By Raphael Meyer
The cryptocurrency Bitcoin was conceived during the last financial crisis. Its creator, the mysterious Satoshi Nakamoto, quoted a newspaper article regarding the “bailout for banks” in the very first record of Bitcoin’s public ledger: the cryptocurrency was made to be independent of all governments.
Coincidentally, every election year since its inception, Bitcoin enters a cycle of its own: following a hard-wired design, the yearly supply of new bitcoins is cut in half. In the Bitcoin network, new payments are recorded into the public ledger – the blockchain – by participants called miners. Miners compete with each other, and every 10 minutes on average, one of them gets to write a new page of the ledger and is rewarded with newly created bitcoins. Since May 11th, this reward has been cut in half, bringing the daily crop down to 900 bitcoins. As a result, the stock of bitcoins will grow by less than 2% per year until the next “halving” event, sometime in 2024.
Bitcoin’s hard-coded supply reductions happen for a reason: by issuing fewer and fewer coins over time, they ensure that the number of bitcoins in circulation will never exceed a predetermined maximum. In other words, the quadrennial cuts make bitcoins a scarce resource. With more than 18.5 million coins already in circulation, the remaining 2.5 million will be created, at a slower and slower pace, well into the 22nd century…
A couple of years ago, I was asked to make a short presentation about Bitcoin to a non-technical audience. I had studied computer science in college in my home country of France when the internet was just coming together (Netscape was the top browser at the time!), and I had worked thereafter in research and the multimedia industry. Naturally, I had kept an eye on the further evolutions of the internet, whether it was e-commerce, peer-to-peer networks, or the rise of social media. But I had not heard about Bitcoin until 2012. Honestly, it sounded like a very nerdy experiment: digital tokens that you could exchange for pizza? Not so exciting.
Around 2014, however, I kept hearing again about the cryptocurrency and decided to give it another look. By that time, Bitcoin was more institutionalized: one could buy bitcoins directly from cryptocurrency exchanges (brokers) rather than through personal connections. So, I did: I bought a few at around $200 per coin, thinking it was an excellent way to get involved in this experiment. I also thought they were very expensive: just a year or two earlier, the price had been around a dollar per coin! Of course, now I wish I had been even more adventurous then, but as the proverb goes, hindsight is 20/20!
As I was getting my presentation ready, I realized I still had much to learn about Bitcoin. The internet was full of information about cryptocurrencies, but there was a lot of lingo to decipher. To understand mining, you had to know what Proof-of-Work meant, but to understand Proof-of-Work, you had to know about one-way functions, and so on. I realized why so few people knew about Bitcoin: the information available was either too vague or too technical. I was afraid of getting lost myself.
Still, my presentation went quite well. So, instead of keeping all my notes to myself, I decided it could be useful to assemble these into a short book with a simple goal: to present Bitcoin clearly, but without oversimplifying so much that its essence would be lost.
The result, which I called Keys to Bitcoin, is – I hope – the opposite of a Google search. It introduces Bitcoin idea by idea, each chapter building on top of the previous one. I try to situate Bitcoin in the history of money, somewhere between the stone discs of the Pacific islands and the US dollar. Yet, I am as blunt as possible about the current limitations of the cryptocurrency. The book is not meant to sell you Bitcoin (or to scare you from it), but to explain it.
Bitcoins can be used to buy furniture, cars, software, or to book hotel rooms (when we’ll be able to travel safely again). They can also be sent across the globe in a matter of minutes without any intermediary. Cryptocurrencies are evolving technologies with the potential to reshape the world of finance and to move control from institutions to customers. They’re fascinating. And no, Bitcoin isn’t dead.
Raphael Meyer lives in Greenwich. He grew up in France and has a Ph.D. in Computer Science from ENS Cachan. He’s the manager of ADR Collection, an art investment company, and writes cryptocurrency articles on Medium (https://medium.com/@meyer.raph).
