Thoughts on Bitcoin
Published:
Bitcoin is a decentralized censorship resistant technology, open and permissionless for all. There are no third party issuers or charismatic leader to influence the protocol. Bitcoin is an open protocol that anyone can examine and critique. Its source code can be inspected and openly improved through the Bitcoin Improvement Proposal (BIP) process. Bitcoin is often compared to the TCP/IP protocol. TCP/IP is the foundation of the internet to transmit packets openly across the internet. Bitcoin is the monetary layer on top of TCP/IP to transmit value peer to peer.
Bitcoin solves the problem of digital scarcity. Analogous to the physical world of precious metals and rare commodities. There has always been a void in reenacting scarcity in the digital domain. This has progressively been relevant with the advent of e-commerce and high speed internet, particularly as businesses and entire industries are built on the internet. Having a native currency for the internet was the next logical step. The challenge, however, was solving the double spending problem. Satoshi Nokomoti assembled the ingredients in the right proportions to solve this with proof of work, game theory, asymmetric cryptography, and so on.
So Bitcoin is the first known digital scarce commodity, now what? As Bitcoin continues to gain adoption, its essential engineers and cryptographers continue to enhance the foundations of the protocol. Satoshi has endowed the world with a base layer monetary protocol for peer to peer transactions and final settlement. Similar to TCP/IP or the OSI layer, there are opportunities to build other layers on top of Bitcoin. Popular of which is the lightning networks. Lightning facilitates instant transactions where the baselayer may take minutes. Following Lightning, there are numerous applications at higher layers of the protocol (e.g., eliminating intermediaries to stream micropayments directly to creators, staking payment to limit spam, etc.).
Having a native internet currency grants limitless possibilities to open and democratize the transfer of value. Following history, it’s evident that building in layers has been the approach that has turned out well (e.g., the Linux operating system, network protocols, etc.). Continuing in this direction permits many other applications to be built on the solid Bitcoin rails.