What is the exact concept of Bitcoin

Darknet

On January 3, 2009, Satoshi Nakamoto pressed a button and started a project that should change the world: Bitcoin, the first purely digital money that is not managed and organized by states and banks, but rather by mathematics, cryptography and algorithms. The aim of the project was a free, open and decentralized monetary system as an alternative to a centralized, opaque and crisis-prone financial system, which at that time was showing its ugliest side and forcing the world's governments to bail out banks with taxpayers' money. So in the middle of the crisis, a single computer began to work - publicly, but ignored by the public. A short time later there was the first result: In return for solving a complex arithmetic problem, the program had credited its creator with 50 bitcoins and noted this credit in a specially created database: the blockchain. Some time later the next entry followed, then the third and so on.

Every ten minutes a new data block is created and new bitcoins are generated with it. It has been running uninterruptedly for almost nine years now. The blockchain grows data block by data block and with it the number of available bitcoins. More than 16 million of them are already circulating online. And they are no longer just any data, but valuable data. In the meantime, every single bitcoin is traded for a price of 6,000 euros and more. Bitcoin software has long been running on thousands of computers that are globally distributed and connected to one another via the Internet. Millions of people now own Bitcoins (or at least fractions of them) and use them to buy physical goods, services and digital goods. [1] Or they speculate with them on further rising prices as a modern form of investment.

Bitcoin has grown from a niche project into a remarkable phenomenon in just a few years. The phenomenon no longer only plays a role in nerd, hacker and darknet circles, but is becoming increasingly relevant for society as a whole, and it raises many questions. Because Bitcoin shouldn't actually exist - at least not if you trust the expertise of experienced economists, bank representatives and the media public. In recent years, they have repeatedly declared digital money to have failed and explained why a means of payment that is not secured by the state and banks cannot actually work. [2] Actually, because reality shows: Bitcoin is not only still there, but is growing and developing. With a market capitalization of over 100 billion US dollars, the open source project has long been worth more than twice as much as the largest German financial institution, Deutsche Bank. One would think that failure actually looks different.

How does this contradiction come about? On the one hand, there is the well-founded expertise that argues that a stateless and bankless cryptocurrency like Bitcoin cannot work. On the other hand, reality shows that Bitcoin obviously works after all. To resolve this discrepancy, one has to face the questions the project raises. First and foremost the question: What is Bitcoin?

Bitcoin basics

Finding a satisfactory answer to even the most obvious question is surprisingly difficult. Because Bitcoin is a complex and multifaceted phenomenon, and the answer to the question "What is Bitcoin?" varies depending on the point of view and perspective of the questioner: For some, Bitcoin is a contemporary form of payment. A purely digital money medium that better meets the monetary needs of citizens in a highly networked society than any previous option. Others see the technology behind Bitcoin, the blockchain, as the next great technical evolution of the Internet and a multitude of economic and social opportunities resulting from it. Still others hope that Bitcoin will make a contribution to democratization and see it as a tool to lead modern people out of their dependence on states, banks and corporations and to give them more freedom, autonomy and sovereignty over their own lives. It is this amalgamation of sociopolitical ideals, new technology and the power catalyst money that drives the Bitcoin phenomenon, and anyone who wants to understand it has to deal with these three dimensions: Bitcoin the money, Bitcoin the technology and Bitcoin the social event. And you have to ask yourself where it actually came from.

The idea of ​​digital internet money is by no means new, but as old as the internet itself. Over the past decades, scientists, internet pioneers and idealists have tried again and again to develop a usable form of e-cash. Various procedures were tried out, but all of them failed for different reasons: lack of acceptance, problems with the software, lack of technical infrastructure or legal pressure from political interest and lobby groups who did not want to allow a privately initiated alternative to money to arise in the first place. The long history of e-cash shows one thing above all: It is anything but easy to invent alternative money that is actually used as such.

Bitcoin's long-term existence alone makes the phenomenon remarkable. Because the bigger and more prominent such a project becomes, the stronger the headwind becomes - especially if it threatens the power of governments and the profitable business models of the financial sector. However, these adverse circumstances did not detract from the idea of ​​free and independent internet money. On the contrary: it was pursued unwaveringly as a logical and necessary, albeit politically unenforceable vision. In an interview in 1999, for example, Nobel Prize winner Milton Friedman explained his idea of ​​an inevitable Internet-based cash. [3] His description at the time applies almost perfectly to Bitcoin: electronic money that can be exchanged over the Internet as easily and anonymously as cash and that will reduce the role of the state - with all the positive and negative consequences that this entails. Friedman himself never saw the implementation of this. It would take another ten years before Satoshi Nakamoto presented Bitcoin and achieved what many had believed and worked in before him, but ultimately all failed in the implementation: the first digital, stateless and bankless money system. How did Satoshi Nakamoto succeed where everyone before him failed? How did he manage to get Bitcoin to emerge, grow and establish itself as a digital reserve currency worth billions within eight years?