Bitcoin Basics

So first, just for those folks, just to level set, because I know there's varying backgrounds, I want to give the very, very, very basics. And in particular, this slide over here is if you only remember one slide and you don't want to remember anything else, this is the motivation behind why even invent bitcoin in the first place, right? So with physical cash, if I have a dollar bill and I hand Tom that dollar bill, there's an implicit property of the dollar bill, which is when A hands that dollar bill to B, A no longer has it and B has it. Right? I had it then, now Tom has it. And anybody who's observing that can see that that physical bill was handed over. If I try to naively transplant that to the digital realm, if I take the Federal Reserve serial numbers on that dollar bill and I just go and email them to Tom, okay, well, I still have a copy of those serial numbers and I can go and email them to somebody else. Okay? And that is the fundamental issue with a naive representation of digital cash. It is the double spend problem. I could have spent those serial numbers with Tom and then with somebody else and somebody else. And so simply using serial numbers alone, that's not sufficient for basically scarcity in the digital realm. And so the way that we, until the invention of bitcoin, the way that we represented digital cash was, was with a bank, like a centralized actor that we trusted in the middle. And this actor over here is where the scarcity enters the system. When A sends money to B digitally, C is trusted to debit A and to credit B. Right? So this is where the scarcity enters the equation. The thing about this is you're putting a lot of trust in C, right? They can debit and credit anybody they can choose not to debit or credit. They cannot allow a transaction to go through in extremists, as in 2008, they could print billions of dollars for themselves. So this is something which is inelegant from a computer science perspective, to have a trusted central node if you can avoid it. And so what Satoshi Nakamoto did is he came up with D decentralized digital cash. And so essentially, this central actor, this bank, was replaced with a network of miners. And any one of those miners could approve that transaction, that debit or credit between A and B. And so since any one of them could approve it, one of them disapproving it, all they would just do is be giving up some bitcoin that they would have mined otherwise. It's basically a way to combine transaction approval and senior Ridge currency printing in the same unit. So the details of this aren't super important technically, at least for a talk like this. But the concept is important, which is we took physical cash we tried to naively turn into digital cash. That didn't work. So we had these centralized actors, and Bitcoin dispenses with those centralized actors by having anybody in theory who can connect to the Internet with sufficient computational power can now approve transactions and push them through.