine for mining bitcoin can produce 55 terra hashes per second, which is an enormous number. So it is possible that with the details you provide about the transaction and possibilities of nonce by the miner, you do not get the block’s hash until the number of combinations runs out. A second has to wait for new varieties to be tried out. In this case, the miner refers to the Mempool, where people wait for their transactions to be included in the blockchain. You did not select these people before as they were giving you a lower transaction fee. It is better to process their transactions by finding new combinations with their data rather than waiting for part of a second; remember, we are talking about exa-hashes here, and it costs electricity to run the machine. The miner is incentivized to run this machine by the amount of bitcoin he receives from the transaction fees and the block reward, similar to paying an employee for his work. This ‘proof of work’ secures the Bitcoin network and allows the transactions to be processed in a decentralized manner.
After the miner processes your transaction, it is verified by an extra layer of validators and then included in the blockchain. But here’s the fun bit, your receipt of the ice cream has a number associated with the previous person’s receipt. This is how in Bitcoin, every preceding block can be traced, and a whole chain can be formed, hence the term ‘blockchain.’ This is why it is the most secure ledger to date.
You don’t buy a miner, a ledger, or a block when you buy bitcoin. It isn’t even a physical coin you can hide below your mattress. What you acquire is a coin existing on the blockchain responsible for all the economic activities on the chain: transferring liquid value on the chain, paying the miner for processing a transaction, and governing the rules of the Bitcoin protocol. The underlying Bitcoin protocol is the rules that each member of the Bitcoin network is bound to obey.
Bitcoin was made to be a ‘peer-to-peer currency.’ The mechanics behind it indeed do support that claim. It is maintained by miners that do not know each other, and no single organization is behind it. Money is usually defined as a store of value, unit of account, and medium of exchange. If you see Bitcoin, it stands out in all three areas. It preserves purchasing power by increasing logarithmically over time and is deflationary. It is divisible into satoshis equal to 0.00000001 BTC, allowing the liquid flow of value. Bitcoin has demand because of its underlying fundamentals. This makes it a medium of exchange for anyone transacting it as standard.
Those nine pages written by Satoshi Nakamoto represent an elegant and unique technology that has stood the test of time and is a breakthrough in the finance world. We revolutionized the way we communicate through the internet; this, now, is the “internet of money.”
Bitcoin is simple, you respect it, and it will respect you.