[Note: for my more recent article about bitcoin, see How to Explain Bitcoin to your Granny]
By now many people will have heard about Bitcoin. That’s the global, decentralised, online crypto-currency (check out this Wired Magazine article for some background). You can either buy it on online exchanges, or your can ‘mine’ it by running algorithms that are likely to cause your laptop to catch fire. You can then use it to buy things from vendors who’ll accept it, albeit Sainsbury’s still only accepts British Pounds. There are even mainstream currency traders who actively trade Bitcoin now.
By now many people will have heard about Bitcoin. That’s the global, decentralised, online crypto-currency (check out this Wired Magazine article for some background). You can either buy it on online exchanges, or your can ‘mine’ it by running algorithms that are likely to cause your laptop to catch fire. You can then use it to buy things from vendors who’ll accept it, albeit Sainsbury’s still only accepts British Pounds. There are even mainstream currency traders who actively trade Bitcoin now.
I’ll bet all the Bitcoins I have though, that very
few people actually understand what the hell Bitcoin is. I myself do not
understand it. Try listen to this guy
explain it, and feel your mind frazzle. More than anything, I have the sense that
Bitcoin is a cult. A strange cybernetic cult. An anarchic techno-pirate,
quasi-mystical collective on a dystopian mission to subvert the global monetary
system. I guess that’s why it attracts me, but I’d still like to know exactly
how it works.
The Blockchain
One thing I do know is that the
Bitcoin network worships something called the BlockChain. I don’t really know what the blockchain is, but it
exists on a huge global network of nodes. It all sounds a bit like the
Matrix. My friend @Webisteme
understands it, and he keeps trying to explain it to me. The other night we
were at the Dogstar pub in Brixton and he said various complicated-sounding
things like:
1) "It's almost like a section of the blockchain has my signature on it, and then I sign it with your name, and then the whole network agrees that we've done a transaction"
2) "The blockchain is on everyone's computer. The nodes compete to process the blockchain, to create the next piece, which then everyone has to validate again"
3) "The network is so powerful, you'd need at least 50% of the total processing power to override it, and not even the world's largest supercomputer can do that"
I'm not sure if I've quoted him correctly, but I mostly sat at the table and stared at him with a strong feeling of bewilderment. In the absence of a nuanced understanding of the currency though, I come up with my own rough analogy: "Riiight" I say, "So would you say it's a little bit like the Borg in Star Trek?"
Is Bitcoin the BORG?
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| THE WORLD'S FIRST PICTURE OF BITCOIN'S BLOCK CHAIN |
If you’ve never seen the
Star-Trek episodes with the Borg, you can check out clips on Youtube. The clips do have something of a negative spin on them, with the Borg being portrayed as an
enormous sociopathic cube bent of destruction. The interesting thing about the
Borg though, is that it's an entity which has no leader, its direction being rather a
function of all the pieces that make it up. According to Wikipedia “The Borg manifest as cybernetically-enhanced humanoid drones of multiple species, organized as an interconnected collective, the decisions of which are made by a hive-mind, linked by subspace radio frequencies.”
It is perhaps most famous for the phrase “Resistance is futile”. The analogy with Bitcoin is apparent to see: Interconnected collective? Tick. Hive-mind? Tick. Linked by subspace radio frequencies? Hmm... well, I think it uses internet relay chat. Resistance is futile? Yep, the Feds can attack it, but it doesn't exist in one place so they'd have to attack all nodes at once to shut the system down. Wait a minute, Borg and Bitcoin even have two letters in common - a coincidence?
@Webisteme looks at me from the
table. “Um… I guess it’s kind of like the Borg," he says, "The network is very resilient but we’re not
really cybernetic drones. It’s mostly guys with big computer rigs and powerful graphics processing cards”.
The mojo of Nakamoto
What strikes me most about
Bitcoin though, is how it’s managed to capture the imagination of its users.
People cite various reasons why it’s powerful, including how it’s managed to
overcome double-spending
problems you find with other online currencies. To me though, the real source
of its power comes from its mythical
foundation story, involving the mysterious character of Satoshi Nakamoto.
Let me explain. Imagine a group
of researchers at MIT said "Hey guys, we’ve invented a cool new crypto-currency
that is decentralised and resilient. Do you want to try it?" Maybe some people
would take them up on that, but it would have no mystery, no intrigue, no dark
story about mafia and the CIA. Now imagine that instead of that, a mysterious
dude with no traceable identity releases
strange tracts onto the web, describing a new currency, and then
disappears. That’s exactly what Satoshi did, and it’s the very mystery of his
story that makes people want to take part in the first place. It gives the currency
soul, and that’s crucial because currency
that is not legally mandated needs to be imbued with soul in order to start
working. That’s one reason why gold
continues to be viewed as a valuable currency: It shines and you can’t really
do anything with it, and for some reason humans take that to be a good
indication that it has mystical quasi-religious properties worthy of being valued.
Satoshi Nakomoto basically created
crypto-gold, and sent all the miners out to find it. He then departed the
earth, leaving disciples such as Gavin Andresen to continue the work in his
absence (check out this psychedelic
video that visualises the activities of the original developers). The elite
nature of that exercise is part of the appeal too. Everyone has the potential
to get the crypto-gold, but only those who invest the most time and passion
will actually do so. I mean, look at this fanatical maniac who will almost
certainly burn his warehouse down with his Bitcoin rig. There’s
something about the sheer absurdity of devoting huge amounts of computing power
to something that has no physical existence which gives power and reality to
the currency.
Getting my piece of the Blockchain
If you want to learn more about Bitcoin, you can go to the main site here. If you want to work on developing it
yourself, check out the Sourceforge site here. If you want to see
Bitcoin blocks as they’re created check out Blockexplorer, and if you want to monitor transactions as they occur see
here. If you want some
free Bitcoins, you can apparently get them from this kind Samaritan here. If you want to check out more general
info, see WeUseCoins. Good luck, and keep me posted on how it goes.
