Bitcoin in 21 pictures

In this article we try to introduce some of the many aspects of Bitcoin in 21 images and captions. We attempt to give an overview of Bitcoin as a money and a payment network, as well as its historical, economic, environmental and societal context. 🔽

Giant stones have been used as money by inhabitants of the Yap Islands in Micronesia. Just like with Bitcoin, the stones themselves do not move during a transaction. Instead, everyone knows who owns each stone, and changes of ownership are publicly announced.

From seashells and glass beads to precious metals like gold, humans have used many forms of money, to trade with each other, save for the future, or for emergencies. Good money should be scarce, durable, divisible, easy to transfer and transport, and accessible.

Around 2% more gold is mined every year—the supply doubles every 35 years. 92% of all bitcoins have already been minted, and the supply cannot exceed 21 million coins. Unlike gold, anyone can easily audit the bitcoin supply.

Gold is hard to protect and transact with, and could not function as money in the modern world. Its value has to be abstracted to paper or digits, and the gold ends up left with custodians. Bitcoin settles like cash over the internet, without the need for a third party.

Central banks can create as much fiat currency as they want at no cost to themselves, leaving you with inflation: the hidden tax. Governments can use this money to fund war, social programs, manipulate the economy, or bail out banks—without having to raise taxes.

When central banks increase the money supply, prices go up. This fast food menu from 1972—a year after the gold standard was dropped—shows the debasement of the US dollar. The price of property goes up the most, and wages cannot keep up, resulting in a wider wealth gap.

Banks lend out or invest customers deposits to a ratio of more than 100/1. When people want their money back, the banks start to collapse, only to be bailed out by freshly printed money—this way, central bankers get to pick the winners.

Money in a bank can be confiscated for any reason by governments, sometimes without due process—this happened in Canada in early 2022. Bitcoin can be used privately, and as long as you hold the keys yourself, no one can take it away from you.

Before the invention of Bitcoin, electronic cash systems relied on a company or institution to mint the currency and certify transactions. Bitcoin is a public, open-source network run by its users. Money issuance and transaction validation are handled without a central party.

Thanks to Bitcoin’s multi-year leap start, no other electronic payment system could reach the same network effect. The hype around “cryptocurrency” is used to issue and sell securities and scams. Competing protocols lack security, or introduce features that cannot work at scale.

Programs called wallets are used to receive and send Bitcoin payments. Software wallets are used for smaller amounts, while hardware wallets securely generate and store the user’s cryptographic keys offline, and can safely protect large amounts of money.

Bitcoin wallets must connect to a node to make transactions and display your balance. This may be the wallet’s default public nodes, or users can run their own one. Anyone can run Bitcoin at home, audit the entire system and broadcast their own transactions.

Bitcoin was used as money for the first time in May 2010 when Laszlo Hanyecz, a programmer from Florida, traded 10,000 BTC for two Papa John’s pizzas. The first Bitcoin exchange was created in that year, during which the price for a coin never topped 1$.

Mt Gox, a very popular Bitcoin exchange at the time, collapsed in 2014 after losing most of their customers’ money to hacks, fractional reserve, and malpractice. Exchange bankruptcies are still common today and users should always withdraw BTC to their own wallet.

In 2014, a Newsweek article claimed to have discovered the creator of Bitcoin, Satoshi Nakamoto: a Japanese-American software developer from San Francisco who denied the allegations. The Bitcoin creator disappeared in 2011, remaining anonymous to this day.

In 2017 at a bi-annual testimony where the FED answers to congress, a member of the audience held a sign that read “Buy Bitcoin”. The image went viral and became a symbol of Bitcoin entering the collective consciousness. The price of BTC was 2360$ at the time of the hearing.

Bitcoin uses a system designed in the 90s called proof-of-work to verify transactions without a central party. Anyone can try and add new blocks to the chain to earn BTC, but doing so takes computing energy. This way people can’t cheat, and trying to disturb the network is costly.

In order to face peaks, energy must be produced in excess of average demand. Proof-of-work can consume the energy that would have been wasted. The revenue can be used to harness energy sources like geothermal, hydro, wind, or solar, which would not have been profitable otherwise.

Heat is generated by proof-of-work machines. This by-product can be used to heat homes, commercial buildings, greenhouses, or in other industrial processes. The bitcoin earned helps recoup the energy costs, instead of just burning resources for heat.

During the Bitcoin Conference 2021 in Miami, Nayib Bukele, president of El Salvador, announced a new bill that would make bitcoin legal tender in the country alongside the dollar. The bill mentions the need for a currency outside central bank control.

Technological advancements have more profoundly shaped human societies throughout history than political movements or violent revolutions. The separation of money and state could mitigate the power of nations and usher in a new era for freedom and human flourishment.

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Posted at block 792272

Bitcoin Bumblebee