Bitcoin October 3rd, 2021


I don't know anything about Bitcoin and everything I say is usually wrong.

Imagine Alice grows turnips in a village. Everyone buys her turnips because hers are the best around. She trades them locally with money.

Then one day, she hears that there's a guy Bob in a village far away that wants to buy her turnips. She can't sell them there herself because it's too far, but hey old Eve there has a horse and cart, so you say "hey Eve, fill that cart up with turnips. Take them to the other village, sell them, you take 10% and I get the rest."

So off Eve goes to the other market. Eve sells your turnips on and takes a cut. Then after a while, because of all the new business other people start buying carts, and reselling your turnips elsewhere too.

After a while most of your business is exporting turnips. Then one day, you find out that Eve, and all the other resellers, have been forming a cartel to try and lie about how many turnips they actually sold, and you didn't get nearly the money you should have. And they got away with it because they all outnumber you, and no one saw it happen and no one seems to care.

This happens because the reselling happened far away, where you couldn't see it. The trade you do in person is all fine because you can check it, but once that horse and cart disappears over the horizon then the money kinda disappears with it you see.

What happened was Alice and Bob were trying to have a private transaction, but Eve somehow was able to eavesdrop on it, and siphon money out of the system for herself.

Cartels naturally arise in any system where all players cannot trade directly.

This always happens, because as long as there's a sink/source that can take money far enough so that no one person can see the whole system, scams can always be run. There'll always be an Eve, as long as you don't have direct contact with your customer. Local economies create middle men.

Bitcoin fixes this. With Bitcoin, Alice sells the turnips direct to Bob and Eve is simply hired as a delivery driver. Eve never handles the money. The reason Bitcoin is able to do this is because the blockchain creates, for the first time in history, a historical record of events that we can actually PROVE happened. History books can be inaccurate. If you show me a note saying you have $1000 you could pay me, I can go check with the bank to see if that's correct or not. But the bank could be in a cartel with Eve, you see. They could lie too. Or someone else down the chain could be. Because there's always an Eve, unless you remove all secrets from the world. Which Bitcoin does, because now we can make facts mathematically provable.

Bitcoin removes not just Eve but all middle men. From society. Forever. That's why it's cool.

Written by Richard Mitton,

software engineer and travelling wizard.

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