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Bitcoin! by Derek Braid

cacheflow.ca @Royal_Arse

Part 1: Laymen Intro to Bitcoin Part 2: Technical Intro Part 3: Future of Crypto currencies

Bitcoin for Intelligent Investors: Value in New Protocol

How do you know if something is real? What is money? In 9 words: medium of exchange, store of value, unit of account. Are loonies and greenbacks real? What about CLOs or leveraged loans?

Paul Graham evokes a primordial ooze-type analogy, suggests that we assume tech expands spreading itself out like a fractal stain.

Everything on the fringe presents an interesting problem. Get yourself to the leading edge of a technology. Live in the future.

When you get there, ideas that seem uncannily prescient to others, seem obvious to you. These might not be great businesses, but they are things that ought to exist.

Some personal examples of powerful things that should exist but do not:

  1. self driving cars https://www.youtube.com/watch?v=opKjfK1tcao
  2. github for dna www.cacheflow.ca/blog/
  3. frictionless digital banking (bitcoin and sidechains)

Common bond: extreme risk-reward asymmetry.

Bitcoin Simplified:

Bitcoin is a currency, and a network, and a protocol (set of standards and conventions).

Why is it special? the blockchain. Distributed ledger of all transactions is fully private. Transactions are authorized with by a specific, random string of letters and numbers, one from a public 'wallet' the other your private key 'signature'.

Bitcoin suffers from horrible branding. As noted, there are several complex systems at work here. Bitcoin (BTC) not exclusively a currency. The idea of keeping private keys in a wallet with a public address sounds like that money is vulnerable! Again, poor branding, the wallet hold the thing of most value, your private keys, and the wallet address, while public, is as harmless to share as your license plate number.

License plate number analogy helps to iron out the identity/privacy situation with bitcoin: it is anonymous, but public. HUH? I know. Anon meaning your wallet doesn't explicitly have your name on it (wallet is identified by whatever numbers/letters are assigned to it, like the plates).

Money is already digital, stored as 0 and 1 in various servers for mega-banks, money transmitters and investors. Central control -- intermediation -- by bankers, lawyers and others is very costly. Fees for VISA or Mastercard range from 150-300bps.

Bitcoin eliminates/reduces the need for costly payment infrastructure required for AML and fraud.

Common Objections:

  1. Punks in basement, mysterious: white paper, open source software. Satoshi in 2008/2009.

  2. Paradox of decentralization: don't need 3rd parties, make money by being 3rd party... WTF

  3. Good pipe vs. bad pipe -- SMTP (email) protocol vs SMS (text message)

  4. EARLY ADOPTERS are financially and/or technically savvy. Educated and wealthy. Why?

  5. How is it created? Doesn't matter. How is money created? What is money? For simplicity, just assume that it exists and will exist for some time. See proof of work vs. proof of state, of bitcoin mining.

Real World Examples:

ChangeTip, CoinKite, Brawker, many more! See www.cacheflow.ca/blog/bitcoin/