More on this book
Community
Kindle Notes & Highlights
Started reading
April 25, 2018
Perhaps the most important milestone in Bitcoin's life was the first day that the tokens in this network went from being economically worthless to having a market value,
Bitcoin were a country, the value of its currency would be the 56th largest national currency worldwide, roughly in the range of the size of the money supply of Kuwait or Bangladesh, larger than that of Morocco and Peru, but smaller than Colombia and Pakistan.
The growth in the price is a reflection of the growing use and utility that the network offers its users.
Average Daily Percentage Change and Standard Deviation in the Market Price of Currencies per USD over the Period of September 1, 2011, to September 1, 2016
Bitcoin's volatility derives from the fact that its supply is utterly inflexible and not responsive to demand changes, because it is programmed to grow at a predetermined rate.
The limit on how much we can produce of each of those metals, however, remains the opportunity cost of their production relative to one another, and not their absolute quantity.
In reality, the more humans exist, the more production of all these raw materials can take place. More importantly, perhaps, as economist Michael Kremer2 argues, the fundamental driver of human progress is not raw materials, but technological solutions to problems.
cryptographically secured forms of money independent of all physical restrictions that cannot be stopped or confiscated by government authorities.
Traditionally, gold was the medium of settlement of payments and store of value worldwide. The inability of any party to expand its supply in any significant quantities made it so.
Even at the time of writing, with Bitcoin at a relatively small level of public adoption, the majority of Bitcoin transactions are not recorded on‐chain, but occur in exchanges and various types of Bitcoin‐based online platforms such as gambling and casino websites.
On the one hand, Bitcoin's strict scarcity makes it a very attractive choice for a store of value, and an ever‐growing number of holders could tolerate the volatility for long periods of time if it is heavily skewed to the upside, as has been the case so far. On the other hand, the persistence of volatility in bitcoin's value will prevent it from playing the role of a unit of account, at least until it has grown to many multiples of its current value and in the percentage of people worldwide who hold and accept it.
PoW makes the cost of writing a block extremely high and the cost of verifying its validity extremely low, almost eliminating the incentive for anyone to try to create invalid transactions.
In January 2017, the processing power behind the Bitcoin network is equivalent to that of 2 trillion consumer laptops. It is more than two million times larger than the processing power of the world's largest supercomputer, and more than 200,000 times larger than the world's top 500 supercomputers combined. By monetizing processing power directly, Bitcoin has become the largest single‐purpose computer network in the world.
The sovereignty of Bitcoin is derived from the fact that, as far as anyone can tell, the way its consensus rules operate makes it very resistant to alteration by individuals. It is no exaggeration to say nobody controls Bitcoin, and that the only option available to people is to use it as it is or not use it.
Miners are only Bitcoin miners to the extent that they produce blocks with valid transactions according to the current consensus rules.
