Bitcoin is a digital phenomenon that will continue to spread until it is as socially accepted as email is today. In this post, I will explain not only why this rapidly expanding computer network has changed the paradigm on what defines money, but why the blockchain represents a historical image of the digital economy and provides a record of any past activity due to the nature of peer-to-peer timestamp verification.
The Blockchain Is A Monetary Image
For the purposes of illustrating why bitcoin has redefined money, let us assume there exists two users on a blockchain – User A and User B. User A controls 3.0 million bitcoin on the entire network. User B controls 3.6 million. There also exists 14.4 million unmined bitcoin.
User A has used their private key to authorize a transaction to User B worth 1.8 million bitcoin. User A sends this amount to User B’s public key. At this point, the transaction has been authorized by User A and is in the process of being confirmed by miners of the network.
After the transaction has been confirmed, the bitcoin network now reflects the change in hands of the 1.8 million bitcoin User A sent User B.
Note that no currency has moved from point A to point B, but an authorization on behalf of User A to alter the network in a way which increases User B’s control of the blockchain by a measurement of 1.8 million bitcoin at the expense of User A. In bitcoin, this ledger payment system is the money supply and is radically different from any type of money we have previously seen.
When an individual makes a transaction on the bitcoin network, no actual currency is moved. That is – no file has moved. No commodity or asset has moved. No private or public key has moved. Rather, the only thing which changes is the percentage of the blockchain ledger which User A & B claim control over. When a transaction occurs in the realm of bitcoin, the image of the blockchain is altered. Nothing ever changes but the composition of this blockchain record.
The blockchain is a historical record of the bitcoin economy. There is no separation to be made between the blockchain and bitcoin. They are one in the same. Without the blockchain, you have no bitcoin ecosystem. Without an accompanying cryptocurrency, you have no measuring tool to determine the ownership of the blockchain.
Money is now an image, rather than something which can be separated from the system itself. This image of money is being constructed, altered, and verified by the thousands of machines acting as miners across the globe, and it’s a composition on public display for all to see. The miners are the painters of this network composition. The users, the brush and strokes.
In the bitcoin digital economy, money is an image continuously being constructed, verified, and reattributed by way of cryptographic authorization.
“Tangible money, old-fashioned money … is a phantom from the past, an anachronism. In its place is an entirely new form of money based not on metal or paper, but on technology, mathematics, and science. This new ‘megabyte’ money is creating a new and different world wherever it proceeds. Money now is an image.”
– Joel Kurtzman, The Death of Money
With the intrinsically valuable property of decentralization, we have a monetary system that comprises a historical record of purchasing power at any point of time in existence. The timestamping function of the blockchain allows anyone to go back and publicly determine the holdings of any address (perhaps soon any individual).
A payment conducted with bitcoin represents a paradigm shift in our concept of money – one where there is no division between currency and the system through which it flows.
Bitcoin has redefined money. Money is now an image.