In today’s Exponential Investor…
- A decade of the same thing
- The most important thread you’ll read
- Power of the many
I was sat with my old Toshiba laptop on my couch, in front of my 24 inch LCD TV, having a look online at a few threads that had popped up on my radar.
Somehow I’d managed to stumble across this forum and a bunch of thread on it called, Bitcointalk.
Little did I know that would be my venture into the crypto rabbit hole to which I would never emerge. Frankly, I also don’t want to emerge from it. Once you start down the path of bitcoin and cryptocurrency, dare I say you won’t want to return out of it either.
My earliest expedition into Bitcointalk and learning about crypto goes back a decade now –researching, learning, testing, trying, buying all the ins and outs of the “OG” bitcoin and everything that’s spawned ever since its genesis block which went live on 3 January 2009 with the additional text,
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
The reason for that extra text, helps you to understand the core reason for bitcoin’s existence. It also helps you to understand why now, over a decade since the genesis block, bitcoin is thriving and so is the wider crypto ecosystem.
As recently as last week strategists from JP Morgan indicated there may be appetite for $600 million worth of demand for bitcoin building. This coming from insurance companies and pension funds looking for exposure to bitcoin.
It’s still early days for both bitcoin and for the likes of traditional finance finding their way into it.
Thankfully there’s still time for everyday investors and individuals to look at bitcoin and make a much faster decision if it’s for them or not. Maybe you’re still in that category, trying to figure out if bitcoin and crypto is something you should be adding to your portfolio, or not.
With that in mind, I want to share with you something that I believe every person should read and understand before they decide one way or another on bitcoin.
I think this is perhaps the most important foundational knowledge that you can have when thinking about bitcoin.
When you hear bitcoin get talked about these days, it usually falls into one of two categories. It’s referred to as a “store-of-value” or simply as a cryptocurrency. Some think it’s more like a stock, a tech stock, and some have no idea what it is.
The reality is that it’s really a bit of all of those things, and then some.
But if you trace back to the very core origins of bitcoin you find that its design was to simply be peer-to-peer electronic cash, P2P e-cash.
How do I know?
Well for a start you can refer to the bitcoin original white paper published on 31 October 2008 at ten past six in the evening. If you’ve never seen the original white paper, I suggest you do so here.
However, that’s not the important thing to read to really understand its origins.
No, for that you need to commit a little bit of time and read a giant thread of emails from what was the “Cryptography Mailing List”.
In this list a number of cryptography experts have a back and forth with each other on the merits (or lack thereof) of a new idea proposed by one, Satoshi Nakamoto, the creator of bitcoin.
The very first email broadcast to this mailing list reads,
I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.
The paper is available at:
The main properties:
Double-spending is prevented with a peer-to-peer network.
No mint or other trusted parties.
Participants can be anonymous.
New coins are made from Hashcash style proof-of-work.
The proof-of-work for new coin generation also powers the network to prevent double-spending.
Bitcoin: A Peer-to-Peer Electronic Cash System
Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without the burdens of going through a financial institution.
Digital signatures provide part of the solution, but the main benefits are lost if a trusted 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 honest nodes control the most CPU power on the network, they can generate the longest chain and outpace any attackers. The network itself requires minimal structure. Messages are broadcasted 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.
Full paper at:
The true essence and power of crypto
From there it’s quite a long and fascinating thread debating all the mechanisms and functions that Satoshi proposes in his white paper.
There’s a lot to absorb from the thread. But for me, nothing else really gives you the depth of consideration on bitcoin’s origins than this entire thread. It’s why I think it’s the most vital piece of reading you’ll probably read on bitcoin when starting out.
There is one email though, from early on in the discussion, from Nakamoto, that I felt was worth a few lines too.
In response to an earlier email that makes an argument that “You will not find a solution to political problems in cryptography”, Nakamoto replies,
Yes, but we can win a major battle in the arms race and gain a new territory of freedom for several years.
Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.
What he’s describing there is the essence of a distributed, decentralised network. A network where everyone is as important to its ongoing existence as everyone else. A network made of many, that is inherently stronger, more secure and more trusted than any network that’s ever existed with centralised control at the helm.
That is the true power of crypto, of bitcoin and of the revolution at hand.
Editor, Exponential Investor