Previously
In the previous article, here, we looked at prominent industry leaders and institutions which have taken the plunge of acquiring bitcoin in significant quantities. We also noted BitcoinTreasuries, a great web resource which tracks notable bitcoin ownership for a wide variety of institutions and countries.
Now, let’s dive into why we’re all here – the question of, “What is bitcoin?“
“What Is Bitcoin?“
This is my working definition of bitcoin:
“A decentralized, intangible, digital asset which can be used as un-confiscatable and un-censorable property, has all nine attributes and three functions of good money, requires no central authority, and utilizes a trustless methodology via cryptography for ensuring that all trades & exchanges are cleared and accounted for accurately, promptly, and globally.” [1]
Monetary Note: Just like dependable money, you’ll notice that there is nothing in the definition which requires central parties nor trust.
One of the best descriptions that I’ve ever heard about bitcoin I believe comes from Max Keiser:
“Bitcoin is [VERY SECURE] email on top of gold.“
[emphasis added by me]
“What Does This Mean? “
The above definitions means that bitcoin gives us the ability to send value over the internet… consistently, instantly, and verifiably.
Skipping to the punch line:
It matches the definition of money! [2]
Bitcoin has the purpose, qualities, attributes, characteristics, functions, and philosophy of good money built into it (Technically, most of these are emergent properties of the bitcoin code, but let’s not quibble…). From a historical point of view:
Bitcoin is actually the FIRST true
form of money that we have ever known.
Taking this a step further, we can ascertain:
Since money is a psycho-technology,
the first true money actually had to be invented
and engineered from the ground up. [3]
Monetary Note: This is in comparison to gold, which is merely pulled from the ground “as is“. Consequently, we had to use all of the properties of gold, regardless if they were suitable (much less, optimal) for good money. As an example, “verifiable” is a requirement for dependable money. As talked about in a previous article, here, verifying a gold bar’s or gold coin’s content is not easy. This would be an example of one of gold’s monetary properties which are not desirable (because it is low on the “Verifiability Index” of the “Chrematistics Index“).
Historical Note: I want to be fair here; I love what gold has done for us for 5,000 years. If you understand gold’s mechanical, chemical, thermal, and quantum properties, it’s actually a very interesting and unique substance. The human race has done a good job of applying those properties for the purpose of creating good money.
“Trust… But Verify” [4]
As the reader, you’re probably questioning me, “How can you be so sure of the above working definition and observations of bitcoin?“
Before I answer your question directly, let me assure you:
You should be questioning me. You should trust nothing that I tell you and you should make every reasonable attempt to verify all of my claims independently.
Instead of trusting me, DYOR – Do Your Own Research.
My aim is to give you all of the tools to DYOR!
But, to answer the question directly, to the best of my ability, I have made personal best efforts to verify my working definition of bitcoin based upon what is demonstrable. The reason why I am able to do my own research is because bitcoin is open source! [5] This means that there is nothing proprietary because the bitcoin code is available to anyone to download and review directly.
Consequently, everyone can verify the code on their own!
Any of us can go to GitHub.com, download the code, compile it, and run it on your own. None of us have to depend on anyone else to verify, run, or test the bitcoin code. We don’t need some multi-national corporation or government agency.
Anyone can look at the code, file-by-file, section-by-section, line-by-line, character-by-character. Nothing is hidden; everything is transparent. [6]
Because the bitcoin code is open source, the actual code has been audited THOUSANDS and THOUSANDS of times by multiple independent experts around the world.
In fact, some of the most ardent bitcoin proponents actually started with the premise that bitcoin was flawed and that they were going to expose the errors in bitcoin’s code, architecture, and functionality. Eventually, those very same people became massive bitcoin advocates. [7]
Going On Tour
Some of you are exclaiming, “I’m not a coder or a developer! How am I supposed to audit the code??“
Enter the bitcoin “guided tours“. Usually, these guided tours are videos of a presenter or narrator who displays the bitcoin code directly from GitHub and provides explanations for what each file, section, and line of code do. [8]
Here’s what this means for you, dear reader:
Anyone can take guided tours of the bitcoin code!
I’ve actually gone on a few of these bitcoin guided tours. The majority of the presenters do a good job of trying to appeal to a broad audience, to make the technical code something that is comprehensible to most people, technical and non-technical alike. I love that I can follow along section-by-section, line-by-line, character-by-character.
It is NOT necessary for you to take these guided tours nor audit the code on your own. I explain all of this so that you know that everything about bitcoin is completely open and transparent. We don’t have to worry about a special secret technology created by some “wizard” who hides in the shadows. Bitcoin really is the ultimate in the old Russian expression, “Trust… but verify.” [4]
Bitcoin or Banks?
I realize that it seems strange that I am emphasizing the auditability so much. But, let’s compare this to any other financial institution or central bank or government treasury on the planet. How many of them provide any sort of reasonable transparency as to how they operate, their true intent, and their inventories of currencies or commodities (i.e. the gold in Fort Knox)?
In addition to a lack of auditability, let’s compare bitcoin’s speed and availability to most banks’ speed and availability for wire transfers or ACH. As most of you know and have experienced personally, bank wire and ACH transfers:
- Can’t work on the weekends
- Only clear during normal business hours
- Can’t work on holidays
- Only work about 40 hours / week
- Out of a possible 168 hours per week, 25% of the time
- Typically take 3 – 7 days to clear (4,320 – 10,080 minutes)
In addition to the much slower speeds, banks provide ZERO visibility to you, the customer, as to what is happening on the back-end for the transfer of funds from your bank to another bank. In other words, ZERO auditability.
Monetary Note: Bitcoin transactions typically take about 10 minutes to clear, which is orders of magnitude faster than banks. Lightning Network transactions, which happen on top of the bitcoin network, clear in about 1 – 5 seconds, even more orders of magnitude faster than the banks.
Next Up
In this article, we conducted a high-level look at what bitcoin is and how you can verify how bitcoin works.
In the next article, here, we’ll dig a little deeper by examining some of the important and demonstrable aspects of bitcoin which have made it so compelling for many around the globe and who consider it to be the first true form of money we have ever seen.
The Learning Never Stops!
If you want to continue your journey of learning about all things bitcoin with knowledgeable people who love to be helpful, I highly recommend my bitcoin MeetUp, “Bitcoin, Huntsville, Crypto, & Coffee” which you can find here . We meet two times every month online to discuss bitcoin and its impact on the world. You’ll be able to talk directly with others who are also on their personal bitcoin journey and ask them engaging questions. We’re not selling anything. The only thing that that we ask of you is to come to the table in good faith and be willing to DYOR – Do Your Own Research. We love newbies and the energy they bring!
Donations
If you found value in this article please feel free to donate via the following payment methods:
CashApp:
$JohnYoung357
Venmo:
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End Notes, References, & Citations
[1] Cryptography
Brave search engine summary: “cryptography summary“
“Cryptography is the practice of securing information and communications using codes to ensure confidentiality, integrity, and authentication, thereby preventing unauthorized access. It is derived from the Greek word ‘kryptos,’ meaning hidden, and translates to “hidden writing”. The fundamental process involves transforming readable data, known as plaintext, into an unreadable form called ciphertext through encryption, which can only be reversed back to plaintext by authorized parties using a specific key. This process is often represented as C=Ek(P) and P=Dk(C), where P is plaintext, C is ciphertext, E is the encryption method, D is the decryption method, and k is the key.
The primary functions of cryptography include ensuring privacy/confidentiality, authentication, data integrity, non-repudiation, and secure key exchange.
It is essential for protecting sensitive information in various applications, such as secure online transactions, encrypted messaging, banking, and data storage. Modern cryptography relies on mathematical concepts and algorithms to create secure systems, with key length being a significant factor in the strength of encryption.
There are several main types of cryptography. Symmetric-key cryptography uses a single secret key for both encryption and decryption, making it efficient for bulk data but requiring a secure method for key distribution.
Asymmetric-key cryptography, also known as public-key cryptography, uses a pair of keys—a public key for encryption and a private key for decryption—enabling secure key exchange and digital signatures. Hash functions are another critical component, transforming data into a fixed-size message digest that is unique to the input and cannot be reversed, ensuring data integrity. These methods are often combined in modern security protocols, such as TLS for encrypted data transport and encryption-at-rest.
Historically, cryptography has been used for centuries, from ancient Egyptian hieroglyphs to military and diplomatic communications, and has evolved significantly with the advent of computer technology.
Today, it is a foundational element of cybersecurity, protecting digital communications across the internet, including web browsing, email, and secure network connections. Despite its importance, cryptography is not a standalone solution; it is one essential step in a broader security strategy, and no system is entirely immune to attacks.“
“Cryptography
Cryptography, or cryptology (from Ancient Greek: κρυπτός, romanized: kryptós “hidden, secret”; and γράφειν graphein, “to write”, or -λογία -logia, “study”, respectively), is the practice and study of techniques for secure communication in the presence of adversarial behavior. More generally, cryptography is about constructing and analyzing protocols that prevent third parties or the public from reading private messages. Modern cryptography exists at the intersection of the disciplines of mathematics, computer science, information security, electrical engineering, digital signal processing, physics, and others. Core concepts related to information security (data confidentiality, data integrity, authentication, and non-repudiation) are also central to cryptography. Practical applications of cryptography include electronic commerce, chip-based payment cards, digital currencies, computer passwords, and military communications.“
[2] Definition of “money”
To see my previous definition of money as well as the pertinent attributes and qualities of dependable money, please reference this article.
[3] Psycho-technology and money
The idea that money is actually a type of psycho-technology is a concept that I picked up from Robert Breedlove, host of the “What Is Money” podcast, which I recommend everyone listen to.
[4] “Trust… But Verify“
“Trust, But Verify
‘Trust, but verify‘ (Russian: доверяй, но проверяй, romanized: doveryay, no proveryay, IPA: [dəvʲɪˈrʲæj no prəvʲɪˈrʲæj]) is a Russian proverb, which rhymes in Russian. The phrase became internationally known in English after Suzanne Massie, a scholar of Russian history, taught it to Ronald Reagan, then president of the United States, who used it on several occasions in the context of nuclear disarmament discussions with the Soviet Union.“
[5] Open source
Brave search engine summary: “what is open source“
“What is Open Source
Open source refers to a decentralized production model where technology, particularly software, is developed collaboratively with its design and source code publicly accessible to anyone who wishes to use, modify, or share it. The term originated in software development but now embodies a broader set of values known as “the open source way,” emphasizing principles like open exchange, collaborative participation, rapid prototyping, transparency, meritocracy, and community-oriented development.
Open-source software is defined by its source code being available for inspection, modification, and enhancement by anyone. This contrasts with proprietary or closed-source software, where only the original creators have control over the source code and users must agree to restrictive licenses that limit their ability to view, alter, or redistribute the software. Examples of open-source software include the Linux operating system, Mozilla Firefox, and LibreOffice.
The core principles of open source include community, transparency, open collaboration, rapid prototyping, and inclusive meritocracy. These principles foster a development environment where anyone can contribute, leading to increased security through widespread code review, greater project resilience as communities can adopt or fork projects, and collaborative problem-solving where improvements benefit everyone. Open-source software is often released under licenses that permit free use, modification, and redistribution, with common types including permissive licenses (like Apache and BSD), copyleft licenses (like the GPL), and public domain licenses.
While open source software is often free to use, it is distinct from “free software” (a term associated with the free software movement focused on user freedoms) and “freeware” (software available at no cost but with restrictions on modification or redistribution). The Open Source Initiative (OSI) is the standards body that maintains the Open Source Definition, which legally defines the conditions for software to be considered open source, and approves licenses accordingly. Many critical technologies, including the internet infrastructure, cloud computing platforms like OpenStack, and popular programming languages, are built on open-source foundations.“
“Open-Source Software
Open-source software (OSS) is computer software that is released under a license in which the copyright holder grants users the rights to use, study, change, and distribute the software and its source code to anyone and for any purpose. Open-source software may be developed in a collaborative, public manner. Open-source software is a prominent example of open collaboration, meaning any capable user is able to participate online in development, making the number of possible contributors indefinite. The ability to examine the code facilitates public trust in the software.”
“What Is Open Source Software?
“Open source software is software with source code that anyone can inspect, modify, and enhance. ‘Source code‘ is the part of software that most computer users don’t ever see; it’s the code computer programmers can manipulate to change how a piece of software — a ‘program‘ or ‘application‘ — works. Programmers who have access to a computer program’s source code can improve that program by adding features to it or fixing parts that don’t always work correctly.”
[6] For the non-technical readers
I am neither a professional coder nor developer but I have done a little development in my professional life in Visual Basic for Applications (VBA) in Excel and Word (to create macros), some SQL and MySQL, as well as some Python. If I, a relative beginner, can garner a basic understanding of the bitcoin code via the guided tours then I think the vast majority of people can do so, too. I encourage anyone to give it an earnest attempt. Even if you don’t understand it the first time around, you can attend my MeetUp, “Bitcoin, Huntsville, Crypto, & Coffee” to ask good questions!
[7] Andreas Antonopoulos and his e-book “Mastering Bitcoin“
For those who are interested, I recommend checking out Andreas Antonopoulos on YouTube. He has a great channel there. In addition, he wrote the definitive book on understanding bitcoin from a non-programming point of view called “Mastering Bitcoin“. I cannot recommend this book enough. Since the topic of bitcoin was so important to me, I took my time in reading it because I wanted to digest it fully. From his book, he answered about a dozen nagging questions that I had about bitcoin. Not only did he write this amazing book but he made it FREE. For anyone who is interested in understanding the technical aspects of bitcoin but not have to worry about the code, dig into Mr. Antonopoulus’s book “Mastering Bitcoin” which you can download here.
[8] Bitcoin guided tours
Brave search engine summary: “guided tours of the bitcoin code”
“Bitcoin Code Tour
Several guided tours of the Bitcoin source code are available, offering insights for developers and enthusiasts. One such tour, presented by a lead developer from a UK-based software company, provides a detailed walk through of key components, starting with the chainparams.cpp file in the official Bitcoin GitHub repository. This file defines the initial parameters for the blockchain, including the three distinct networks: the main network, the test network, and the regression test network. The test network is used for safely testing protocol changes without financial risk, while the regression test network allows for rapid block mining, which is useful for development and testing purposes.
The tour specifically examines two critical parameters within the code: nPowTargetTimespan and nPowTargetSpacing. The nPowTargetTimespan is set to two weeks (14 days), representing the period over which the network adjusts its mining difficulty based on the time it took to mine 2,016 blocks. The nPowTargetSpacing is set to 10 minutes, meaning the network aims to produce one block every 10 minutes, adjusting the mining difficulty to maintain this target despite fluctuations in the network’s hash rate. The guide explains the trade-offs involved in altering these parameters, noting that a shorter block time can increase transaction throughput but also demands more memory from full nodes, while a longer difficulty adjustment period can make the network vulnerable to hash attacks.
Another resource is a GitHub project titled “Bitcoin v0.1 – A Guided Tour,” which aims to create a book that guides users through the original Bitcoin source code by collecting comments and descriptions of its most relevant parts. This project invites developers to contribute by commenting on specific code sections or submitting issues. Additionally, a blog series on the crypto.bi website details the author’s journey of learning the current Bitcoin source code, focusing on modern developments like Dandelion and Segregated Witness, and starting with the present-day code rather than the original 2009 version to avoid confusion. These resources collectively provide a range of entry points and depths for anyone interested in studying the Bitcoin codebase.“
“The Bitcoin Source Code: A Guided Tour” (on YouTube)
This is actually a playlist of several of videos produced by “Dev Oskii (Oscar)“. This is the exact guided tour that I went through. This content creator did a good job of showing the exact code he was referring to as well as providing context for non-technical individuals. If you have some time, try a couple of the videos on your journey to learn more about bitcoin.