Understanding Bitcoin in Ten Minutes

Over the past decade, the value of Bitcoin has skyrocketed/ unsplashIf combined with reality, the pond itself, at different depths, the blackboard (bulletin board), all belong to blocks, and the management logic behind this is called chain; The fish in the pond are Bitcoin.Pinch your fingers and calculate, Bitcoin has been around for ten years

Over the past decade, the value of Bitcoin has skyrocketed/ unsplash

If combined with reality, the pond itself, at different depths, the blackboard (bulletin board), all belong to blocks, and the management logic behind this is called chain; The fish in the pond are Bitcoin.

Pinch your fingers and calculate, Bitcoin has been around for ten years.

If there have been any "commodities" that have truly maintained and appreciated value in the past decade, pork and housing may have achieved remarkable results. But the number one is definitely Bitcoin.

At the end of 2017, the price of this invisible 'commodity' reached 19000 US dollars, which was 125400 RMB at the exchange rate of 6.6 at that time. A Bitcoin withstood the pressure of eating meat throughout the year.

In 2010, the value of 10000 Bitcoins was only about two pizzas.

Is it rising faster than a pig?

The price of pork has risen rapidly, but it is nothing compared to Bitcoin/ Image source pixabay

As long as it rises, the market will catch up, so this has driven the development of related industries.

On October 28th of this year, the US Securities and Exchange Commission announced the listing application of a mining machinery company in Hangzhou, China, with plans to raise $400 million.

On December 2nd, this company welcomed the shining moment and successfully rang the bell on NASDAQ.

In fact, the larger mining machine company is called BitContinent, which sold $2.8 billion in goods in the first half of last year.

Whether you like this emerging "currency" or not, as a new era, you must at least know what this is about!

Bitcoin is the fish in the pond

To explain what Bitcoin is, which is more advantageous in economics or computer science?

Economists like to analyze concepts that are difficult to understand and remember in our daily lives; Computer Science? Without mobile phones and computers, computers seem to disappear from life, with concepts and protocols that are almost incomprehensible.

In economic terminology, no one has a big mistake/ Image source pixabay

But Peter Schiff used a very small model in "Small Island Economics" to clarify the context and principles of American economic development.

By using this logic, the principles of Bitcoin can also be explained clearly using a huge pool of water.

Ten years ago, a fisherman who was worried about the future economy dropped 2100 fish into a huge pond. Although these fish were of different types, the price of each fish was the same, without gender, skin color, or even size discrimination.

Subsequently, he released this news to fishing enthusiasts around the world.

At first, the pond was filled with fish/ Tu Hutong

The message roughly states that there are 2100 fish in my pond, and these fish live at different depths of the pond due to their different species. I am not very sure how many fish there are at each depth, but everyone, come and play.

If you catch it, the fish will belong to you. However, in the spirit that the people have already solved the problem of food and clothing and will no longer work hard to eat one fish at a time, the fisherman hopes that the fish will not be used for braising or making soup, but it is necessary to make a mark on the fish to prove that it belongs to you.

With this voucher, the cost of doing transactions with others anywhere is that fish.

At first, people thought this was absurd, after all, people were accustomed to trading with currency.

But there are always curious people who plan to give it a try. In addition, there are many fish in the pond, at different depths, and with different bait, they can catch them in one go. There were idle people waiting to trade fish, and the first transaction turned out to be pizza.

Now that this fish is very expensive, if you still want to trade pizza with it, you can exchange a portion of this fish.

Although people use 'one' to quantify Bitcoin, in reality it can be traded as a whole/ Image source pixabay

After all, buying fish in the Guangdong market can be done in any location.

Busy Blackboard

The foundation on which traditional currencies can be traded is actually very simple, which is trust.

The bank has guaranteed that our paper currency can be traded, and we will try our best not to let it depreciate.

People were bewildered by the incomprehensible theory, so they quickly believed the words of banks and economists.

We don't plan to complicate the problem, but from another perspective, a level 12 strong Taiwan eye is about to land, but meteorologist didn't find that he might have to go home to farm.

Strangely, when an economic and social hurricane approaches, economists will reassure everyone that there is no such thing; Especially those who support Keynesian theory. Finally, people not only lost a large amount of money, but also made allowances for them.

Fragments from the movie "Heart Blossom Road Release"/ Video screenshot

The fisherman who released the fish hated it to the bone, so ten years ago, when the global financial crisis caused by the subprime mortgage crisis began, he planned to release the fish.

He first conducted a study on the management of the pond.

Firstly, he set up a large blackboard to record the fish in the pond, which ones were caught, who caught them, what they did after catching them, and how many were not discovered.

In order to prevent people like economists from using other fish to exchange ideas.

Fishermen must install satellite locators on every fish in the pond. The blackboard is constantly recording the movements of this fish.

The blackboard even shows similar information about who is a skilled angler and how many fish have been traded today.

The blackboard is very busy.

For those who agree with the rules of the game, this game is very fair.

In daily application scenarios, the behavior of trading with this fish becomes easy to understand.

For example, the fish owner likes the human DNA sequence that scientists have worked tirelessly for ten years to develop. As long as he is willing, I can use the fish in my hand to trade with the fruits of his labor.

At present, if I had three Bitcoins, I could also enjoy a lazy afternoon/ Henry Matisse's "Goldfish"

Be more straightforward.

If bin Laden, who was passionate about fishing, were still alive, he might have traded fish for weapons with an arms dealer. Because this peer-to-peer trading method is not regulated, and the large amount of currency flow will attract the attention of international financial institutions.

This is the temptation brought by the fish pond.

If combined with reality, the pond itself, at different depths, the blackboard (bulletin board), all belong to blocks, and the management logic behind this is called chain; The fish in the pond are Bitcoin.

Blockchain, also known as Blockchain in English, is actually a combination of the words' Block 'and' chain '.

So blockchain is two concepts, but it is a whole.

Now, different fishermen are starting to put fish in different ponds, using similar management techniques, except that the names of the fish are not the same.

Are there any scenes of fishing now?

Everyone knows that to make money, go to emerging industries, and get the first bucket of gold.

Ten years ago, fishing enthusiasts, based on their understanding of fish habits, some caught grass carp with grass, and even more outrageously, someone scattered a handful of cat food into the fish pond and took away all the carp.

Now, out of 2100 fish in the fish pond, there are only 300 left.

People gradually realized that the value of this fish was getting higher and higher, so they began to think of ways to use bait? Bionic or blended, what is the depth, and how to lift the hook. These are all questions that anglers need to consider.

Let's liken this thinking to finding algorithms for Bitcoin. As long as you have qualified computing power and the calculation process is accurate, you can catch the remaining Bitcoin in the virtual world.

The Bitcoin that "Fisherman" Nakamoto (founder of Bitcoin) "dropped" into the blockchain was actually 21 million pieces. People around the world with conditions are searching for them, and there are still 3 million pieces that have not been discovered.

The feeling of not catching fish for a long time is loneliness and loss/ Image source pexels

At first, searching for Bitcoin was very simple, and ordinary home computers could easily make a fortune with just a few calculations.

But as more and more Bitcoin is discovered, the blackboard used to record Bitcoin information is a bit busy, and faster and stronger computing power is needed at this time.

So someone developed a machine to search for Bitcoin, which people call a mining machine.

This type of machine is not like the computers we commonly use. When opening Word files and moving bricks, the backend still has most of the computing power to maintain the operation of the operating system.

Mining machines can put all their energy into searching, and with technological advancements, these machines are usually equipped with several chips. Therefore, another problem with mining machines is that they consume a lot of electricity and heat.

The mining machine company that just went public in the United States produces machines with a power output of approximately 2000 to 3000 watts. That means it takes two to three degrees of electricity per hour.

Copy this mining machine over a thousand times, and you're probably a professional miner/ Image source pexels

To operate mines more efficiently, it also requires air-conditioned warehouses, piles of mining machines, and a large amount of electricity.

From the perspective of the development of a thrifty society, this is not an environmentally friendly currency.

The creator of the Bitcoin mining pool concept, Marek Palatinus, was once hacked into stealing Bitcoin worth approximately $230000.

But he still holds hope for Tecoin.

In an interview, he said that several Chinese entities did indeed dominate mining, with two of them possibly controlling more than 50% of the Hashi power (computing power) because Chinese mining areas are more convenient and cost-effective.

Coincidentally, in early April of this year, the National Development and Reform Commission of China listed the mining activities of virtual currencies as eliminated industries. By November 6th, this mining activity had been removed from the eliminated industries category and included in the encouraged category.

The National Development and Reform Commission has listed blockchain information service projects as an encouraged category/ Screenshot of the official website of the National Development and Reform Commission of China

So is Bitcoin and blockchain technology about to become popular?

Think beautifully

Once there was a computer engineer who wanted to immigrate. When the immigration officer asked him how you could prove that you were better than your peers, he said, I have a lot of bitcoins, and I used some of them to buy villas in your country.

The next day, his application was approved.

This is not a scenario for the widespread application of Bitcoin, but at least it indicates to some extent that Bitcoin has begun to be internationally recognized.

Part of the reason is that the stability of the currency is gradually being distrusted.

For example, if a poor person wants to buy a house, they first need to go to the bank for a loan. In order to promote development, the bank did not conduct much investigation into their situation and gave me a large amount of money. The real estate developer found that he could easily obtain the loan, so they set the house price higher.

This idea of promoting commodity circulation can easily lead to currency depreciation. When people start to discover this lie, they stop buying houses and the credit system slowly collapses. If they solve the problem by printing more money, the currency will depreciate.

If we consider the bank responsible for issuing loans or the factory that prints banknotes as a center.

One advantage of Bitcoin is decentralization.

Peer to peer trading is not regulated, making it happy for those engaged in cross-border commodity trading or illegal transactions/ Image source pexels

In a free economy, decentralization can make the economic ecosystem full of vitality.

But there is also the opposite.

Economist Milton Friedman, who opposes the Keynesian school, said, 'I will give you a $20 bill, but there is no record of where this bill came from.'; Therefore, electronic cash is reliable and will become one of the main forces weakening the role of the government. Of course, it also has side effects, such as the activities of bandits and people engaged in illegal transactions will become easier.

Another advantage of Bitcoin is that it has organic traceability throughout the entire process, but the cost is extremely high.

Do you remember the big blackboard by the pond? The piece used to record where each fish has been.

As more and more fish are discovered, fish trading is becoming more frequent, and managers require the information on the blackboard to be updated every ten minutes (so Bitcoin trading will go through two cycles of initiation and confirmation, which will be reflected in the bulletin board, so a trading cycle will take 20 minutes). What's even more troublesome is that 0.01 Bitcoins can also be traded, and this transaction also needs to be recorded.

The so-called Bitcoin is relatively safe because every transaction is recorded and can be traced back to its source/ Image source pexels

So by the beginning of 2016, the transaction information of these fish, namely the scale of blockchain, had exceeded 50 billion bytes, and now it is far beyond that scale.

So who is actually doing this kind of recording and maintenance work?

The entire internet, including mining machines.

So from another perspective, mining machines are not just searching for undiscovered fish in the pool, but are involved in the management and maintenance of blockchain. According to fishing rules, they will also receive a certain proportion of Bitcoin as rewards.

Have you forgotten the power consumption and network resources occupied by the mining machine? This is equivalent to the whole society paying seigniorage for Bitcoin.

Paying taxes is really impossible to escape anywhere.

It seems that the cost of mining is already very high now.

Alright, when the trading behavior of Bitcoin increases, more processors are needed to record transaction information, and the problem lies here. Currently, computers cannot complete such huge computing and recording capabilities in a short period of time.

Unless quantum computer appears.

So the development of Bitcoin and blockchain is constrained by the current computer operating capabilities. After this ability is broken, this trading model may become popular.

But currently, this scene is still quite distant.

After all, due to the influence of electricity, the daily standby time of mobile phones does not exceed two days.

[1] History of Human Currency | David Orrell

[2] Small Island Economics | Peter Schiff

[3] Blockchain Technology Guide | Zou Jun/Zhang Haining/Tang Yi/Li Lei

[4] Guiding Catalogue for Industrial Structure Adjustment (2019 Edition) | National Development and Reform Commission

[5] Bitcoin Price Returns to $10000, Mining Machinery Giant Restarts Listing Process | China Newsweek

Author | Hutong

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