Know What Bitcoin & Blockchain Is All About

[Afi4wins]

There are so many of you that do not actually know how Bitcoin first came to life, or what cryptocurrency is,

or what Blockchain is all about, so here’s a very interesting abstract from ‘Beyond the Bitcoin Bubble’:

 

You can read the entire long article at this link from The New York Times Magazine:

 

https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html?utm_source=pocket&utm_medium=email&utm_campaign=pockethits

 

 

By STEVEN JOHNSON  JAN. 16, 2018

 

 

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The sequence of words is meaningless: a random array strung together by an algorithm let loose in an English dictionary. What makes them valuable is that they’ve been generated exclusively for me, by a software tool called MetaMask. In the lingo of cryptography, they’re known as my seed phrase. They might read like an incoherent stream of consciousness, but these words can be transformed into a key that unlocks a digital bank account, or even an online identity. It just takes a few more steps.

 

On the screen, I’m instructed to keep my seed phrase secure: Write it down, or keep it in a secure place on your computer. I scribble the 12 words onto a notepad, click a button and my seed phrase is transformed into a string of 64 seemingly patternless characters:

 

1b0be2162cedb2744d016943bb14e71de6af95a63af3790d6b41b1e719dc5c66

 

This is what’s called a “private key” in the world of cryptography: a way of proving identity, in the same, limited way that real-world keys attest to your identity when you unlock your front door. My seed phrase will generate that exact sequence of characters every time, but there’s no known way to reverse-engineer the original phrase from the key, which is why it is so important to keep the seed phrase in a safe location.

That private key number is then run through two additional transformations, creating a new string:

 

0x6c2ecd6388c550e8d99ada34a1cd55bedd052ad9

 

That string is my address on the Ethereum blockchain.

 

Ethereum belongs to the same family as the cryptocurrency Bitcoin, whose value has increased more than 1,000 percent in just the past year. Ethereum has its own currencies, most notably Ether, but the platform has a wider scope than just money. You can think of my Ethereum address as having elements of a bank account, an email address and a Social Security number. For now, it exists only on my computer as an inert string of nonsense, but the second I try to perform any kind of transaction — say, contributing to a crowdfunding campaign or voting in an online referendum — that address is broadcast out to an improvised worldwide network of computers that tries to verify the transaction. The results of that verification are then broadcast to the wider network again, where more machines enter into a kind of competition to perform complex mathematical calculations, the winner of which gets to record that transaction in the single, canonical record of every transaction ever made in the history of Ethereum. Because those transactions are registered in a sequence of “blocks” of data, that record is called the blockchain.

 

The whole exchange takes no more than a few minutes to complete. From my perspective, the experience barely differs from the usual routines of online life. But on a technical level, something miraculous is happening — something that would have been unimaginable just a decade ago. I’ve managed to complete a secure transaction without any of the traditional institutions that we rely on to establish trust. No intermediary brokered the deal; no social-media network captured the data from my transaction to better target its advertising; no credit bureau tracked the activity to build a portrait of my financial trustworthiness.

 

The first hint of a meaningful challenge to the closed-protocol era arrived in 2008, not long after Zuckerberg opened the first international headquarters for his growing company. A mysterious programmer (or group of programmers) going by the name Satoshi Nakamoto circulated a paper on a cryptography mailing list. The paper was called “Bitcoin: A Peer-to-Peer Electronic Cash System,” and in it, Nakamoto outlined an ingenious system for a digital currency that did not require a centralized trusted authority to verify transactions. At the time, Facebook and Bitcoin seemed to belong to entirely different spheres — one was a booming venture-backed social-media start-up that let you share birthday greetings and connect with old friends, while the other was a byzantine scheme for cryptographic currency from an obscure email list. But 10 years later, the ideas that Nakamoto unleashed with that paper now pose the most significant challenge to the hegemony of InternetTwo giants like Facebook.

 

The paradox about Bitcoin is that it may well turn out to be a genuinely revolutionary breakthrough and at the same time a colossal failure as a currency. As I write, Bitcoin has increased in value by nearly 100,000 percent over the past five years, making a fortune for its early investors but also branding it as a spectacularly unstable payment mechanism. The process for creating new Bitcoins has also turned out to be a staggering energy drain.

 

History is replete with stories of new technologies whose initial applications end up having little to do with their eventual use. All the focus on Bitcoin as a payment system may similarly prove to be a distraction, a technological red herring. Nakamoto pitched Bitcoin as a “peer-to-peer electronic-cash system” in the initial manifesto, but at its heart, the innovation he (or she or they) was proposing had a more general structure, with two key features.

 

First, Bitcoin offered a kind of proof that you could create a secure database — the blockchain — scattered across hundreds or thousands of computers, with no single authority controlling and verifying the authenticity of the data.

 

Second, Nakamoto designed Bitcoin so that the work of maintaining that distributed ledger was itself rewarded with small, increasingly scarce Bitcoin payments. If you dedicated half your computer’s processing cycles to helping the Bitcoin network get its math right — and thus fend off the hackers and scam artists — you received a small sliver of the currency. Nakamoto designed the system so that Bitcoins would grow increasingly difficult to earn over time, ensuring a certain amount of scarcity in the system. If you helped Bitcoin keep that database secure in the early days, you would earn more Bitcoin than later arrivals. This process has come to be called “mining.”

 

The blockchain world proposes something different. Imagine some group like Protocol Labs decides there’s a case to be made for adding another “basic layer” to the stack. Just as GPS gave us a way of discovering and sharing our location, this new protocol would define a simple request: I am here and would like to go there. A distributed ledger might record all its users’ past trips, credit cards, favorite locations — all the metadata that services like Uber or Amazon use to encourage lock-in. Call it, for the sake of argument, the Transit protocol. The standards for sending a Transit request out onto the internet would be entirely open; anyone who wanted to build an app to respond to that request would be free to do so. Cities could build Transit apps that allowed taxi drivers to field requests. But so could bike-share collectives, or rickshaw drivers. Developers could create shared marketplace apps where all the potential vehicles using Transit could vie for your business. When you walked out on the sidewalk and tried to get a ride, you wouldn’t have to place your allegiance with a single provider before hailing. You would simply announce that you were standing at 67th and Madison and needed to get to Union Square. And then you’d get a flurry of competing offers. You could even theoretically get an offer from the M.T.A., which could build a service to remind Transit users that it might be much cheaper and faster just to jump on the 6 train.

 

Like the original internet itself, the blockchain is an idea with radical — almost communitarian — possibilities that at the same time has attracted some of the most frivolous and regressive appetites of capitalism. We spent our first years online in a world defined by open protocols and intellectual commons; we spent the second phase in a world increasingly dominated by closed architectures and proprietary databases. We have learned enough from this history to support the hypothesis that open works better than closed, at least where base-layer issues are concerned. But we don’t have an easy route back to the open-protocol era. Some messianic next-generation internet protocol is not likely to emerge out of Department of Defense research, the way the first-generation internet did nearly 50 years ago.

 

Yes, the blockchain may seem like the very worst of speculative capitalism right now, and yes, it is demonically challenging to understand. But the beautiful thing about open protocols is that they can be steered in surprising new directions by the people who discover and champion them in their infancy. Right now, the only real hope for a revival of the open-protocol ethos lies in the blockchain. Whether it eventually lives up to its egalitarian promise will in large part depend on the people who embrace the platform, who take up the baton, as Juan Benet puts it, from those early online pioneers. If you think the internet is not working in its current incarnation, you can’t change the system through think-pieces and F.C.C. regulations alone. You need new code.

 

 

 

[Afi4wins]

Sharon dear, you must take some free time and read this article...then you can know and understand what Bitcoin, Blockchain and Cryptocurrency is. Just read those few paragraphs that explains each item, or you can read the entire abstract to get a better bigger picture.

 

That goes for anyone else too...who don't quite know what those 3 words are all about...nope...I don't mean those 3 words of 'I love you'...and nope...not BBC either!

[pinnit2015]

When the world devolves into chaos, with a pending water crisis, it'll all be worthless anyhow.

 

My nestle bottles will see me as King in a dystopian land.

 

In that world I will call upon the Directors of BTG games to answer for their crimes against slotting.

[Afi4wins]

When the world devolves into chaos, with a pending water crisis, it'll all be worthless anyhow.

 

My nestle bottles will see me as King in a dystopian land.

 

In that world I will call upon the Directors of BTG games to answer for their crimes against slotting.

 

Aaah...so your 3 words are B-T-G then... 

[cocopop3011]

Thanks Afi and sorry I'm late to the party! I read it from start to finish, not the whole article what you've put in here for us. 

 

It does actually seem a very clever process and once I was completely unaware of how it worked. The writer is very talented but there are still loads of it I don't understand but I'm glad to know how exactly it works and I think I had mis-interpreted it before. I've always said that I don't think bitcoin will last but never really knew why I was saying it 

 

So now I have a question...

 

 

 

The paradox about Bitcoin is that it may well turn out to be a genuinely revolutionary breakthrough and at the same time a colossal failure as a currency

 

 

What exactly could cause bitcoin to fail? And what happens when it does? Will our economy be effected in any way or just the people who have invested in it?

[Afi4wins]

Thanks Afi and sorry I'm late to the party! I read it from start to finish, not the whole article what you've put in here for us. 

 

It does actually seem a very clever process and once I was completely unaware of how it worked. The writer is very talented but there are still loads of it I don't understand but I'm glad to know how exactly it works and I think I had mis-interpreted it before. I've always said that I don't think bitcoin will last but never really knew why I was saying it 

 

So now I have a question...

 

 

 

What exactly could cause bitcoin to fail? And what happens when it does? Will our economy be effected in any way or just the people who have invested in it?

 

Good question my dear! 

 

I'll make it as brief as possible, for easier understanding. 

 

What exactly could cause Bitcoin to fail?

 

Ever since its introduction some years ago, Bitcoin's value has shot up by about 100,000%!!! That's one hundred thousand percent! Simply unbelievable and simply unachievable with any fiat currency! Why has its value shot up so high? It's all purely because of human greed - everyone of the buyers want to be a millionaire quickly! So its value is pushed up by pure speculation and by pure greediness! As long as there are new buyers of Bitcoin, this cryptocurrency will survive...but there will come a time when all interested buyers have already owned enough of Bitcoin, and there won't be new buyers anymore! So what happens then? No more demand for Bitcoin...but with an extremely over supply of Bitcoin in the market! That's when the Bitcoin bubble will burst...and the cryptocurrency would crash like a holocaust! Owners want to sell their Bitcoins...but there won't be any buyers! 

 

Will the economy be affected by it? Nope! Not at all! That's because Bitcoin is an open free-for-all currency, existing only 'on air' in the internet, and is unregulated or controlled by any government or any financial body, so no fiat currency would be affected in any way. When BItcoin crashes, only the owners of Bitcoin would be affected...because all of those riches would be nothing more than mere digital numbers that has no real value at all! Try buying food or drinks with 16-digit numbers! Hahaha.

 

Buyers and owners of Bitcoin are into it simply for the profit Bitcoin can bring! They know it's not real money. They know they cannot survive with digits if no one accepts it. But as long as they 'believe' that Bitcoin's value can still go much much higher, then they'll keep on buying the damn thing! Hehehe.

 

What that long article meant to imply...is that the innovative technology behind that Blockchain has good potentials indeed...to further improve on the current financial protocols...and it is this technology that would emerge victorious in due time...not the cryptocurrencies! 

 

But of course, those evangelists, or true believers, in Bitcoin, would never agree to anything that critics have pounded BItcoin with thus far! 

[cocopop3011]

Sorry Afi I seemed to have missed your reply so I'm late to the party    Ahh very interesting indeed thanks for the explanation. I don't think I'll ever have the need to use bitcoin but I certainly know more about it now.

[Afi4wins]

Sorry Afi I seemed to have missed your reply so I'm late to the party    Ahh very interesting indeed thanks for the explanation. I don't think I'll ever have the need to use bitcoin but I certainly know more about it now.

 

No problem about being late, my dear, always better late than never. Hehehe.

 

And getting you, or anyone else, to understand what Bitcoin and Blockchain is all about, is and was my main intention for this post anyway. So I'm glad you know better now. 

[jayshi19]

Buyers and owners of Bitcoin are into it simply for the profit Bitcoin can bring! They know it's not real money. They know they cannot survive with digits if no one accepts it. But as long as they 'believe' that Bitcoin's value can still go much much higher, then they'll keep on buying the damn thing!