Authors: Philipp Sandner, Constantin Lichti
Bitcoin is much more than interconnected processors. Far too often, Bitcoin is explained from a technical point of view. Attempts are made to make a significant invention understandable solely through technical terms such as nodes, hash functions, or nonces. Of course, technology is the foundation. Bitcoin is not an app on a smartphone that you can install, use and delete again. Bitcoin consists of nearly 10,000 global nodes that are interconnected and mutually synchronize with each other. This makes Bitcoin the global network that issues a new block every ten to twelve minutes and attaches it to the so-called blockchain. Every ten to twelve minutes. Viewing Bitcoin as such, it quickly becomes clear that it does not matter to this global network whether some computing nodes drop out of the network. Even if individual countries were to prevent the operation of computing nodes and these nodes had to be shut down, the overall network would always survive. This leads to the conclusion that Bitcoin has now reached the point where – technically speaking – it can no longer be shut down by anyone. The conclusion is that Bitcoin will continue to exist for the next few years – and probably even decades. However, this goes hand in hand with outrageous power consumption.
Certainly, the technology is important, but other explanations are better suited to illustrate the significance of the invention of Bitcoin. In any case, it is not just hype, not just speculation, but the beginning of something bigger.
Bitcoin as a “digital commodity”
With Bitcoin, a new kind of commodity has been discovered. No commodity you could touch, like chemical elements known as gold, silver, platinum, or even uranium. Instead, Bitcoin is a kind of digital commodity, generated by computers and partly made for computers. Mankind has a history of significant inventions. In history books written in the future, Bitcoin will be listed as one of these. That said one thing at a time for now.
How does gold actually work? The essence of gold is its scarcity and the belief of hundreds of millions or even billions of people in its value. Gold is mined in gold mines using excavators, heavy equipment, workers, and chemicals. The extraction of gold results in operating costs for the gold mine. Mined gold can be sold at the market price and the gold mine makes a profit. As long as the gold mine is making profits, it will invest resources to produce more gold. But: Eventually, mining will become so expensive that selling gold on the market will no longer be profitable. This illustrates the scarcity: It is not possible to mine an unlimited amount of gold.
It is precisely because of this scarcity, and essentially because of the belief of millions of people in this scarcity, that gold has acquired a certain kind of value. Of course, gold is physical and can be touched. It can be manufactured into jewelry and used in microelectronics. But the…