Bitcoin Is Not Complicated, Just Different

Bitcoin isn’t complicated, nor is it difficult to understand. It just requires a bit of time and the realization that Bitcoin is unlike anything you’ve heard of or seen before. It’s different.

From the outside looking in, Bitcoin seems like a whole world full of strange and sophisticated words. What is a hash? Is it related to hash rate? What about this talk of public keys, private keys, and seed phrases? Are these seeds edible? While these aren’t words you’d find in traditional finance and economics jargon, they’re fairly simple to understand.

Going deeper, there are concepts and properties of Bitcoin that aren’t found elsewhere.

What does it mean that Bitcoin is deflationary? What’s this talk of Lightning, layers, and on-chain vs off-chain? These can seem complex to the uneducated reader, but fear not as they can be understood with a little bit of explanation.

These concepts aren’t complicated, just different.

I once read that “Bitcoin is everything people don’t understand about computers mixed with everything people don’t understand about money”. While I do find this amusing and think it’s a witty one-liner, I don’t think it’s entirely accurate.

I would say that Bitcoin is the answer and the solution to a significant problem in the world today that the majority of people don’t even realize exists.

Our money and everything built on it is broken.

To the average person that last sentence probably provokes thoughts and questions. Most people do not understand what money is and its purpose. It makes sense why this is. At least in the United States, we are not taught what money is.

We all think we know what money is: the dollars in our wallets that we use to buy goods and services. These dollars are actually currency, which is a form of money, though the two are different.

Before I went down the rabbit hole and learned about Bitcoin, I also had no idea what money was.

Going back to Bitcoin, Bitcoin is two things: money, and a computer network.

The fact that we don’t understand money is why Bitcoin seems so complicated. Add that Bitcoin is a new form of money that our species has never seen before and things get hairy very quickly for the outside observer. With a basic understanding of what money is, as well as a run-down of how blockchain technology works, Bitcoin becomes much more digestible.

Money is three things: medium of exchange, store of value, and unit of account. Currency is two things: medium of exchange and unit of account. We use money in the form of currency as a medium of exchange to pay for goods and services. We use units of account to price goods and services. The store of value property is how we preserve the fruits of our time and energy (work) into the future.

To be good money a thing must fulfill these three properties well. Gold did succeed as a hard money until it didn’t. Gold still succeeds as a store of value, which is the most elusive of the three properties. However, gold has failed as a medium of exchange, which is why we transact with paper currency and not gold coins. Gold can only move at the speed of humans.

Bitcoin is proving with each passing day that it succeeds as hard and sound money by checking the box of these three properties.

If you’re reading this and asking “but a bitcoin is worth $96,000, how do you possibly use that to transact with?” then I have a great answer for you: a bitcoin is divisible into 100 million units, called satoshis or sats. This divisibility property gives Bitcoin the ability to succeed as a medium of exchange and unit of account. Everyday and small purchases are priced in satoshis, while less frequent but significant purchases are priced in bitcoin. A cup of coffee can be 3000 satoshis, while a house can be 3 bitcoin.

Bitcoin already has and will continue to succeed and take over on a global scale due to its store of value properties. For the first time in human history, a perfect money exists. Or rather, as close to “perfect” as possible. Due to its unique properties and absolute scarcity, Bitcoin will continue to become more valuable over time. It’s logical.

Absolute scarcity is difficult to comprehend because it has never existed before on such a large scale. More gold can always be mined, and more oil can always be drilled, but more than 21 million bitcoin total and a predictable and fixed release/minting schedule is forever. For the first time, society can save in money that can’t be debased and diluted. For the first time, society has money that discourages frivolous spending. This is amazing.

On a subconscious level, we are conditioned to want to spend our paper money since we are aware that it is constantly losing its value and buys us less in the future. With hard and sound money, there is no need to buy 20 properties to preserve one’s wealth. For the first time people can save in money, and no longer monetize other things. This will allow the prices of everything to fall, as they naturally should.

Photo by David McBee

With this understanding of what good money should be, the defects with our current money become blindingly obvious, as if a switch were flipped for the first time. With this new understanding, it becomes a lot easier to understand Bitcoin and what it means for the world.

Understanding Bitcoin and its monetary system requires looking outside of the existing system. What makes it seem complicated is the fact that the majority of people do not realize what the current system is, how it works, and why it’s so severely flawed.

There are other and more comprehensive resources on the web for understanding how the Bitcoin blockchain works. However, I will provide a very basic explanation to get your big toe wet.

Transactions amongst peers are sent to a pool where they await inclusion into the blockchain. Highly specialized computers are constantly working around the globe to solve complex math problems to win the right to add the next block to the chain. When a computer solves the math problem, it adds transactions to the next block and is rewarded with a fixed amount of bitcoin (the block reward). Each block references and builds upon the previous block. Each new transaction is checked against previous transactions to ensure that no bitcoin is being double spent or invalidly spent. Once the new block is assembled, it is sent out to a global network of nodes that check the new block (and with it the rest of the chain) to verify that it is valid and conforms to the rules of the network. If the nodes are in consensus, the new block is added to the chain and the process starts over again.

There is no need for trust in the Bitcoin network, just verification.

A very important aspect of this process is that physical world energy, resources and time are required to mine blocks and keep the system running. This link between the physical and digital world is extremely crucial and is what sets Bitcoin aside from the rest and makes it the money that it is.

No matter how much computational power and no matter how much money you put into the system, there will never be more than 21 million coins total, with a release schedule set every 10 minutes on average. You could be the richest person in the world and have the computational power of Google, Microsoft, and Amazon combined. But on the Bitcoin network, you’re the same as the person who holds 1/100 of a bitcoin, and this is beautiful.

An understanding of Bitcoin isn’t something that happens overnight. While it’s possible to understand the concepts behind Bitcoin, a full understanding of what Bitcoin means to the world takes time. Much like any large change in life, it takes time to digest and truly understand that it has and will continue to have in the future.

Learning about and understanding Bitcoin isn’t like learning a new theory or equation. It isn’t like learning about a new way of doing things in the existing system. It’s a completely new and foreign system providing solutions to problems that you didn’t even know existed.

Bitcoin is changing the world with each passing day and will continue to change and improve our world in ways we can’t even imagine in 2024.

With a growing understanding and the passage of time to digest, comprehend, and fully realize it, Bitcoin will change your perspective on the world and what you do with your time and energy. Once the mind opens up to what Bitcoin is and its significance, the world as it is now and the way we deal with money will seem completely asinine.

Bitcoin is exactly one of those things that you don’t notice until you notice it. And then it becomes impossible to ignore and see things as they once were.

Study Bitcoin.