Episode Transcript
[00:00:00] Alright guys, so this is a two sats about bitcoin mining and what it is like, what purpose does it actually serve? And I tried to narrow this down. I tried to make this as succinct as possible.
[00:00:12] However, there are a number of visuals in this that I think do kind of make a difference in the quality of the argument.
[00:00:21] So even though this one does stand alone in audio, I'll have the link to the YouTube and rumble so that you can actually watch the video. If you really kind of want to see the full picture, shout out to leden to the hrf synonym and git chroma. There are links and details to the services and products that you can find right down in the show notes. It's time for guys two sets.
[00:00:58] I know what bitcoin mining sounds like to a lot of people. There's some program or game that you can run where you can use your computer to do a bunch of complicated math and it earns you some Internet points and you can collect them and then sell them for real money, you know, kind of like Pokemon.
[00:01:17] And I completely understand why some people see it that way. If you don't look at it very deeply, it does kind of sound retarded.
[00:01:27] Interestingly, the system of mining is actually one of the most profound breakthroughs of the bitcoin system.
[00:01:37] So why is bitcoin mining even a thing to begin with? The thing that people call mining is actually called proof of work.
[00:01:48] And the tool itself is actually much older than bitcoin. You can kind of think about it like a signature or a digital stamp connected to a piece of information. But what's interesting about it is that it requires some amount of unforgeable computer processing in order to make one that's valid. Cryptographers and early protocol developers realized that spam on open networks was going to be a big problem because there's no cost to just blasting out a million emails to people. So I'm thinking about how to defend the network from this type of attack.
[00:02:26] Cryptographers thought, what if you needed just a tiny amount of unforgeable computation stamped to that email in order to send it? Maybe it only takes like 3 seconds for your computer to do well. In that case, most users would never even notice that it was happening.
[00:02:44] But the spammer who's trying to send out a million emails might take hours or even days to get through them all and might have a decent electricity bill to go with it. And with that tiny little bear hair, just like that. The economics of most spam is Broken. It's cheap for an honest user and it's expensive for a spammer. That's a pretty neat way to protect the network.
[00:03:09] But it wasn't until bitcoin that Satoshi found an even more brilliant way to use it. So proof of work is a lot less like complex math than it is just rolling a die. But you're required to roll a particular number. Let's say you have to roll snake eyes. If someone shows you that they did roll snake eyes, well, you have a pretty fair guess that that was not their first roll. And you could make it harder if you wanted. You could require them to roll snake eyes twice in a row.
[00:03:40] Now, you know, they have to roll the dice a lot. Now bitcoin. Bitcoin is basically like a giant open record keeping system. And in order to add new pages to this record keeping system, it requires a certain amount of proof of work to be stamped on the new page. And if they find a valid stamp, they get to unlock some of the 21 million Bitcoin that will ever exist, as well as all of the transaction fees for the transactions that are asking to be st stamped on the page. That proof of work is basically like requiring an insane number of dice rolls.
[00:04:16] Every single participant on earth running the bitcoin system is rolling dice on the latest page in order to find a stamp that lets them add it to the record keeping history so that they can earn some bitcoin. And the more people who participate in this electronic dice rolling, the network automatically makes the proof of work harder to keep the pace of the network stable.
[00:04:41] So the multi trillion dollar question is, but why?
[00:04:46] And here's the little fascinating piece of the puzzle. If I wanted to replace the last page with a version that didn't have your transaction in it because I don't like you for whatever stupid reason that humans don't like each other, I have to redo all, all of the dice rolls that every other person on earth contributed into stamping that page all over again by myself. And even worse, I have to do it faster than everyone else in the world rolls the dice to add the next page on top of it. And every page's stamp is connected to the last one. So if I go 10 pages back, I don't have to just redo the 10th page to redo the other nine that come after it. The more pages I'm trying to replace, the more energy I have to burn.
[00:05:43] It's a wall.
[00:05:48] It is a literal force field of energy and raw compute cycles blocking the edit button. And there's no way around it, only through it.
[00:06:00] There are millions of these machines all around the world. Stationed at hydroelectric dams in China, in data centers in Texas, capping and using flared gas in the oil fields, heating greenhouses in Europe, heating pools and Jacuzzis, balancing out solar production, making electricity sustainable in Ethiopia, being used as space heaters, keeping my house warm for the winter, being powered by a volcano in El Salvador. And then thousands of these cool little guys just sitting on the desks of bitcoiners all around the world who just want to participate in something awesome. The Bitcoin Network is at 1 zeta hash per second in compute power. This is 342 times more powerful than the most powerful computer in the world, El Capitan in California. If an attacker with a data center in Nevada was just trying to match the sheer energy that is going into protecting the Bitcoin system, in order to attack it, they'd have to cut the power off to most of the surrounding states just to turn the machines on.
[00:07:10] Every digital system you have ever used makes itself secure by preventing other people from having access. And they have a tiny powerful group with a master key to do whatever they want. Bitcoin discovered a system that allows it to be orders of magnitude more secure by removing the master key entirely and inviting everyone to join in a market where the network pays participants to build a wall around itself. And the more people who join, the more secure it is, not less it rewards honest actors and cost a fortune for an attacker.
[00:07:55] Bitcoin mining is pointless math or a waste of energy in exactly the same way that all of the concrete and steel in a bank vault is pointless building materials.
[00:08:09] So contrary to bitcoin being a silly little app where you collect Internet Pokemon points, It's actually the 50 foot thick steel walled nuclear bunker of digital monetary networks. But that's just my two cents.
[00:08:30] And if you're looking for a good wallet for your digital bunker money. Bitkit is a fantastic simple design intuitive interface wallet. It's non custodial, it's got on chain and lightning in a very simple to understand interface. Check it out if you haven't links and details are right down in the show notes.
