How Bitcoin works

A guide to the future of money

A while back — I would say somewhere between one and seven years ago, which is about the closest I can estimate time these days — I had asked my faithful readers for ideas about subjects which should be covered herein and henceforth. It was framed as a sort of a selfless,

“What would YOU like to see me write about?”

but was more along the lines of,

“What ideas do YOU have? Because I am tapped out.”

In any case, one dear and faithful reader suggested that I should tackle the subject of Bitcoin, should explain what it is and how it works. I was so touched by an actual suggestion, that I did what any good writer would do: I sat on it for several years. Like most of my creative endeavors, not to mention my golf swing, I did not follow through, and therefore the idea became as rusty as the 8 iron I “borrowed” from my brother in 2005.

But, now, perhaps out of a conviction that I should complete something I started, combined with a certainty that I have no other ideas at the moment, I have decided to finally take this subject on.

And so, journey with me as I set out to understand Bitcoin myself so I can explain to you fine people.

The fount of all knowledge

Our odyssey of understanding starts as most do: by asking ChatGPT what it knows. But because I don’t have all day to read a bunch of boring and frankly unbelievable words and sentences about a fictional currency, I decided to ask ChatGPT to explain it in one sentence or less.

Its response was very clear and relatable:

Error, try again later.

I should have left it at that, as this might be the truest response I am to get. But I had my dear reader (who probably unsubscribed years ago) to think of. So I did, in fact, try again. And ChatGPT’s response was as just what I expected, in that it was not at all clarifying.

According to ChatGPT:

“Bitcoin works as a decentralized digital currency where transactions are verified and recorded on a public blockchain through cryptographic consensus instead of relying on banks.”

Ok then. As I a have not yet stooped to having AI actually write posts for me, we might as well start with this definition. Let’s see if we can break this statement down.

And just so I don’t have an unfair advantage, I’m gonna do my best not to look any of this up herein from henceforth. Let’s see what we can reason.

“Bitcoin works”

I have always heard that you should make money work for you, and it’s good to see that Bitcoin takes this admonition to heart. I guess we’ll have to dive down a little deeper to see HOW it works. But if nothing else, we now know Bitcoin does, in fact, work. Does it work for us? I guess we will see.

By the way, if you’ve got other things to do - and who doesn’t - feel free to log off now and rest in the knowledge that Bitcoin works. I actually think that may be a nifty parlor trick, were someone to ask YOU how bitcoin works. Simply nod knowingly, lean in, all confidential-like, place a hand on their shoulder and say, “How does bitcoin work? Here’s all you need to know, my friend: it works.”

“decentralized”

Well, I know enough to know that if you add de- in front of a word, it means “to do the opposite of”, like in delouse (”do not put lice on”) or dethrone (”refrain from putting a throne in or on”). So I can deduce here that something that is decentralized is not centralized.

And I know from that time my doctor told asked me if my bunion pain was centralized to my big toe, that this word means “centered there”. So putting these two concepts together, I can only assume that “decentralized” here means “not in one place” (much as my bunion pain wasn’t).

Onward!

“digital currency”

This is one concept I am VERY familiar with, because I grew up in the 80’s and my best friend was a plumber from Brooklyn named “Mario” on a semi-fictional game called Super Mario Brothers. This sobering fact may or may not also explain why I’ve had so much time to practice writing in my life. In any case, as I’m sure you know, Mario was flush with digital currency, aka spinning gold coins that were dislodged with a satisfying “twing” sound from hanging brick boxes. Not sure how these apply to the real world, but I know digital currency.

Next!

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“transactions”

Since my family seems to live in the drive thru lane these days, I know all about transactions. I give you $24, you give me a few chicken nuggets which my kids will forget all about in 2 hours, claiming that we “have nothing to eat” and “never have anything good”. Oh, I know all about transactions.

Let’s move on.

“community blockchain”

Blockchain. Block. Chain.

OK. Well, I know what blocks are, both the three dimensional ones meant for building things, as well as the ones that make up most neighborhoods (you know, where Jenny was from). There’s also the term for denying something, as in “How many times did that guy block your shot, Phil?!” or “You have tried to logon on to the McDonald’s App too many times and are now blocked” or “Seriously, was there a shot of yours he did NOT block?!”

I may have to go with the 3D block concept at the moment. Although I also loved the Sims growing up, so maybe there is something to the digital neighborhood being involved? Consider the word “community” and you’ve got a strong contender there.

“Chain” is where it gets a little more iffy. Of course, I know what a chain is, both the kind that is used to restrain animals, like pit bulls, and the ones that adorn the necks of Miami rappers, like Pitbull. I also know that the word “chain” can indicate a string of related retail establishments, as well as things being linked together. Seems the latter is most likely here, but I’m not sure we can settle there yet.

And how do these two words - block and chain - fit together to make a new word? Is it a cube of chains, or vice versa? Is it a community chain for restraining the community pit bull (or Pitbull)? We might have to put a pin in this one. Let’s see what else we can find out.

“Cryptographic consensus”

Ok, I feel like this is key. The first thing that comes to mind here is another staple of the 80’s and 90’s, the Crypt Keeper from the quintessential horror anthology Tales from the Crypt. If you’re not familiar with this show, it was like a slightly edgier version of The Twilight Zone or Amazing Stories, focused more on horror than on sci-fi. In any case, I had no business watching it then, and probably would not watch it now, save for the hit of nostalgia. Plus, it’s likely on past 8 PM, so I’d just fall asleep.

Nostalgia aside, there is little chance, I would say, that the Crypt Keeper has much to do with this; although, I do feel the same degree of unease when I think about Bitcoin and I do when I ponder the Crypt Keeper and his menacing laugh and off-kilter mandible, so maybe there is something there.

Beyond that likely-unrelated association, the only thing that comes to mind is the term “cryptography”, which I believe is about breaking secret codes. I once read a book by an obscure author named Don Brown (?) which had something to do with cryptography and the Pope and The Louvre, if memory serves. In this novel, a so-called cryptographer ran around opening secret boxes, solving puzzles, and making sacrilegious claims about famous paintings.

So, I can surmise here that “cryptographic” has to do with mysterious puzzles and/or codes. Which tracks, since Bitcoin is very mysterious, especially if you haven’t studied it in great depth to become an expert, like we are doing. (We’re nailing this!)

Which leaves us with the word “consensus.” Without looking it up, I believe this word means something along the lines of “agreement” or “togetherness”. I do know that “con” means “with”, because we just had some chili con queso the other night (“spicy things with cheese”), so that strengthens the idea that this term, herein, has something to do with a common agreement or understanding, henceforth.

Ok, we’re closing in.

“instead of relying on banks”

This one is pretty clear. As a recent example, my son practices this religiously. He had a summer job, and although we opened a bank account for him, he prefers to keep his money as cash hidden in his room. His reasoning is that the account we opened for him is not an investment account, and therefore is not making enough interest. His response when we ask him how much interest his cash is making sitting in his sock drawer is a little flimsy, in my opinion.

Nevertheless, my son demonstrates this concept well, I think. He does not rely on a bank, but keeps his financial assets in the same place he keeps the socks he refuses to wear.

Alright! I think we can finally land this plane.

What is Bitcoin?

Based on what we have reasoned, I think we can pretty clearly define Bitcoin, what it is an what it does:

Bitcoin is money. It simply works. It doesn’t exist in just one place, but in many places, like Brooklyn and Miami, among others. It is available to a wide cross-section of people, including plumbers, rappers, and those in charge of crypt upkeep, just to name a few. It is, in short, for the global community, a currency for the people, by the people.

BUT, in order for it to be its most effective, we have to come together and rally around it, must agree that it is, in fact, money and that it does work. Like much fine art, it may be puzzling, a nonsensical, abstract thing, at first or always; but we must stick together and just enjoy that it is a thing, a thing that allows us to, once and for all, not rely on stupid institutions like banks.

That, my friend, is what you need to know about Bitcoin.

And by the way, if there are other advanced concepts that it might be helpful for me to tackle, let me know! I’ll get to it “soon”.

Herein and henceforth.

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Thanks as always for reading! Would love to hear from you. Feel free to leave a comment, or reply directly.

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