This is the first paragraph of the original essay that created Bitcoin:
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
"Bitcoin: A Peer-to-Peer Electronic Cash System" by Satoshi Nakamoto http://bitcoin.org/bitcoin.pdf
A former Dutch central bank president speaking to The Guardian about Bitcoin (versus the tulip bubble). (via parislemon)
"Bitcoin IS like tulips. Scarce, durable, fungible, divisible, un-forgeable tulips that can be instantly teleported to anyone, anywhere."
Before the Bitcoin protocol was invented, most computer scientists thought a system like Bitcoin was impossible because of a famous problem in computer science called the Byzantine Generals Problem.
The problem, in a nutshell, is how to coordinate among distributed nodes to come up with a consensus that is resistant to attackers who are trying to undermine that consensus. A significant component of the solution is the proof-of-work algorithm, which is the main purpose of so-called Bitcoin miners.
The mainstream press has ignored the importance of this computer science breakthrough. When the mainstream press writes about mining, it either ridicules it:
Bitcoin is digitally “mined” by computers running an algorithm. (If you just rolled your eyes, you’re not alone.)
Or calls it wasteful:
One thing I haven’t seen emphasized, however, is the extent to which the whole concept of having to “mine” Bitcoins by expending real resources amounts to a drastic retrogression — a retrogression that Adam Smith would have scorned.
How much does the existing banking/payment infrastructure cost? One reasonable measure are the fees charged. Standard online payment fees are 2.5%, not including the added costs fraud (chargebacks plus transactions blocked out of fear of fraud). Bitcoin payment fees are close to zero and fraud is impossible since Bitcoin is a bearer instrument.
At a specific level, they each work in a way that is consistent with how people think and, 20 years into the web, desire to find information. For example, someone may think to herself, “I forget how to subtract fractions.” They then conduct a search for it, and Khan delivers a 4 minute video lesson. The whole process may take 5 minutes and is hardly interruptive.
This really resonates with me. When I think about how I learn and more importantly, re-learn, things now, it’s mainly through a quick Google search. I’m not saying it’s a better or worse way to learn, it’s just different. And it’s the way a lot of people gain (and, again, re-learn) knowledge now.
Something about this also reminds me a bit of the brain uploads in The Matrix.
The internet is for snacking.