Bitcoin - One Answer to Many Questions

1.

WHAT IS BITCOIN? - A BEGINNING

E very beginning is difficult. This book is intended to help make the seemingly difficult world of Bitcoin simple and easy to understand. But why should you even bother learning about Bitcoin? Are you interested in topics such as: ownership, time, trade, money, energy, responsibility, independence or freedom? As we will explore together in this book, Bitcoin offers a solution to many problems.

BITCOIN FIXES THIS.

How can that be? Isn't it just a digital coin or currency or something? As we will soon learn, Bitcoin is so much more than that. It's like a rabbit hole that keeps branching out. In seemingly infinite subterranean corridors, connections that you can't even fathom on the surface. Does this all seem far too complicated? Then let's keep it simple in this chapter.

Why is Bitcoin so important, in general? It might be easier to tell you why it's so important to me. Bitcoin is self realization for me. Anyone can participate in it. Whether simply to send money or to keep your property out of reach and away from manipulation. For me, it is the perfect store of value. An uncorruptible medium to store my time. For me, money is the store of my work and therefore also my time. I want to be able to access it again at a later date. For example, I can use my money to pay a service provider, such as a domestic help or a tax consultant, so that I don't have to use my time, but someone else can fill their store of value and time.

In my opinion, a system that is not inflationary and cannot be manipulated is needed in the long term. Bitcoin is an expression of freedom. Nobody can stop you from taking your bitcoin with you, no matter where you go. No one can stop you from sending your bitcoin. But above all, the protocol is so much more than just money. New inventions are being made every day that utilize the protocol. Ideas range from: lightning fast transactions, sending text messages, internet browsers without internet, sending other assets like stocks, real time payments for energy or streaming money for movies and music on demand, even for less than 1 cent, and for tips on good posts on social media - all via the Bitcoin protocol. Every day I read about new ideas, companies and innovations. It feels like 1000 little revelations that touch so many topics and markets and they could change them forever. It's about further development or progress and this time for the whole world. Everyone is welcome. Everyone can take part. Everyone will find their place. We can come closer together again internationally. I envision a world in which everyone operates at the same standard, on a level playing field, so to speak. We start to establish a common basis, on the foundation of a common currency. But the most important thing are the common values that Bitcoin stands for (chapter 4). Why is Bitcoin important to you? Find out!

The beginning: It's a story that could have come straight out of a movie. Bitcoin's creation in the midst of the 2008 financial crisis was no coincidence. On October 31, 2008, the so-called Bitcoin white paper was published. Incidentally, this was the same day on which Luther is said to have nailed his 95 theses to the door of the castle church in Wittenberg in 1517. An 8-page description of what Bitcoin is and how it works. The protocol (in simple terms: the computer code) was published on January 3, 2009, marking the start of Bitcoin. The inventor with the pseudonym Satoshi Nakamoto worked from this point on with all those who were interested in his invention to bring the system to life. By the way, we still don't know, who Satoshi Nakamoto is or was. We don't even know whether it was a male or female person or a group of computer specialists. The birthday was given as April 5 when the name was created. This is the same day that Executive Order 6102 by President Franklin D. Roosevelt came into force in 1933, which banned the private ownership of gold. The first Bitcoin was created, transactions were carried out and updates were developed. A community quickly formed. A system developed in which everyone could participate, contribute ideas, prompt discussions and further develop the computer code. Basically, nothing has changed to this day. Perhaps also because Satoshi Nakamoto has disappeared without a trace since 2011. There are a number of myths surrounding his sudden withdrawal from the project. But one thing is certain: Bitcoin is now in the hands of anyone who wants to participate. No boss, no CEO. All that remains are the rules of the software, the basic features of which are unchanged.

RULES. NO RULER.

But what is Bitcoin? It consists of Bitcoin, the protocol and payment network, and bitcoin, the money within this system. The bitcoin is not a currency like the euro or the dollar. After all, bitcoin has nothing to do with trust (see chapter 2). It is the natural unit of account of the protocol. Bitcoin is comparable to the Internet. Both are protocols. How can you picture that?

The Internet is the rails of our digital life. The rails set the basic rules for the train. A train can only run where there are tracks. The number of parallel tracks determines how many trains can run and at what speed each individual train can travel without causing a collision. Clear rules that ultimately find their limits in the basic rules of physics. Depending on the radius and slope of a curve, a train can only travel at a certain speed without derailing. All digital services and websites that we use every day are based on the basic digital rules of the internet, which are defined by the TCP/IP protocol.

We should now first clarify who is involved in the Bitcoin protocol. The participants in the Bitcoin ecosystem can be divided into 3 areas. On the one hand, there are the users themselves. People like you and me. Those who want to interact with the network. The reasons for using the network can be very different. Some want to store their property on the block-chain the other wants to buy something without having to exchange it for another currency, or someone wants to send a text message. What is a blockchain, you ask? Basically an unchangeable, infinite account statement that records all transactions. It is literally blockchain, as the name suggests, a chain of blocks strung together. More on this in chapter 4.

The second part of the triangular relationship is formed by the nodes. These are computers on which a special program runs. They are operated by individuals or companies. This gives them direct access to the Bitcoin network with a small investment in hardware. This means that they store the entire blockchain (the account statement, so to speak) with all transactions since the inception of Bitcoin. The nodes synchronize with other nodes to form a global network. The node is used to decide and enforce the rules of the Bitcoin network. These are constantly checked and validated. So that all blocks in the blockchain and therefore the transactions comply with the rules. If you operate such a node yourself, you are not reliant on a third party who could report something incorrectly or simply lie to other users.

DON'T TRUST. VERIFY!

But how are the transactions published and implemented? This is done by the miners. They are the system's accountants. They assemble the blockchain. So it's people like you and me or entire companies who buy machines, which are also called miners, and thus secure the Bitcoin network (the accounting system). They connect our analog world with the digital world. They execute the so-called proof-of-work algorithm and thus synchronize the network. They can be used in large numbers as in datacenters. Proof-of-work is explained further in this chapter and in the 3rd section of the book.

The three pillars now form a self-monitoring system. The miners are the executive, so to speak. They carry out what the users want (input of transactions / data), taking into account that the nodes check and validate the rules. In this metaphor, the nodes are the judiciary. They check the execution of the miners and ensure law and order. This makes the users the legislature. Ultimately, they set the rules according to which the game is played. They are the joker in their own game. In contrast to states, the users are not just the citizens in the state, in which the separation of powers is established, but they are the state. The users choose the rules with the help of their own or selected nodes (enforce the desired rules) according to which they want to play (the basic rules must be in consensus with the other participants so that they can communicate) and help shape updates. You decide, whether you want to accept changes to the protocol or not. Users can be even more powerful. You can decide for yourself whether you want to operate nodes and become a miner. In other words, you become a state, but you only function together with all other participants and cannot gain an advantage for yourself. But you are sovereign.

Confused but interested? Good! If you are interested and would like to find out more about the technology and algorithms, I recommend the book in the endnote1 as an introduction.

So what are the rules for the Bitcoin protocol? We will limit ourselves to a very simple answer here and delve into the nuances in further chapters. One of the most important rules is the absolute maximum of 21 million bitcoin that will ever exist. It is also...