Or… why is it so hard to come up with a simple, yet accurate, explanation of Bitcoin and its importance?
I am a firm believer in the following rule-of-thumb:
“If you can’t explain something clearly, it means you don’t understand it.”
Put more positively, we could perhaps say:
“Only when you understand something deeply can you make it sound simple”.
Many of my colleagues will recall situations where I have been almost fanatical in driving for intense clarity of expression. And so it concerns me deeply that there is no good, simple, accurate and comprehensive explanation of Bitcoin that helps people understand what makes it so unique.
Here’s what I mean: I want a description that doesn’t lead the listener to say:
- “So how is that different to my electronic bank account?”
- “So how is that different to airline miles?”
- “So how is that different to m-pesa?”
- “So how is that different to Mondex?”
- “So how is that different to Ripple?”
- … and so on.
And no cheating is allowed…. You can’t refer to these systems in your description…. Your description has to be so good, it has to be so precise and it has to be so comprehensive that an attentive listener cannot possibly confuse Bitcoin for anything else. In other words, you need to get to the irreducible core of this bewilderingly complex system.
Here’s a sample of existing explanations that show how hard it is. I typed “What is Bitcoin?” into google.co.uk and clicked on the first five hits:
- We Use Coins.com
- The video is helpful but I’m looking for prose that meets my text above. The closest we get are three boxes that mention “secure”, “open” and “fair”. These things may or may not be true but they don’t really explain what’s going on
- Wikipedia: “Bitcoin is a peer-to-peer payment system and digital currency introduced as open source software in 2009 by pseudonymous developer Satoshi Nakamoto”
- OK – perhaps this is accurate but it doesn’t give me any indication that this could be the most important invention of the last decade and an intelligent reader could legitimately confuse it any number of pre-existing centralized systems.
- The Washington Post: “It’s an electronic cash system that allows online payments to be sent directly from one person to another without going through a financial institution (like a bank) or a third party (like PayPal).”
- This is actually pretty good. It brings out the “directness” and uses the word “cash” to evoke the idea of a bearer instrument and finality. But note that it doesn’t tell me anything about how it works or why it’s so revolutionary.
- Children’s BBC: “Bitcoin is a new type of money that is completely virtual. It’s like an online version of cash.”
- Pretty good – but limited (I’ll go easy on them given their demographic!)
- Bitcoin.org: “Bitcoin is an innovative payment network and a new kind of money.”
- This is true and is probably enough to pique interest – but you have to go over to the FAQ to get this:
- “Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence.”
Of all these descriptions, I like the last one the best from the perspective of technical accuracy but it focuses only on the “payment” use-case. For day-to-day usage, I think the Children’s BBC or maybe Washington Post versions are also pretty good.
But did you notice how many concepts were packed into these descriptions, how much knowledge they assumed and how none of them really explained why this was so revolutionary?
I think this is because there are really three independent concepts all competing for attention at the same time and we need to step back to unpack them.
The world’s first internet-scale decentralized platform for value exchange
First, Bitcoin is the world’s first true system of digital cash, which allows peer-to-peer value exchange over the internet with no reliance on third parties. This is the key feature of Bitcoin as a currency and payment system and explains most of the current infrastructure build-out.
… implemented on a decentralized global asset register…
Secondly, Bitcoin works because it is based on a new concept: decentralized global asset registers.
Decentralised global asset registers are also an entirely new invention. They can be used to register and transfer ownership of any digital asset.
It is this that people are talking about when they say things like “currency is just the first application” for the Bitcoin platform.
… which is a decentralized consensus system
However, the story doesn’t stop here. There’s a third element: how do these asset registers work? They work because of a third breakthrough: the invention of “decentralized consensus systems”. That is: internet-scale systems that can reach and maintain a common state without the involvement of any third party and in the presence of malignant adversaries. This is a breathtaking breakthrough in computer science; we should expect to see the most forward-looking computer science schools undertaking active research in this space.
Putting it all together
“Bitcoin is the world’s first system of digital cash, which allows peer-to-peer value transfer over the internet with no reliance on third parties. It is built on a new invention, the decentralized global asset register. This global asset register is the world’s first decentralized consensus system.”
I’m still working to refine this description, but I think it’s getting close… although it’s very technical and not suitable for everybody.
Adam invented “Hashcash”, the inspiration for Bitcoin’s mining function and contributed to the years of experimentation and prototyping that ultimately led to Bitcoin’s invention.
In the PodCast, he used an interesting phrase. He described the idea of “digital scarcity”. That is: how to create a system that allows you to make objects in the digital world “scarce”. The obvious intuition here is to think of .mp3 files. If I email one to you, it hasn’t been transferred, it has been duplicated and is no longer scarce. We know what happened to the recorded music industry when this happened on an industrial scale. Back’s concept, thus, is the problem of how to enable transfer without duplication. Clearly, this property is key to making Bitcoin work and Back’s phrase captures it perfectly: “digital scarcity”.
So, my challenge is to consider how to update my “three concept” model to incorporate this key idea: “digital scarcity”.
Perhaps Digital Scarcity is the irreducible essence….
Is this the single concept that captures what makes Bitcoin so utterly unlike anything that came before?