** Version en français suivra dans un autre post **
Why did I name this blog “Bits of Value”?
Because the main innovation breakthrough that made Bitcoin possible is the ability to store value in bits. That had never been done before. And it's phenomenal. It's paradigm-shifting. Like when I had my first milkshake; my eyes popped and the world zoomed out around me. I realized that if we could now store stuff in bits, we could now own stuff on the internet. Strawberry chocolate banana. Kabang!
The ability to store value in bits, digitally, is the complete opposite of what the internet made possible. The internet made "copy-paste" free: it is the kingdom of duplication. It's like a house of mirrors where a cat stands in the middle and sees its reflexion infinitely.
Gutenberg might have brought down the cost of diffusing information tremendously when he invented the printing press, but when Tim Berners-Lee invented the internet, he effectively brought it down to zero. It's funny to say it like this, because to "digitize" actually means to write something in "digits". In 1s and 0s. In bits that have either “on or off” as a state. Binary. For instance the digital version of "Mr Roboto", the title of Styx's most famous song is:
M = 01001101, r = 01010010, (space) = 00100000, R = 01010010, o = 01101111, b = 01100010, o = 01101111, t = 01101111, o = 01101111
Those digits are what computers read. They cost quasi-nothing to store and not much to decrypt back into the title song. At first, in the 90s and 2000s, it was still a little bit (no pun intended) expensive to store the audio version of the file, so my friend and I only exchanged the lyrics of the song. A combination of bandwidth increasing and encoding getting better (i.e. mp3 files) made sending a digitized version of the entire audio song possible. Copy paste. Bye bye copyrights, internet just knocked you out. Napster this, namasté!
(By the way, I read somewhere that Gutenberg was not upset at all when the internet came out. He didn't "press" charges against Tim. )
To power all that near-zero-cost information, internet needs servers connected to one another. It needs common language to understand what the other servers are asking, and that's the stuff like "html" and "smtp" protocols. Protocols are just languages. I speak french, english and portuguese. Hence if you ask me "Tudo bom?", then I'll understand you. "Tudo bem, obrigado!"
Consider sending some of that strawberry-cholocate-banana milkshare story to someone in need of pure dumb human intelligence! Maybe they’ll learn something about crypto, too.
Bitcoin has safe deposit boxes
To power the Bitcoin ecosystem, a whole new infrastructure was invented. New languages. A new kingdom. Not a house of mirrors where bits can be infinitely duplicated, but rather a system of safe deposit boxes where only the person with the key can access what's inside.
Imagine safe deposits like in a bank vault: you know, all these small steal doors with two keyholes and a banker sitting by the door…. or a goblin from at Gringotts Wizarding Bank, if you are a Harry Potter fan. You got your mental picture now?
Ok, so now make those doors transparent instead of steal, so that everyone can see what's inside. That is because how many bitcoins are inside any box is public and transparent. Anyone, and any web application, can look at it.
Perfect ! Now, please remove the person or goblin sitting at the door, because Bitcoin does not require a banker or anyone (we say that it is "trustless"). Consequentially, also remove one of the two keyholes as well from the deposit boxes, because they don’t require two separate keys to open. No one can open the door for you if you loose your key. Do you still got the picture in your head? Here is more or less my mental picture right now:
Receiving and Sending: an address and a key
The safety deposit box in this analogy are called "wallets" in the crypto world. And now the only thing that our deposit box / wallets are missing are a public address. If you want to send me something, my box needs an address for the mailman and everyone to find it! My address, my public address, is called "public key". The one you share with everyone and everyone can lookup. To receive anything, you need an address.
In contrast, to send anything, you need to access what’s inside your box; you need the key. In the bitcoin world, it’s called the "private key.” The one that opens the safety box. I know, it’s confusing… but at least it’s not in japanese.
To receive bits of value, you need an address for people to find you (the “public key”). To send, you need a key to access what’s inside your box (the “private key”).
By the way, did you know that people smarter than me have estimated there are between 2 and 3 million Bitcoins that are lost? Well, they are not lost lost; they are still there and we can see them through the transparent door. But they are stuck there. It’s not the bitcoins that are lost, it’s the keys.
And before you ask, you hacker-pirate-robalidou, no we can crack it open. The doors are actually bullet proof, blast proof, we can't drill holes in them, the hinges can’t be removed and they cannot be melted down. The keyhole is also not an option as it is nothing short of magical: like in Harry Potter, it just cannot be tampered with thanks to cryptography. Even the Keymaker from the matrix cannot grind a key to open it. Sorry Neo, you're not getting rich in the matrix just yet.
It’s the idea of ownership!
We can now own bits. We can store bitcoins in a digital place that only us can access. We can store anything. I can produce something digitally and say “only I can access this file”.
I could own my identity online. I could own a digital token that unlocks something in real life.
I can play a game and own my own kart. And leave that game, and bring my kart into another game.
Fundamentally it’s the idea of ownership. Value is subjective and how value is derived is a big topic on its own. It’s for another post. Postsssssss.
So let’s just end with ownership.