I had been preparing this article for several days, but I am publishing it today because this date (December 5, 2024) will be remembered by many and I am sure it will be seen in the future as a major milestone.
Why? Because today the value of one bitcoin has surpassed the symbolic threshold of $100,000 for the first time, nothing more and nothing less.
Bitcoin is much more than its value in trash money (dollars, euros, etc., those whose ability to store wealth deteriorates over time).
By surpassing the $100k barrier, a new scenario opens, and, logically, it is not by chance; there are many reasons behind it reaching this valuation: the incoming pro-bitcoin Trump government, growing interest from large and not-so-large companies in holding part of their treasury in bitcoins, greater awareness of what Bitcoin is (distinguishing it from crypto), investors buying ETFs from large funds as if there were no tomorrow, countries legislating favorably to create an innovative ecosystem around it, and a long etcetera, while… the supply of available bitcoins shrinks and more innovative projects are emerging in the ecosystem.
But I do not want to talk here about the current moment; I want to talk about what I, as a computer engineer for more than twenty-five years, have learned by studying this technology, and it is not a small thing, since I began to become interested in it in 2019.
In the end, I propose a list of books to help you better understand what all of this is about and how it can reform the financial system in the future, if it is not already doing so.
Some facts about Bitcoin today:
- The symbolic and psychological barrier of $100k has been surpassed.
- In just one year, institutional investment has arrived, such as ETFs, although there are many criticisms and controversies around this because it distances Bitcoin from its fundamental purpose.
- Proposals from governments such as the incoming Trump administration to create a “strategic reserve”.
- The industry around Bitcoin is booming.
- Its behavior in value and trend is similar to previous post-halving cycles, nothing more and nothing less.
These are recent facts from this very year that anyone who has followed this technology knows or can easily verify.
What I want to say with all of this is that by now there is no doubt that Bitcoin (the technology that implements it) is here to stay and there is no going back.
When you begin to learn about Bitcoin, the first dogmatic question you rethink and question is: what is money, really? And then you realize how little you know about something you get up to go to work for, use every day, and that may create great anxieties or joys, something you also expect to store somehow for the future, the future of your children, to buy a house, for retirement, who knows, hoping that that thing you keep will maintain its value.
Good money (sound money) satisfies these three rules:
- It acts as a unit of account: it is useful for valuing and comparing what you buy or sell; in other words, it allows expressing its price.
- It serves to exchange goods and services and is accepted broadly.
- It acts as a store of value: it is expected not to lose purchasing power over time and you can accumulate in it your wealth (that for which you have spent so much time working).
If we get into details, fiat money (issued by central banks and backed by nothing, such as the euro and the dollar) certainly satisfies the first and second points (practically by legal imposition).
But not the third. If not, try saving €100 a month and in twenty years tell me what you can buy with that money saved and devalued year after year.
A picture is worth a thousand words:
Why does this happen? Very simplistically and at the risk of not being precise, because states (their governments) have the ability to borrow (to borrow money printed out of thin air from central banks) to finance their policies, spending more than they receive, much more, in fact. And what happens when the market is flooded with something massively? Value is lost: inflation and higher taxes to balance the excess spending.
Some say that the French Revolution was missing one essential thing: separating the government from monetary issuance.
This is what Bitcoin is about.
Even today, those who continue to criticize Bitcoin fall into the same error as those in the 1990s who said that the Internet would go nowhere, that it was useful only in academia, that nobody would have a computer at home, and a long list of claims that now seem absurd. The reality is completely different, and as with all disruptive things, at first only a few understand it, and little by little the phenomenon grows until it becomes a true snowball and spreads massively.
This happened with electricity, railways, aviation, the Internet… and now with Bitcoin, with just 16 years of life.
That is right: Bitcoin (the software project) is 16 years old since its creator (or creators), under the pseudonym Satoshi Nakamoto, published the whitepaper explaining how a digital money could be created that solved the double-spend problem and was unhackable based on consensus proofs, resolving the issues that had prevented such a thing from being implemented until then.
In reality, it is believed that Satoshi Nakamoto published…
Satoshi, who is still anonymous to this day, combined a set of technologies that already existed at the time and had been studied and used for years, some of them, such as cryptography, closely related to cyberpunk circles.
The genius lay in combining them to create something new, something extraordinarily new and disruptive.
So new and successful that even today it is immensely misunderstood by most of humanity: paradigm shifts take a lot of work to digest.
Read carefully what I am about to say (better, read it several times):
With the Internet, the transmission of information was democratized, something undeniable today, to the point of transforming economies, business models, and even our own lives when we no longer only have one computer at home, but several: several laptops, several PCs, and a smartphone we cannot separate from, which is already part of our skin.
Bitcoin is a radical paradigm shift: it democratizes the transmission of value.
Bitcoin invents something new and non-existent until now: digital property.
But a true property that does not depend on the guarantees of a third party (bank, state, institution) and is unseizable (no one can take it from you unless they torture you into revealing the keys to your addresses).
The depth of this is so profound, so absolutely disruptive, that even after studying this technology and industry for roughly five years, I still do not know many details about Bitcoin, its medium- and long-term consequences, or what this paradigm shift will provoke in the world in terms of its impact, even after reading, and I am not exaggerating, dozens of books, blogs, and even delving into the project code (which you can obtain at https://github.com/bitcoin/bitcoin).
The important thing about Bitcoin is not the value it may have in dollars or euros (that is just the tip of the iceberg), but the impact of its use and adoption: and it is already being adopted, with governments proposing a strategic reserve, large institutional investors buying bitcoin as if there were no tomorrow, and a runaway mining industry, even countries such as El Salvador making it official legal tender for daily buying and selling, mainly through “layer 2” protocols such as the Lightning Network.
However, what I want to emphasize in this article is what I, personally, have learned by studying and using Bitcoin, even much beyond the technical side.
It is not an exaggeration: if you want to learn about the paradigm shift that Bitcoin represents in relation to our conception of money, I am afraid you will have to read at least five or ten books on the subject.
It is striking how visceral the rejection of many people toward Bitcoin is when they have not read even a single introductory book on this technology and do not even understand what money really is.
By studying Bitcoin, I have learned about:
- Cryptography, specifically elliptic curve cryptography. Digital signatures, validation, etc.
- Different serialization methods used by Bitcoin (such as DER and SEC).
- Algorithms well known in my field such as hash, ripemd, wif, base58, and several more.
- The Script language and its partial implementation in Bitcoin.
- Distributed systems and networking.
- The Proof of Work (PoW) algorithm, essential in Bitcoin’s validation mechanism (a piece I wrote on PoW here).
- Blockchain and data structures such as Merkle.
- Decentralized file exchange protocols.
That is from a technical point of view, but this is only one part. I have also learned about:
- The theory of money.
- Gamification.
- Characteristics of FIAT money (such as the euro or the dollar).
- Mining.
- The gold standard.
- The Cantillon effect.
- How pernicious it is that the government (of any country) can generate deficits and control monetary issuance.
That is why it is said that when you enter Bitcoin, you get deeper and deeper into the rabbit hole, because one thing leads to another and you always find a new topic to delve into.
It is no coincidence that there are books about Bitcoin far beyond the technical, with emphasis on economics, the theory of money, philosophy, and even soundness. Nothing more and nothing less.
Today, December 5, 2024, is a day of celebration for bitcoiners, and reaching this point, believe me, has not been an easy path, especially since a path is finally opening for Bitcoin, its use, and its impact to expand exponentially. Although nobody can predict the future, a radical change is already visible in the current narrative around crypto in general and Bitcoin in particular.
Here are some books I recommend for entering that rabbit hole, and once you are in it, I assure you you will never get out (it is a metaphor, :-))
- Mastering Bitcoin (by Andreas M. Antonopoulos), technical.
- Programming Bitcoin (Jimmy Song), technical.
- The Bitcoin Standard (by Saifedean Ammous).
- The rest of the books by the same author.
- Thank God for Bitcoin (by Lyle Pratt and several co-authors).
- The Philosophy of Bitcoin (by Álvaro D. María).
- The Fundamentals of Bitcoin (Álvaro Suárez Bravo).
- Bitcoinism: the era of inconfiscable wealth (by Adrián Bernabéu).
- The Blocksize War (by Jonathan Bier).
And, of course, my contribution written in 2022: “Bitcoin: An essential and practical guide to understanding and using the greatest innovation since the Internet.”
Finally, in Learn me a bitcoin, you can read both an introduction to Bitcoin technology and more technical explanations of how it works.
With Bitcoin, digital scarcity has been invented. Will it replace gold as a store of value in the future?