UNDERSTANDING BITCOIN

AND THE FUTURE. HOW WHAT

YOU KNOW WILL BE
REDEFINED FOREVER.
By Adrian Iliopoulos  | 
13 minute read  | 
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Understanding Bitcoin and the Future. How What

You Know Will Be Redefined Forever.
 
Bitcoin.
 
A crypto-currency.
 
A decentralized application.
 
A bubble.
 
An investment.
 
A speculation.
 
The next big thing after the Internet.
 
These are only some of the epithets and
descriptions people like to give to bitcoin. The
reality, however, is that none of them really
describes what bitcoin is and how this idea will,
probably, redefine the future of humanity forever.
 
For me, the journey to the mystical landscape of
bitcoin started almost 5 years ago. Back then, I
wasn’t really involved in investing and businesses. I
was just starting my baby steps in the
entrepreneurship world and I was just following
mainstream startup outlets to educate myself on
the happenings of the community. The term
bitcoin was still very nebulous, but most of the
technology geeks in the startup world showed
interest in it and that was enough to tantalize me a
bit.
 
In the beginning, my interest was infinitesimal,
since its valuation was insignificant and the
technology seemed quite complicated and unsexy
to invest the time required to understand its
mechanics. As time went by, I kept following the
trends and, although I was still a bit reluctant, I
started to realize that this seemingly trivial
speculation became a serious life investment for
some people.
 
The year I decided to take bitcoin seriously was
the year 2015 and it coincided with my reading of
the book “Sapiens” by Israeli historian Yuval Noah
Harari.

In this magnificent work, Harari explains how,

throughout the history of mankind, humans
created powerful stories in order to give our lives
purpose and consequently ensure the stability of
our social edifice. Without stories, we feel lost and
desperate. Stories metamorphose our lives into
adventures and act as moral compasses that allow
us to recalibrate our existence during dark times.
 
I saw the power of stories everywhere around me.
In religions, in politics, in social theory, in
economics, in movies. And that’s when it dawned
on me. I came to realize that bitcoin is nothing
more than another story. A story created by some
extremely intelligent people and gained steam by
being adopted by more intelligent people. When
smart people come together and unite around a
powerful story, you can’t help but realize that there
is serious potential in it.
 
So, I decided to invest a significant amount of
money in this story and, today, view it as one of the
most important investment decisions I have ever
made.
 
As a serious bitcoin hodler (I explain below) and a
person who has skin in the bitcoin game, I consider
it a personal responsibility to educate people
around the bitcoin story and also evangelize its use
so that its promises can eventually be materialized.
 

Explaining hodling: Back in 2013, member

GameKyuubi of the bitcoin forum
bitcointalk.org, started a post titled “I AM
HODLING.” This was a 200-word rant of him
expressing how difficult it is to be a bitcoin
trader with the constant ups and downs.
Obviously, he didn’t realize that he misspelled
the word hold, but the bitcoin community
adopted the word and made it a word of
reference for everyone who believes in bitcoin
and is willing to hold no matter what.

 
In the following paragraphs, you will read not only
my explanation of the bitcoin story so far but also
an analysis of the underlying meaning of this story.
 
Enjoy.
 

UNDERSTANDING BITCOIN:
HOW IT ALL STARTED – THE
SATOSHI NAKAMOTO
STORYLINE
 
October 31, 2008. In a cryptography mailing list
called metzdowd, devoted to cryptographic
technology and its political impact, a member with
the name Satoshi Nakamoto published an email
titled Bitcoin P2P e-cash paper. In this email
Nakamoto introduced the members of the list to
Bitcoin: A Peer-to-Peer Electronic Cash System.

It was an exceptional piece of work predicated on a

very revolutionary idea – how to send online
payments directly from one party to another
without the burdens of going through a financial
institution.
 
In a nutshell, what Bitcoin does is it creates a
robust decentralized network of exchange that is
based on a technology called blockchain. Now let’s
explain the fuzzy terms:
 
Decentralized: This means that there is no central
authority that regulates the transactions. In our
current state of affairs, if I want to send money to
someone online I need to do so through an
intermediary like a bank or an online payment
processing system (paypal, stripe etc.). This kind of
system creates a plethora of problems ranging
from hidden fees to lack of anonymity and also a
huge dependency on the system itself.
 
Blockchain: This is a technology proposed by
Nakamoto that tries to solve the infamous double
spending problem. Double spending occurs when
the same single digital token can be spent more
than once. This is possible because a digital token
consists of a digital file that can be duplicated or
falsified. Imagine the equivalent of counterfeit in
digital form. He addresses the issue by creating
blocks of transactions within the network called a
blockchain that are cryptographically secured. The
level of cryptography entailed in this process is
quite sophisticated and ensures that the
transactions are safe and that there is no ambiguity
behind the operation of the network.
 
One can realize the depth of Nakamoto’s intellect
by reading how elaborate the structure of
his/her/their work is. This paper is not something
a normal person could come up with. It is a very
complex algorithmic process that requires a great
deal of knowledge in computer science,
mathematics, and cryptography.
 
My estimation is that Nakamoto, although in the
paper he makes use of “we,” is one person and most
probably a male with a high-level degree, possibly a
PhD, in computer science or cryptography. People
suggest that he is of British descent because in
various posts he makes use of Britishisms, such as
“bloody hard,” and that he dwells somewhere in the
eastern parts of the Americas (because of the
timestamps on his e-mails). His command of the
English language is quite advanced and that
suggests that he is a native English speaker. The
name Satoshi Nakamoto is clearly a pseudonym and
it could have been picked for various reasons.
Satoshi is a very common Japanese name (one of its
interpretations is philosophy or enlightenment)
and Nakamoto means ‘central origin’ or ‘(one who
lives) in the middle.’ One could make the
assumption that the use of the words Satoshi and
Nakamoto allude to the idea behind Bitcoin and its
decentralization theme. Also one could presume
that he spoke Japanese or that he admired the
Japanese culture.
 
Regardless of how the persona of the bitcoin
creator is interpreted, one thing remains certain.
This person was extremely intelligent, he valued his
anonymity and he wanted to ensure that he
wouldn’t stay long in the spotlight.
 
After his initial email in the cryptographic
community newsletter, he released the Version 0.1
of bitcoin software on Sourceforge on 9 January
2009. According to Wikipedia, “Nakamoto created
a website with the domain name bitcoin.org and
continued to collaborate with other developers on
the bitcoin software until mid-2010. Around this
time, he handed over control of the source code
repository and network alert key to Gavin
Andresen (lead developer in the Bitcoin project),
transferred several related domains to various
prominent members of the bitcoin community, and
stopped his involvement in the project.”
 
His final email or personal message to the bitcoin
community is dated April 2011. In it, he told to Mike
Hern, one of the developers of the bitcoin code at
the time, “I’ve moved on to other things. It’s in
good hands with Gavin and everyone.”
 
Satoshi Nakamoto is now a legendary figure. The
public bitcoin transaction log shows that
Nakamoto’s known addresses contain roughly one
million bitcoins (they were all part of the first
blocks mined). As of 17 December 2017, this is worth
over 19 billion USD. This makes him the 44th
richest person on earth.
 

THE POST-NAKAMOTO ERA

 
Since Nakamoto rejected the role of the new
messiah (very smart move in my opinion), the
bitcoin game became open to anyone willing to
influence it. The first popular bitcoin transaction
was documented in May 2010, when Laszlo
Hanyecz, a programmer from Florida sent 10,000
Bitcoins to a volunteer in England who spent about
25$ to order him a pizza from Papa John’s.
Afterwards, the cryptocurrency started being
covered by different media outlets, thus gaining
steam. A huge number of tech-savvy investors saw
enormous potential not only in bitcoin itself but
also in its underlying technology, the blockchain,
which can be used in a wide array of applications
ranging from banking to file sharing and even
government-related processes.
 
Apart from the first Bitcoin exchanges that allow
people to buy and exchange bitcoin, many people
start to accept this new currency as a form of
payment and, not surprisingly, the most passionate
early adopters are drug dealers. Silk road, an illicit
drugs marketplace which used Bitcoin as an
untraceable way to buy and sell drugs online, is
established in January 2011, paving the way to the
evolution of the dark web and the creation of a
whole new online ecosystem.
Slowly but steadily Bitcoin becomes more
reputable and, as a result, new cryptocurrencies
that want to compete with it emerge. People
believe that there is always a better version of a
new system and want to be the first who will invent
this “better version.” Etheruem, Litecoin, Monero,
Ripple, Dash are some of the earliest alternative
cryptocoins to appear in the scene and are still
amongst the most dominant players in the
landscape.
 
2013 marks the most important year for bitcoin
since it was the year when the bitcoin price
experiences its highest surge. On November 29,
2013, the price of a single coin hit an all-time high
of $1,242.

Something important to note here is that, usually,

surges and declines in prices occur due to
statements by influential figures or critical events
in the development of the currency.
 
For instance, in November 2013, Bitcoin received
the blessing of Ben Bernanke 1 , the chairman of the
Federal Reserve. That is not a small thing. Ben
Bernake is one of the most prolific individuals in
the finance world. His opinion is taken very
seriously and many people will experience the
need to invest in Bitcoin when it is promoted by
someone so reputable.

Ben Bernanke

 
But there is also the other side of the coin. In 2014,
Mt. Gox, the most famous Bitcoin exchange at the
time closed its website and exchange service and
filed for bankruptcy protection from creditors.
That, along with the shut down of Silk road in
November of the same year, marked the
plummeting of the Bitcoin price to around $300.

From 2015 until the end of 2016, Bitcoin slowly

scaled up the charts to reach a value close to $960
by December 2016. The number of miners,
developers, and investors associated with Bitcoin
during that period grew exponentially.
 
And that brings us to 2017, the most prosperous
year for Bitcoin, to date. I am not entirely sure
what happened in 2017, but I guess that when you
create a story so alluring and with so much future
potential that will allow early investors to make
money out of, literally, thin air, at some point this
story will explode.
 
Bitcoin entered the mainstream, buying the
currency became very easy, many prominent and
respectable figures started endorsing it and, as a
result, one of the most interesting creations in the
history of mankind skyrocketed in value.
 

THE REAL VALUE OF

BITCOIN
 
Regardless of whether you have skin in the Bitcoin
game or not, you need to understand something
very fundamental about this idea:
 

“
Bitcoin isn’t something that
emerged out of the sick or crazy
mind of a random programmer.
Bitcoin was something that was
desperately needed by all of us.

 
The banks and the governments have been
controlling the monetary system since the
beginning of time and this creates all sorts of
problems for the average person.
 
First and foremost, we are dependent on two
entities that can decide about how money is
circulated within the society without them being
omniscient. Namely, their decisions are not
predicated on a flawless system that will ensure the
stability of the social edifice, but rather on
economic assumptions that are usually influenced
by the needs of certain individuals. Individuals that
are high up in the dominance hierarchy of society
and will do whatever it takes to maintain their
power and wealth.
 
The evidence of how blemished the current system
is, is indisputable. Our economic life isn’t a straight
line that leads to sustainable growth but rather a
playful interplay between moments of crisis and
moments of prosperity.

This occurs due to faulty interpretations of the

current system and the fact that we are delusional
with regards to its limits. Whenever we hit a
roadblock, we try to squeeze everything we can
out of the monolithic structure we have created,
thus creating debt and bubbles. These bubbles, in
respect, lead to moments of crisis where we seek
the intervention of “the invisible hand” which
offers temporary and unsustainable solutions to
our predicaments.
 
The funny part is that the inexorable propagation
of this system can’t continue forever and it will
evidently lead to anomalies. From my
understanding, such an anomaly we experience at
the moment with the dawn of Bitcoin and other
cryptocurrencies.
 
Bitcoin suggests something very simple, yet
something very revolutionary:
 
It’s the first time in history we can start discussing
alternatives to the current Fiat standard. Back in
the 1800s people used to rely on gold to estimate
the value of the currencies in circulation. Every
dollar was connected to a certain amount of gold
and that helped the value of a dollar stay stable.
This system was quite efficient, but not really that
flawless.
 

Fiat explained: Fiat is a Latin word that means

“let it be done” and it is used to signify an order
or decree. That is, fiat money is money issued
by the government and regulated by the
government. It has an assigned value only
because the government uses its power to
enforce the value of a fiat currency. Every
country in the world has a fiat currency that is
issued by the respective government and is
 susceptible to economic fluctuations, such as
inflation or deflation.

 
During the great depression in the 20s, the gold
standard inhibited economic growth because it
prevented the Federal Reserve from expanding the
money supply to stimulate the economy, fund
insolvent banks and fund government deficits that
could “prime the pump” for an expansion.

Also gold, in and of itself, doesn’t have any

tremendously significant usability. Yes, it can be
used in jewelry, electronics, and some other
industries, but that alone isn’t enough to make it an
important asset. What triggered the idea of a gold
standard was that gold was a very expensive metal
with limited circulating supply.
 
Which is an argument tantamount to the Bitcoin
argument. When Satoshi Nakamoto invented
Bitcoin, he did so with the intention of creating a
specific amount of Bitcoins that could be mined.
Specifically, there are 21 million Bitcoins to be
mined and, according to estimations, the last
bitcoin will be mined in 2140.
 

Bitcoin Mining: The mining of bitcoin isn’t a

simple process. When Satoshi introduced us to
the concept of Bitcoin, he also created a
mathematical algorithm that allowed
programmers to mine it using powerful
computers. The need for a powerful computer
is essential because the way this algorithm
works is that it makes computers compete with
each other in order to decode specific
cryptographic elements involved in the process
of bitcoin creation. This video explains it in
detail. Basically, each block that is added in a
blockchain contains a specific amount of
bitcoins that can be mined by solving a
cryptographic riddle. Every four years the block
size is halved and the number of bitcoins that
can be mined in each block decreases. Satoshi
did that to make the game of mining more
interesting and probably lengthier.

 
If we take the limited circulation into account and
add on top of that the incredible feasibility and
usability prospects of bitcoin, that include
decentralization, security, anonymity, and ease of
use, bitcoin becomes one of the most important
alternatives to fiat currencies the world has ever
seen.
 

WHAT THE AVERAGE

PERSON DOESN’T GET
ABOUT BITCOIN – 
PHILOSOPHICAL
ARGUMENT
 
On the surface, Bitcoin is a digital currency. For
when people get interested in it, they do so
because they see it as a form of investment or as an
alternative payment method. However, when one
starts to dive deeper into the idea of what Bitcoin
represents, one can see something quite
groundbreaking. One can see the future of
humanity.
 
If you take a look at our history as species, you will
realize that our progress is predicated upon the
progress of our governing systems. What we are
constantly trying to achieve is the optimization of
our societies in order to reach a state of universal
equality and dissipation of suffering. We have tried
monarchy, oligarchy, democracy, communism, and
other forms of governance and none of them have
lived up to our expectations. Our ideal political
system is none of that.
 
Ideally, we would be happy with a mode of anarchy
that favors the ability of the individual to offer
value within society. We don’t need governments
to take care of us. We know that we can do that by
ourselves, but the mere structure of our social
patterns don’t allow us to do so.
 
Especially when the monetary system is structured
in such a crazy way.
 
And here is where the idea of Bitcoin comes into
play. Bitcoin is a decentralized system, which
means that it is not governed by anyone. This
seemingly small idea can lead to a monumental
shift in the way we interact with each other and
eventually re-engineer our whole thinking motifs.
 
The average person doesn’t see that. However,
bitcoin renegades, do see it. And if they don’t see
it, they feel it. That’s what makes them so crazy
about bitcoin. That’s what really keeps them
investing in it.
 
Throughout my whole life, I have been part of
many social groups. I have been part of football
teams support groups, I have been part of
university groups, I have been part of political
groups. During my interaction with various entities
within the groups I joined, I noticed a similar
pattern. The groups that usually prevailed were the
ones whose supporters showcased two important
attributes: Dedication and intelligence.
 
Dedication is required in order to keep the group
running. Without dedication, the members can’t
stay engaged and, eventually, the group dissolves.
However, dedication alone isn’t enough. You can be
dedicated, but if you aren’t smart enough to
understand what goes on behind the veil of reality,
you can’t sustain a group’s stature and also
outperform other groups.
 
The bitcoin community is comprised of some of
the most dedicated and intelligent people I have
ever encountered in my whole life. Take a look at
this talk by Bitcoin evangelist Andreas
Antonopoulos:
The intellectual rigor and the passion entailed in
his speech is contagious. And he is just one of the
many intellectuals that have embarked on the
bitcoin train and are urging the rest of us to join
too.
 
Notwithstanding, an important thing to note is that
the major adopters of the bitcoin philosophy aren’t
the average joes of the world. They are people with
skin in the game of technology and knowledge in
areas like programming and engineering. That adds
a layer of security in the bitcoin movement that
very few revolutionary movements in the history
of the homo sapiens species accrued.
 

IN CLOSING – IS IT A
BUBBLE AND WHAT WILL
DETERMINE ITS FUTURE?
 
Most people will fight bitcoin and that’s a fact. That
fighting is not just a byproduct of an astute lack of
understanding in the concepts I just described, but
also because of a resistance to change and the
inherent self-preservation mechanism most
humans fall a victim to.
 
What will determine bitcoin’s robustness is the
community’s major players’ tenacity to keep on
playing and that involves miners, programmers,
investors, evangelists and entrepreneurs who are
willing to risk everything to make this work.
 
History is full of similar revolutionary movements
and we all know that the change such a revolution
will bring about isn’t monumental, but it is
definitely a change in a better trajectory than the
one we are heading.
 
The use of the word bubble many bitcoin anti-
sympathizers are prone to is fallacious since most
bubbles in history were carried out by scammers
who were willing to take advantage of people’s
greed. Bitcoin is far from what these people
promulgate.
 
Yes, some ICOs have a bubble element entrenched
to them but one needs to be able to discriminate
between ICOs and bitcoin.
 

ICO Explained: An ICO is an initial coin offering

and all it does is to try and bypass traditional
funding systems. When a startup or a small
business needs to raise money, they can either
do so by using their own funds or asking a bank
to lend them or trying to convince an angel
investor or a VC to buy equity. An ICO is, in
essence, an early stage IPO. The company
introduces its concept in a white paper and
issues coins that are worth an equity stake in
the company and every person interested in
investing can acquire these coins. This is an
interesting system but it also begs the question
of how many of the ICOs out there are
legitimate. Many people are buying into the ICO
craze and invest in companies without even
understanding major investment principles.
Evidently, this creates a bubble; a bubble that
surely will burst at some point.
 
The game is a marathon and not a sprint. It is a
game that involves high stakes, risk, drama,
influence, persuasion, money, politics, psychology,
philosophy, economics, and history.
 
For some reason, it is a game many people find
tantalizing. And, sometimes, that’s all it takes to
play a game and, eventually, redefine our world
forever.
***
 
What should I do as a bitcoin beginner: Many
people have asked me if it is too late to buy bitcoin.
Well, my personal view is that it is still a great time
to buy bitcoin. Of course, it would be great to have
bought 2-5 years ago, but I believe that we haven’t
reached the peak of its price. That is because it is
still a young technology, it is not mainstream yet,
and we haven’t experienced its full potential. I don’t
really think that bitcoin will ever go beyond
$100,000 because that is insane, but it could rise up
to $60,000-$100,000 at some point. I see bitcoin
the same way I see stocks. Its value is predicated
upon how effective it is as a “business” and how
much people value it. For instance, if you bought
$10,000 worth of Amazon stock back in 2000 when
the price was $20, today you would probably own
half a million dollars. As a general rule of thumb, I
advise people to not invest more than they are
willing to lose. Also look at other cryptocurrencies
and follow the same tactic. All you need to do is
educate yourself. Knowledge is power. Also, in case
you decide to invest, make sure to diversify with
regards to where you keep your crypto. I suggest
using a popular platform like Coinbase and a
hardware wallet like the Ledger Nano S.
 

If you feel that you don’t have enough

knowledge in bitcoin and crypto, my suggestion
is to spend at least 30 minutes per day reading
relevant articles and books. I did that for more
than 6 months and now I feel quite competent
in the field. If you like accountability, gaining
knowledge in a new topic is one of the
challenges I suggest in “30 Challenges-30 Days-
Zero Excuses” along with 29 more that can
evolve one’s mindset in unprecedented ways. I
strongly suggest that you accept the challenge.
You have nothing to lose and so much to gain.

***
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And if you enjoy video, here is the video essay
version of this post: