In a little more than 10 years, Bitcoin has become a ubiquitous part of everyday life, and the community around Bitcoin (and other cryptocurrencies) has grow...
You're a libertarian so you believe that all the world's problems are caused by central banking. You want currency to be decentralized, not controlled by a government, and more like the gold standard. These are bullshit problems that don't actually matter, but bitcoin solves them fairly elegantly.
A bank is mostly a ledger (list of transactions and when they happened). A whole bunch of bullshit can happen if the ledger is inconsistent, like if you receive money then send it, and in one ledger it's send then receive but the send bounces because you didn't have the balance to do that. This is a problem for a distributed system, because the order of events in those is never consistent. Bitcoin solves this.
When you send a transaction via bitcoin, you broadcast it to the network, and a bunch of computers try to add it to their ledgers and broadcast the new ledger to each other, then use those going forward. To make this less of a chaotic clusterfuck, the longest ledger wins, so they'll end up more consistent in the long run. To slow this down, they have to do an arbitrary hard computing task before sending the new ledger, so globally new ledgers get sent about once per half hour. To incentivize people doing this, whoever makes the new ledger gets to add one bitcoin to their account. So that's what bitcoin mining is - computing new ledgers and doing arbitrary hard computing tasks to sign them, so you get rewarded a bitcoin.
So now you have some pile of cryptography and game theory that allows you to have a distributed ledger. It's decentralized and not controlled by the government. One bitcoin is printed every half hour, so the rate of currency creation is linear, like a gold mine. Everything the libertarian wanted is done.
Word of mouth is exponential and bitcoin is linear, so weird libertarians found out about this and decided to buy in faster than bitcoins were created, and the price kept going up. Eventually actual groups with money started buying in, because if it's stupid and it keeps going up it's still a good investment. This makes it go up, which makes it a better looking investment, so the price just spikes occasionally.
This is mostly accurate, but incorrect on a couple points:
The target time between "blocks," as new sections of the ledger are known, is 10 minutes, not half an hour.
The block reward is not 1 Bitcoin. It was originally 50 bitcoins, and is cut in half every 210,000 blocks. Eventually the block reward will be zero and mining will earn only transaction fees, at which point the maximum of 21 million bitcoins will have been mined.
It's an arbitrary limit for the sake of having an arbitrary limit, just like there's an arbitrary limit to the amount of gold on earth. This is part of the libertarian ideology baked into Bitcoin.
As for the latter question, the theory goes that transaction fees (which are paid to miners) will be sufficient to support mining as the block reward diminishes. In reality it's more likely that hashing power on the network will decrease as miners go bust, but that won't impact the overall system very much, really (the network adjusts to adapt to changing hashing power to ensure a 10 minute block time). It makes a specific type of attack on the overall system (51% attack, it's called) easier, but the value to an attacker of committing such an attack is, in my view, not well established (beyond having a short position in Bitcoin I suppose, but if you're going to break the law, a simple pump and dump is a much easier scheme to make money in crypto).
You're a libertarian so you believe that all the world's problems are caused by central banking. You want currency to be decentralized, not controlled by a government, and more like the gold standard. These are bullshit problems that don't actually matter, but bitcoin solves them fairly elegantly.
A bank is mostly a ledger (list of transactions and when they happened). A whole bunch of bullshit can happen if the ledger is inconsistent, like if you receive money then send it, and in one ledger it's send then receive but the send bounces because you didn't have the balance to do that. This is a problem for a distributed system, because the order of events in those is never consistent. Bitcoin solves this.
When you send a transaction via bitcoin, you broadcast it to the network, and a bunch of computers try to add it to their ledgers and broadcast the new ledger to each other, then use those going forward. To make this less of a chaotic clusterfuck, the longest ledger wins, so they'll end up more consistent in the long run. To slow this down, they have to do an arbitrary hard computing task before sending the new ledger, so globally new ledgers get sent about once per half hour. To incentivize people doing this, whoever makes the new ledger gets to add one bitcoin to their account. So that's what bitcoin mining is - computing new ledgers and doing arbitrary hard computing tasks to sign them, so you get rewarded a bitcoin.
So now you have some pile of cryptography and game theory that allows you to have a distributed ledger. It's decentralized and not controlled by the government. One bitcoin is printed every half hour, so the rate of currency creation is linear, like a gold mine. Everything the libertarian wanted is done.
Word of mouth is exponential and bitcoin is linear, so weird libertarians found out about this and decided to buy in faster than bitcoins were created, and the price kept going up. Eventually actual groups with money started buying in, because if it's stupid and it keeps going up it's still a good investment. This makes it go up, which makes it a better looking investment, so the price just spikes occasionally.
This is mostly accurate, but incorrect on a couple points:
deleted by creator
It's an arbitrary limit for the sake of having an arbitrary limit, just like there's an arbitrary limit to the amount of gold on earth. This is part of the libertarian ideology baked into Bitcoin.
As for the latter question, the theory goes that transaction fees (which are paid to miners) will be sufficient to support mining as the block reward diminishes. In reality it's more likely that hashing power on the network will decrease as miners go bust, but that won't impact the overall system very much, really (the network adjusts to adapt to changing hashing power to ensure a 10 minute block time). It makes a specific type of attack on the overall system (51% attack, it's called) easier, but the value to an attacker of committing such an attack is, in my view, not well established (beyond having a short position in Bitcoin I suppose, but if you're going to break the law, a simple pump and dump is a much easier scheme to make money in crypto).
:scared: