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Understanding Peer-to-Peer Money

December 1, 2018 - Tutorials - , ,

How often has the technology of money been transformed by invention? How many different forms of money have existed? At a very basic level, a way to communicate value is to exchange things that we consider of equal value.

Now, we have bitcoin. Bitcoin is, in my mind, a pretty radical transformation. It’s as radical as the change from precious metals to paper money. Perhaps even more radical.

Bitcoin isn’t just digital money. Bitcoin is a fundamental transformation of the technology of money. It’s difficult to grasp because it’s so different from everything we’ve known before.

Bitcoin is the first network-centric, protocol-based form of money. That means it exists without reference to an institutional or platform context. I’ll get back to that in a second, this is a really important point.

Bitcoin is fundamentally different because in bitcoin, you don’t owe anyone anything and no one owes you anything. It’s not a system based on debt. It’s a system based on ownership of this abstract token. Absolute ownership.

“In bitcoin, possession is ten-tenths of the law. If you control the bitcoin keys, it’s your bitcoin. If you don’t control the bitcoin keys, it’s not your bitcoin.”

Bitcoin represents a fundamental transformation of money. An invention that changes the oldest technology we have in civilization. That changes it radically and disruptively by changing the fundamental architecture into one where every participant is equal. Where transaction has no state or context other than obeying the consensus rules of the network that no one controls. Where your money is yours. You control it absolutely through the application of digital signatures, and no one can censor it, no one can seize it, no one can freeze it. No one can tell you what to do or what not to do with your money.
It is a system of money that is simultaneously, absolutely transnational and borderless. We’ve never had a system of money like that. It’s a system of money that transmits at the speed of light, one that anyone in the world can participate in with a device as simple as a text-messaging phone. This represents a technological innovation that is terrifying to a lot of people because it is such a fundamental transformation of money. What they will tell you is that they’re worried. They’re very worried. They’re worried that criminals will use bitcoin. But the truth is that they’re far more terrified that all of the rest of us will.

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