If Bitcoin were a mechanical watch, the commission market (not the free market) would be the mechanism that makes everything work.
This is where it all begins and ends.
From here comes resistance to censorship and where the precious resource of block space is valued in energy consumption.
The Bitcoin commission market is the first free market ever created by man.
On the free market:
- No third party can interfere with pricing
- No one can stop you from participating
- Participation is voluntary
Most markets that arise naturally are actually free; it is man-made, as a rule, struggle with this property.
If you believe in the efficient market hypothesis, then you know how important markets are and how they can help us solve many problems.
Most of the problems people have ever faced were coordination problems. One obvious solution is to create a dominance hierarchy and elect a leader on top of it. It worked great for a long time, but as soon as our world got complicated, and it happened because we made it that way, it started to become less and less efficient.
Another problem with such structures is that there is one single point of failure that makes them prone to corruption. Markets face the same problem unless they are built on unreliable and censorship-resistant infrastructure.
Bitcoin: A / D converter function
There are two worlds:
1. The kingdom of the tangible, the real: the world of thermodynamics.
The limitations of the “real world” are imposed by the laws of physics. I cannot get my hand through the wall, or if I do, I need to push through the wall with more force than the forces that hold the wall together, and my bones need to be able to withstand the force with which the wall is pushing me back. If there is a coin on the table, I cannot copy it. The best option is to get the materials, and then spend time and effort creating a new identical coin. As we evolved in this world, we learned to use these limitations to our advantage.
2. Sphere of intangible, abstract: digital world.
In the digital world, the rules are different, there are almost none, and that’s great. This is why we created computers in the first place: to avoid the limitations of our physical reality.
Here you can listen to Joe Rogan at double speed.
Here you can send nude photos all over the world, limited only by the speed of light. Then your nude bodies can be copied with minimal effort and posted on the Internet just as easily.
In most cases, we really don’t need to have a strong connection between the two worlds, as there are clear boundaries and expectations about their relationship between them. It would be absurd to assume that Pamela Anderson can jump off the screen and shake your hand.
This is not the case with money. Money is the most important coordination problem. Moreover, although there are boundaries between the two worlds, sometimes we need a bridge and a common context.
Bitcoin provides this context by enhancing the rigid physical properties of the real world without losing the flexibility of the digital world.
Bitcoin converts analog energy into digital blocks, and this is done through a mempool.
A look at the process
The mining machine ASIC (Application Specific Integrated Circuit) is connected to a power source. Electricity powers the machine through an electrical outlet. This machine is incredibly dumb because it can only do one thing: compute as many SHA256 hashes as possible per unit of time. As a result, the heat is dissipated.
This miner has its own node.
Passing through a pile of unconfirmed transactions (“mempool”) with capitalist desire, machines sort transactions by who is willing to pay more for a virtual byte of block space, and then pick the most expensive ones. At the moment, they have a rough idea of what will go into the block.
Other data is added to the block header: a link to the previous block, a magic number that is not actually magic, and some non-specific data. All data is hashed by the machine.
This is all done at an incredible speed (around 110,000,000,000,000 attempts per second per machine) and the environment is very competitive as everyone wants to get 6.25 BTC provided by the network for every block confirmation, in addition to the juicy transaction fees. they end up in your pocket.
The winner is the first miner to find a hash that is less than the current target mining difficulty.
This is what we call proof of work.
This process transfers energy from a very hot mining farm in some part of the analog world where electricity is cheap to the digital blockchain. This transition was very subtle: somewhere in the mempool, two worlds merged into one.
Bitcoin and the creation of Adam
The Sistine Chapel is in many ways similar to Bitcoin: many people have contributed to it, it is surprisingly complex, and no matter the angle it is viewed from, it can provide amazing insights. It has stood the test of time, and even though it was updated, updates were always done with backward compatibility.
However, for some reason, most of the time the Sistine Chapel is mentioned, one part of it gets more attention than the others: “The Creation of Adam.”
Why is this? Just because Adam was created when we began our existence as a human species?
Not. There is much more to it. At this moment of birth, we were not only touched by the divine, we were divine, and we were created by him and him, and therefore we inherited all the qualities of God. For a short time, we looked almost the same.
Since God created humanity, this small gap between the fingers has become larger and larger, and the flow of energy has been one-way, from God to people or, as shown in the picture, from right to left.
God is impressive not only because He created things; we do it every day. This is because he created a world with solid anchors – fixed objects.
In fact, the immovable object does not exist. There are only objects that require a large amount of energy to change their momentum. It’s the same with Bitcoin transactions.
In inventing Bitcoin, we did exactly the same thing as God: we created a stationary digital object, and as a result, we began to close the gap between us and the deity. We are getting closer and closer to our noble origins.
On January 3, 2009 at 18:15:05 everything changed. It was then that the first bitcoin block was mined. That’s when we become Gods of the digital world. It was then that the flow of energy changed direction for the first time: from left to right.
Bitcoin is a link between two worlds: chaos and order, real and digital, uncertain and definite, unconfirmed and confirmed.
Although we are talking about these two different parts, there is no clear separation between them. In fact, we cannot say where a person ends and God begins, since each person must draw this line for himself. The truth is, there isn’t really a line, just a gap that either gets smaller or it doesn’t.
Likewise, there is no mempool: there is only your mempool. The operator of each node decides which unconfirmed transactions to store locally on their hard drive and propagate further along the network, thereby determining the thickness of the border between unconfirmed and confirmed.
And it is here, in the mempool, that man becomes God.
This is Alex’s guest post. The opinions expressed are entirely their own and do not necessarily reflect the views of BTC, Inc. or Bitcoin Journal.