Explain Bitcoin Like I’m Five

freecode.org ^ | December 12, 2013 | by Nik Custodio

[aMorePerfectUnion]

If you still can’t figure out what the heck a bitcoin is…

I have one apple with me. I give it to you.

You now have one apple and I have zero.

That was simple, right?

My apple was physically put into your hand.

You know it happened. I was there. You were there. You touched it.

We didn’t need a third person there to help us make the transfer. We didn’t need to pull in Uncle Tommy (who’s a famous judge) to sit with us on the bench and confirm that the apple went from me to you.

The apple’s yours! I can’t give you another apple because I don’t have any left. ...You have full control over that apple now. You can give it to your friend if you want, and then that friend can give it to his friend.

What if we gave this ledger — to everybody? Instead of the ledger living on a Blizzard computer, it’ll live in everybody’s computers. All the transactions that have ever happened, from all time, in digital apples will be recorded in it.

You can’t cheat it. I can’t send you digital apples I don’t have, because then it wouldn’t sync up with everybody in the system. It’d be a tough system to beat. Especially if it got really big.

The rules of the system were already defined at the beginning. And the code and rules are open-source. ...

You could participate in this network too and update the ledger and make sure it all checks out. For the trouble, you could get like 25 digital apples as a reward. In fact, that’s the only way to create more digital apples in the system.

[aMorePerfectUnion]

Think of Tulip Mania in the 17th century. Then think about what happened when the tulip “holders” discovered there were other flowers in the world.

There are times of irrational exuberance in the stock markets periodically. I've managed money through them.

The current run up in crypto "feels" to me like the run up of stocks in 1998-2000.

People bid up the prices - particularly of internet companies - to unrealistic levels.

Eventually, we learned how high "up" is and the market corrected.

If I remember correctly, Amazon dropped 90%.

Eventually, the internet became mainstream and today Amazon is one of the largest companies in the world.

But of course, to your comment, tulips had little intrinsic value and it was short-lived.

Time will tell.

But my own take is that the Blockchain is transforming business already and will continue. That is why I'm involved.

[zeugma]

One of the things bitcoin is based on is that some problems are intrinsically difficult mathematically. Much of the work of bitcoin mining is the problem of finding very large prime numbers. Once you have them, you can take the two very large primes and multiply them together to give you an even larger number. Factoring this number is much more difficult than finding the original primes themselves. There are several reasons for this, in addition to the fact that there are actually shortcuts available mathematically to determine that a specific number is prime.

Here is a concrete example that I brought up last time this was discussed here a week or so ago. I run Linux on my computer so it has some rather useful programs available to do this demonstration. The first program is called 'time'. You invoke it by preceeding another program that you want to run. Once the program is done, 'time' tells you how long it took to run the other program. The second useful program is called 'factor'. Unsurprisingly, this program will factor a number. If the number is prime, it only has one factor. The third program is 'bc', which is a command line calculator that can deal with numbers that are arbitrarily large. Now, to the demonstration:

$ time factor 325928985563371356674384180771539
325928985563371356674384180771539: 325928985563371356674384180771539

real    0m0.001s
user    0m0.001s
sys     0m0.000s
$ time factor 6663742992756402236816080367
6663742992756402236816080367: 6663742992756402236816080367

real    0m0.001s
user    0m0.000s
sys     0m0.000s
$ bc
bc 1.07.1
Copyright 1991-1994, 1997, 1998, 2000, 2004, 2006, 2008, 2012-2017 Free Software Foundation, Inc.
This is free software with ABSOLUTELY NO WARRANTY.
For details type `warranty'. 
325928985563371356674384180771539 * 6663742992756402236816080367
2171906993684118463655790070573355681075427646504235890274813

So, from the above you can see that it took .001 second to factor each of these 2 numbers. You can also see that when multiplied together they result in a 61 decimal digit long number.

A couple of weeks ago, I fired up the factor program to see how long it would actually take to do the job of factoring it. Well, it has been 16 days now on my i9 intel processor. The 'factor' program is single-threaded meaning it basically just maxes out one core on my 16-core CPU.

$ ps -ef | grep factor
amp         5281    2805 99 Mar14 pts/1    16-00:46:40 factor 2171906993684118463655790070573355681075427646504235890274813

The above shows that this program has consumed 16 days, 46 minutes, and 14 seconds of CPU time on a modern processor. Obviously, if you were using primes that were themselves that large before you multiplied them together, the resultant number would be insanely impractical to factor.

There are other quibbles about that, because a modern video card is actually much more efficient at math than a general-purpose CPU, also that there is a lot more to bitcoin than large prime numbers. However, at it's core that's what it is based on.

I really wish the 'factor' program was multithreaded, so that I'd get 16 days worth of computation for each actual days that passed. I'm gonna let it run until it completes, or I need to reboot for something. I wouldn't be entirely surprised if it ran for another month.

[Vermont Lt]

If hackers take down the entire internet, we will have bigger problems. The Blockchain needs six computers working. In the world.

And with my bitcoins, I can buy tulip farms.

[aMorePerfectUnion]

Pretty amazing!

[Vinnie]

Thanks

[zeugma]

First, please explain “Q.”

Q is the 17th letter of the english alphabet.
In ASCII, 'Q' is the 81st defined character. It is represented in binary by "01010001".

Let me know if you need any more assistance. I'm here all day.Try the beef.

[PIF]

First you find somewhere that has abundant and very cheap power;

Make sure there are few to no environmental regulationsm and any that exist can go away with a simple bribe;

Make sure there is a large semiconductor plant under your control such that you get first priority;

Set up plants near a large cooling facility, preferably near several;

Hire cheap labor;

Install server farms on every floor in your mega plants;

Begin solving mathematical problems;

Convince the world that the product is worth money;

Where is that? The home of 80% of the world’s bitcoin mining? Who owns the plants?

Easy answers: China, China, the CCP.

[cgbg]

I certainly don’t trust national currencies—but the big countries have two things going for them—big military/police forces and a ruthless willingness to use them to preserve their power.

That tells me that crypto-currencies will end in tears—if governments view them as serious competition they will just ban them—using any means necessary fair or foul.

[SeekAndFind]

Let’s step back a bit and first, briefly explain the blockchain using something he can understand: a choo-choo train.

Imagine that the blockchain is a loooong train — a blocktrain, if you will.

This train contains a public record of all bitcoin transactions. Each time a trade is made through a cryptocurrency platform like Coinbase, the details of the transaction are coded and broadcast, along with other transactions, to a vast network of users called bitcoin miners.

From there, the following process unfolds:

1. Miners compete to add the next car to the train by bundling up a bunch of transactions into “blocks.”
2. Miners solve a computational problem (called “proof of work”) that assigns the block an identifying code (a hash).
3. The “winning” block is distributed to, and verified by, all the other miners in the network and is added to the blockchain.

Only one car can be added to the train at any given time, and each one takes ~10 minutes on average to verify and attach.

---

These bitcoin miners serve 2 major functions:

1. They are the printing press of bitcoin: Adding new blocks to the blockchain is the only way to release new bitcoin into circulation.
2. They are the auditors of bitcoin: Through the process of mining, they verify the legitimacy of all transactions on the blockchain.

By solving the equation first and adding the next block to the chain, a miner is rewarded with a set amount of bitcoin.

When bitcoin mining first started, the reward was 50 bitcoin (BTC). But as dictated by the coin’s creator, the reward is cut in half every time 210k new blocks are added to the chain — or roughly every 4 years.

As of February 2021, miners receive 6.25 bitcoin for every new block they mine — or ~$294k based on the current market value. They also get to keep the transaction fees from the trades in that block, which are currently around $20/trade.

Today, it’s estimated that there are more than 1m bitcoin miners in operation — and they’re all competing to add the next block to the chain.

Combined, the rewards these miners earn top $1B per month.

[Kevmo]

If bitcoin had any true intrinsic value, then countries like Venezuela or Zimbabwe would tie the value of their own currency to it so as to level out those times of extreme inflation.

It looks to me like a monetary Ponzi scheme.

This article fails to explain bitcoin.

[thinden]

bbb

[SeekAndFind]

Diagram illustrates how the process works end to end while bringing together all the technical building blocks - Wallets, Transactions,Miners & the Blockchain.

[aMorePerfectUnion]

If bitcoin had any true intrinsic value, then countries like Venezuela or Zimbabwe would tie the value of their own currency to it so as to level out those times of extreme inflation.

How would they do this specifically??

[Rightwing Conspiratr1]

First, please explain “Q.”

Q works for MI-6 and supplies special equipment to 007.

[Tallguy]

Except it isn’t ‘printed’ and the sum-total of Bitcoin is fixed (actually like gold, a tiny fraction gets created as “payment” for the computational work.). You can’t have “inflation” like when the FED creates money from nothing.

[aMorePerfectUnion]

First you find somewhere that has abundant and very cheap power;

Not so fast.

[Renkluaf]

Blockchain is valuable tech; BC trading is the greater fool theory.

[aMorePerfectUnion]

who says bitcoin has value?.

Everyone who buys it.

The market is the best price finding mechanism ever created:

It is composed of the following buying bitcoin and other crypto:

Individuals,
banks,
insurance companies,
COUNTRIES.

[gloryblaze]

Kewl. But I can’t afford a tip. I haven’t gotten my 14 hunert yet.

[aMorePerfectUnion]

BC trading is the greater fool theory.

Maybe so. To be revealing in the future. So far, the world's smartest institutions seem to believe something different than you are claiming. So are they greater fools than you? If so, why??