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BullionVault

09 December, 2017

What is bitcoin? What is bitcoins value?

First off all, this is high order analysis and not a prediction of the future.

Bitcoins come into existence when a particularly cunning mathematical puzzle is solved. The puzzle gets harder or easier depending upon how much computer power is allocated to the task of solving it. The puzzles designer has decided that it ought to be solved every ten minutes. The reward for solving the puzzle is bitcoin. Once 21 million bitcoins have been allocated, that is the end of bitcoin production. However, the puzzles continue and the winner will get a small skim of any bitcoin transactions that occurred since the last puzzle was solved, about ten minutes ago.

As you may imagine, the first puzzle solvers were cryptographers who were interested in solving the puzzle as well as understanding the puzzle. Today, the puzzle solvers choose to call themselves 'miners'. They would like you to believe that bitcoin is similar to gold. That they are bitcoin miners, who are not unlike actual gold miners. They are people who never switch off their computer which is optimised to solve the bitcoin puzzle, they are unlikely to use it for anything else. At least, for now.

I have known about bitcoin when they were less than fifty dollars each. I very nearly bought three but I didn't. Which is annoying. At the time I thought that these had the potential to be worth one million dollars, or more likely 100,000 dollars or perhaps easily ten thousand dollars.  My plan was to acquire three and swap them for gold when they were at par. What a foolish plan. I smile at my own lack of critical thought.

What I ought to have thought was if one bitcoin could be worth one million dollars, then keep one until it is worth one million dollars, sell it and then retire. Surely, a fifty dollar risk to retire early was worth taking? I never considered it.

If I thought $100,000 was the future value, then I ought to have bought ten. A 500 dollar risk against a win of early retirement?

How about $10,000? I ought to have at least considered buying 1000. A 5,000 dollar risk which could have been realised this week?

Two would have got me a new car and twenty a house. All for 1100 dollars of risk.

Anyway, I didn't buy any. I tried mining but after a couple of hours and some research, I realised I was wasting my time. I needed to buy a 'mining rig' but the lead time was months by which time the 'mining rig' would not be sufficiently powerful to brings the odds of solving the puzzle my way.

A 'mining rig' is a specialised computer designed to solve the puzzle.

I hope that gives you an impression of what bitcoin is. Ownership of these bitcoin can be transferred, between computers incredibly easily, cheaply, quickly, accurately and securely over the internet. The bitcoins are stored in an electronic wallet. The electronic wallet and therefore the bitcoins can be stored on a USB stick, on your phone or even printed out onto paper. You can buy little electronic gizmos too very securely store your bitcoins.

Now, what are these things worth? Each bitcoin is made up of 100,000,000 satoshi. If you owned one bitcoin, you could just as easily say that you own one hundred million satoshi. If each satoshi was 'considered' to be worth one cent, then the bitcoin itself would be worth one million dollars.

This is crucial, how much we believe a satoshi to be worth, if multiplied by one hundred million gives you the value of bitcoin.

The word satoshi is based on the man or group of men who wrote the original cryptography code. He, she or they have 2 million bitcoins which have never ever moved anywhere. Now we have a mystery. I could retire on 100 bitcoin and he has 2 million of them and has done nothing with them. Nothing. This allows the human mind to whirl away believing whatever it chooses too. Such a mind may come to believe that bitcoin is better than dollars or pounds or euros or gold or silver or a pension fund. What wouldn't help is some bloke saying it was just a cryptography puzzle. Or that he can create bitcoin II in about ten minutes, assuming he has to make his own cup of coffee.

Bitcoin can be viewed as a worthless in game currency. However, its value comes from the fact that there is no associated game, apparently.

Higher order analysis reveals to us more detail. The creator never wanted to be asked any questions about what bitcoin is or isn't. He created something beautiful, magical and elegant. He or she did not create it to become rich or famous as they are showing remarkable restraint if that we the case. Bitcoin is a gift given freely to the world for us to use as we see fit. Many have chosen to view it as a currency devoid of any central banker or govt control and that is what gives it value. Others refer to the blockchain or ledger. This shows us who owns which bitcoins, not their name but the encoded name of their bitcoin wallet. This could be used as a way to prove ownership of other assets such as shares or houses. Changing how banking operates. Others realise that this could be used for voting, secure voting over the internet. Changing how we are governed.

The value of bitcoin, or rather the puzzle itself is unimaginable and unrealisable unless we develop the moral courage (https://davidwatkinson1.blogspot.co.uk/2017/12/moral-courage.html) to realise its potential.

Now, forgetting all that, which is really important. How much is a bitcoin worth, how much should you invest and how much could you win or lose?

You have already lost all that you have been given and all that you were and all that you could be. You have no desire to create, you simply wish the means to gain power over the rest of us. To do as you please at our expense. Imagine I have 100 bitcoins, would I now retire and expect you to service all my needs and requirements in exchange for 2-3 bitcoins per year?

That is not the dream of the creator. That is the dream of a member of society. Is that all you perceive yourself to be?

What is bitcoin is a question to ponder for yourself. Is it currency? Do you know what currency is?

Could we use it to redefine banking and government? Could we use it a a stepping stone to creating the truth and beauty of an actual civilisation?

We need to stop concerning ourselves with the price of bitcoin and ponder its value.

However, should society need to see a price of one million dollars per bitcoin before it can begin to realise the value of bitcoin, then so be it.

Attempt to understand the value of bitcoin, not in how many dollars a bitcoin is worth but what is the worth of a dollar and why. Once you understand how a dollar has value you can begin to question if it deserves to have any worth and ultimately the truth. Does the dollar free mankind or enslave it. Once that question is answered we can choose to use bitcoin to free mankind and usher in an actual civilisation.

In asking the question, how much is a bitcoin worth? You prove yourself lost in a system that does not consider you important. Why would you 'choose' to be worthless? You are programmed to respond that society is bigger than all of us and it is good to be a part of it. Which is a lie but very close to the truth so we can readily accept it as truth.

The question is, how best can we use the gift of bitcoin to enhance our collective experience of this thing we call the 'real world'. Is bitcoin real? We have nothing to measure it against as the 'real world' most certainly is not 'real'.

The question is, why do we continue to live in a society as valueless consumers when we have the technological means (bitcoin et al) to live in a civilisation of our own creation? Where we create the value?