What I’ve Learned From Bitcoin: Part I
Posted December 21, 2018
This is part 1 of a 3 part series
- Part 1 Philosophical Teachings of Bitcoin
- Part 2 Economic Teachings of Bitcoin
- Part 3 Technological Teachings of Bitcoin
Some questions have easy answers. “What have you learned from Bitcoin?” isn’t one of them. After trying to answer this question in a short tweet, and failing miserably, I realized that the amount of things I’ve learned is far too numerous to answer quickly, if at all. I also realized that any set of answers to this question will be different for everyone — a reflection of the very personal journey through the wonderful world of crypto. Hence, the subtitle of this series is What I’ve Learned From Bitcoin, with which I want to acknowledge the inherent personal bias of answering a question like this.
I tried to group the teachings of Bitcoin by topics, resulting in three parts:
- I: Philosophical Teachings of Bitcoin
- II:Economic Teachings of Bitcoin
- III:Technological Teachings of Bitcoin
As hinted above, attempting to answer this question fully is a fool’s errand, thus my answers will always be incomplete. I would like to lessen this shortcoming by inviting you, dear reader, to share your own answers to this question:
Bitcoin is indeed a game disguised. It is akin to a trapdoor, a gateway to a different world. A world much stranger than I would have ever imagined it to be. A world which takes your assumptions and shatters them into a thousand tiny pieces, again and again. Stick around for long enough, and Bitcoin will completely change your worldview.
“After this, there is no turning back. You take the blue pill — the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill — you stay in Wonderland, and I show you how deep the rabbit hole goes.”
— Morpheus ***
Lesson 1: Immutability and change
Bitcoin is inherently hard to describe. It is a new thing, and any attempt to draw a comparison to previous concepts — be it by calling it digital gold or the internet of money — is bound to fall short of the whole. Whatever your favorite analogy might be, two aspects of Bitcoin are absolutely essential: decentralization and immutability.
One way to think about Bitcoin is as an automated social contract. The software is just one piece of the puzzle, and hoping to change Bitcoin by changing the software is an exercise in futility. One would have to convince the rest of the network to adopt the changes, which is more a psychological effort than a software engineering one.
The following might sound absurd at first, like so many other things in this space, but I believe that it is profoundly true nonetheless: You won’t change Bitcoin, but Bitcoin will change you.
“Bitcoin will change us more than we will change it.” —Marty Bent
It took me a long time to realize the profundity of this. Since Bitcoin is just software and all of it is open-source, you can simply change things at will, right? Wrong. Very wrong. Unsurprisingly, Bitcoin’s creator knew this all too well.
The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime. — Satoshi Nakamoto
Many people have attempted to change Bitcoin’s nature. So far all of them have failed. While there is an endless sea of forks and altcoins, the Bitcoin network still does its thing, just as it did when the first node went online. The altcoins won’t matter in the long run. The forks will eventually starve to death. Bitcoin is what matters. As long as our fundamental understanding of mathematics and/or physics doesn’t change, the Bitcoin honeybadger will continue to not care.
“Bitcoin is the first example of a new form of life. It lives and breathes on the internet. It lives because it can pay people to keep it alive. […] It can’t be changed. It can’t be argued with. It can’t be tampered with. It can’t be corrupted. It can’t be stopped. […] If nuclear war destroyed half of our planet, it would continue to live, uncorrupted. “ —Ralph Merkle
The heartbeat of the Bitcoin network will outlast all of ours.
Realizing the above changed me way more than the past blocks of the Bitcoin blockchain ever will. It changed my time preference, my understanding of economics, my political views, and so much more. Hell, it is even changing people’s diets. If all of this sounds crazy to you, you’re in good company. All of this is crazy, and yet it is happening.
Bitcoin taught me that it won’t change. I will.
Lesson 2: The scarcity of scarcity
In general, the advance of technology seems to make things more abundant. More and more people are able to enjoy what previously have been luxurious goods. Soon, we will all live like kings. Most of us already do. As Peter Diamandis wrote in Abundance: “Technology is a resource-liberating mechanism. It can make the once scarce the now abundant.”
Bitcoin, an advanced technology in itself, breaks this trend and creates a new commodity which is truly scarce. Some even argue that it is one of the scarcest things in the universe. The supply can’t be inflated, no matter how much effort one chooses to expend towards creating more.
“Only two things are genuinely scarce: time and bitcoin.” —Saifedean Ammous
Paradoxically, it does so by a mechanism of copying. Transactions are broadcast, blocks are propagated, the distributed ledger is — well, you guessed it — distributed. All of these are just fancy words for copying. Heck, Bitcoin even copies itself onto as many computers as it can, by incentivizing individual people to run full nodes and mine new blocks.
All of this duplication wonderfully works together in a concerted effort to produce scarcity.
In a time of abundance, Bitcoin taught me what real scarcity is.
Lesson 3: An immaculate conception
Everyone loves a good origin story. The origin story of Bitcoin is a fascinating one, and the details of it are more important than one might think at first. Who is Satoshi Nakamoto? Was he one person or a group of people? Was he a she? Time-traveling alien, or advanced AI? Outlandish theories aside, we will probably never know. And this is important.
Satoshi chose to be anonymous. He planted the seed of Bitcoin. He stuck around for long enough to make sure the network won’t die in its infancy. And then he vanished.
What might look like a weird anonymity stunt is actually crucial for a truly decentralized system. No centralized control. No centralized authority. No inventor. No-one to prosecute, torture, blackmail, or extort. An immaculate conception of technology.
“One of the greatest things that Satoshi did was disappear.” —Jimmy Song
Since the birth of Bitcoin, thousands of other cryptocurrencies were created. None of these clones share its origin story. If you want to supersede Bitcoin, you will have to transcend its origin story. In a war of ideas, narratives dictate survival.
“Gold was first fashioned into jewelry and used for barter over 7,000 years ago. Gold’s captivating gleam led to it being considered a gift from the gods.” —Gold: The Extraordinary Metal
Like gold in ancient times, Bitcoin might be considered a gift from the gods. Unlike gold, Bitcoins origins are all too human. And this time, we know who the gods of development and maintenance are: people all over the world, anonymous or not.
Bitcoin taught me that narratives are important.
Lesson 4: The problem of identity
Nic Carter, in an homage to Thomas Nagel’s treatment of the same question in regards to a bat, wrote an excellent piece which discusses the following question: What is it like to be a bitcoin? He brilliantly shows that open, public blockchains in general, and Bitcoin in particular, suffer from the same conundrum as the Ship of Theseus: which Bitcoin is the real Bitcoin?
“Consider just how little persistence Bitcoin’s components have. The entire codebase has been reworked, altered, and expanded such that it barely resembles its original version. […] The registry of who owns what, the ledger itself, is virtually the only persistent trait of the network […] To be considered truly leaderless, you must surrender the easy solution of having an entity that can designate one chain as the legitimate one.” —Nic Carter
It seems like the advancement of technology keeps forcing us to take these philosophical questions seriously. Sooner or later, self-driving cars will be faced with real-world versions of the trolley problem, forcing them to make ethical decisions about whose lives do matter and whose do not.
Cryptocurrencies, especially since the first contentious hard-fork, force us to think about and agree upon the metaphysics of identity. Interestingly, the two biggest examples we have so far have lead to two different answers. On August 1, 2017, Bitcoin split into two camps. The market decided that the unaltered chain is the original Bitcoin. One year earlier, on October 25, 2016, Ethereum split into two camps. The market decided that the altered chain is the original Ethereum.
If properly decentralized, the questions posed by the Ship of Theseus will have to be answered in perpetuity for as long as these networks of value-transfer exist.
Bitcoin taught me that decentralization contradicts identity.
Lesson 5: Replication and locality
Quantum mechanics aside, locality is a non-issue in the physical world. The question “Where is X?” can be answered in a meaningful way, no matter if X is a person or an object. In the digital world, the question of where is already a tricky one, but not impossible to answer. Where are your emails, really? A bad answer would be “the cloud”, which is just someone else’s computer. Still, if you wanted to track down every storage device which has your emails on it you could, in theory, locate them.
With bitcoin, the question of “where” is really tricky. Where, exactly, are your bitcoins?
“I opened my eyes, looked around, and asked the inevitable, the traditional, the lamentably hackneyed postoperative question: ‘Where am l?’” —Daniel Dennett
The problem is twofold: First, the distributed ledger is distributed by full replication, meaning the ledger is everywhere. Second, there are no bitcoins. Not only physically, but technically.
Bitcoin keeps track of a set of unspent transaction outputs, without ever having to refer to an entity which represents a bitcoin. The existence of a bitcoin is inferred by looking at the set of unspent transaction outputs and calling every entry with a 100 million base units a bitcoin.
“Where is it, at this moment, in transit? […] First, there are no bitcoins. There just aren’t. They don’t exist. There are ledger entries in a ledger that’s shared […] They don’t exist in any physical location. The ledger exists in every physical location, essentially. Geography doesn’t make sense here — it is not going to help you figuring out your policy here.” —Peter Van Valkenburgh
So, what do you actually own when you say “I have a bitcoin” if there are no bitcoins? Well, remember all these strange words which you were forced to write down by the wallet you used? Turns out these magic words are what you own: a magic spell which can be used to add some entries to the public ledger — the keys to “move” some bitcoins. This is why, for all intents and purposes, your private keys are your bitcoins. If you think I’m making all of this up feel free to send me your private keys.
Bitcoin taught me that locality is a tricky business.
Lesson 6: The power of free speech
Bitcoin is an idea. An idea which, in its current form, is the manifestation of a machinery purely powered by text. Every aspect of Bitcoin is text: The whitepaper is text. The software which is run by its nodes is text. The ledger is text. Transactions are text. Public and private keys are text. Every aspect of Bitcoin is text, and thus equivalent to speech.
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” — First Amendment to the United States Constitution
Although the final battle of the Crypto Wars has not been fought yet, it will be very difficult to criminalize an idea, let alone an idea which is based on the exchange of text messages. Every time a government tries to outlaw text or speech, we slip down a path of absurdity which inevitably leads to abominations like illegal numbers and illegal primes.
As long as there is a part of the world where speech is free as in freedom, Bitcoin is unstoppable.
“There is no point in any Bitcoin transaction that Bitcoin ceases to be text._It is _all text, all the time. […] Bitcoin is text.Bitcoin is speech.It cannot be regulated in a free country like the USA with guaranteed inalienable rights and a First Amendment that explicitly excludes the act of publishing from government oversight.” —Beautyon
Bitcoin taught me that in a free society, free speech and free software are unstoppable.
Lesson 7: The limits of knowledge
Getting into Bitcoin is a humbling experience. I thought that I knew things. I thought that I was educated. I thought that I knew my computer science, at the very least. I studied it for years, so I have to know everything about digital signatures, hashes, encryption, operational security, and networks, right?
Learning all the fundamentals which make Bitcoin work is hard. Understanding all of them deeply is borderline impossible.
“No one has found the bottom of the Bitcoin rabbit hole.” —Jameson Lopp
My list of books to read keeps expanding way quicker than I could possibly read them. The list of papers and articles to read is virtually endless. There are more podcasts on all of these topics than I could ever listen to. It truly is humbling. Further, Bitcoin is evolving and it’s almost impossible to stay up-to-date with the accelerating rate of innovation. The dust of the first layer hasn’t even settled yet, and people have already built the second layer and are working on the third.
Bitcoin taught me that I know very little about almost anything. It taught me that this rabbit hole is bottomless.
Bitcoin is a child of the internet. Even though it requires computers to function efficiently, computer science is not sufficient to understand it. The implications of this new technology are far-reaching. Bitcoin is not only borderless but also boundaryless in respect to academic disciplines.
In this first part of the Teachings of Bitcoin I tried to outline some of the philosophical implications of this fascinating machinery. In part two I will try to discuss what Bitcoin taught me about economics. Part three will conclude this series to show what I, a technologist, have learned from the tech perspective by stumbling into Bitcoin.
As mentioned above, I think that any answer to the question “What have you learned from Bitcoin?” will always be incomplete. The systems are too dynamic, the space moving too fast, and the topics too numerous. Politics, game theory, monetary history, network theory, finance, cryptography, information theory, censorship, law and regulation, human organization, psychology — all these and more are areas of expertise which might help to grasp what Bitcoin is.
What have you learned from Bitcoin?
- The Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous
- Abundance: The Future Is Better Than You Think by Peter Diamandis
- The Mind’s I by Daniel Dennett and Douglas Hofstadter
- Money, blockchains, and social scalability by Nick Szabo
- Bitcoin’s Existential Crisis, originally published as What is it like to be a Bitcoin? by Nic Carter
- Unpacking Bitcoin’s Social Contract: A framework for skeptics by Hasu
- Why America Can’t Regulate Bitcoin by Beautyon
- Why Bitcoin is different by Jimmy Song
- Peter Van Valkenburg on Preserving the Freedom to Innovate with Public Blockchains hosted by Peter McCormack
- Thanks to Arjun Balaji for the tweet which motivated me to write this.
- Thanks to Marty Bent for providing endless food for thought and entertainment. If you are not subscribed to Marty’s Ƀent and Tales From The Crypt, you are missing out.
- Thanks to Michael Goldstein and Pierre Rochard for curating and providing the greatest Bitcoin literature via the Nakamoto Institute and the Noded Podcast which influenced my philosophical views on Bitcoin substantially.
- Thanks to Peter McCormack for his honest tweets and the What Bitcoin Did podcast, which keeps providing great insights from many areas of the space.
- Thanks to Jannik for providing feedback to early drafts of this article.
- And finally, thanks to all the bitcoin maximalists, shitcoin minimalists, shills, bots, and shitposters which reside in the beautiful garden that is crypto twitter.