Mindblown: a blog about philosophy.
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Cryptography And Economics
Bitcoin combines computing and cryptography with a clever system of economic competition and rewards that ensure it’s in everyone’s best interest to respect the rules without the need for a central authority. Instead, the network manages itself, and no single party controls the system. Bitcoin rewards honest “work” that supports the network (validating transactions, as…
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How Bitcoin works
Bitcoin was created by an individual (or group of individuals) who went by the alias of Satoshi Nakamoto. To this day, nobody knows (at least publicly) who Satoshi Nakamoto is – and that’s arguably their biggest legacy to the community. By vanishing into the ether soon after Bitcoin was robust enough, Nakamoto has done away…
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What you`ll learn
What you’ll learn How Bitcoin achieves sound money An introduction to Nodes, Blockchains & Mining Bitcoin’s economics – money supply & inflation Bitcoin’s limitations
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A growing money supply
As more value is created via economic activity, new money must be introduced in the system so that the economy can continue to flow. Grossly oversimplifying, new fiat money is created by Commercial Banks. The extent to which they create new money is rationed by the Central Bank. These are common ways: Providing credit, like…
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Problem of trust in digital money
Money can only be useful (and sound) if the ledgers can be trusted to be accurate and honest, and if its supply is kept under control. This means unreasonable amounts of money won’t suddenly be created or destroyed, with consequential impact on its spending power. So how do fiat currencies solve this today? Simple: the…
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Achieving digital scarcity
A scarce commodity is something that has a limited supply; it isn’t easy to create, copy, or otherwise access. Physical stuff can be scarce (like we’ve seen with gold), but digital things are an entirely different matter. A byte is very easy and cheap to copy, as the music and film industries have painfully discovered…
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Importance of money holding value
Money is a metre/yardstick for measuring value. This aspect of money is taken for granted by everyone who participates in the economy by using it as a medium of exchange. All trade and economic activity relies on it – it’s like a universal language. And just like when we speak our own language, we don’t…
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Bitcoin, scarcity and trust in money
In the previous article, you learned the definition and basic characteristics of a cryptocurrency – including the distinction between the money and the money system, and the role of cryptography. You also had a brief intro to the history and evolution of money up until Bitcoin. This should have given you a grasp on how…
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What you`ll learn
What you’ll learn Why scarcity matters so much for sound money How the existing money system works Fiat money isn’t scarce & why that is a problem Why achieving digital scarcity is such a big deal
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Two for one – Internet money and investment
When the Bitcoin system launched, its currency, bitcoin, was pretty much worthless. It wasn’t until 2010, when someone paid 10,000 BTC for a couple of pizzas, that bitcoin began to give signs that it could be used as money. As of April 2021, that would amount to US$ 600,000,000 – easily the most expensive dinner…
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