This is Part 3 of a 7-part review of the book, The Blockchain Code, by Dave Kinsey. To read the previous installation, CLICK THIS LINK. For the next installation, CLICK THIS LINK. To start at the beginning, CLICK THIS LINK. Thanks for reading!
Scratching the Surface
So, how does blockchain work? And what the hell is a bitcoin? I believe Kinsey does a fairly decent job of explaining these concepts in The Blockchain Code. He didn’t answer all of my questions, but he did answer many of them. And he pulled the curtain back, that was hiding the Wizard, better than any other source of information I’ve ever been able to find.
I will do my best to explain to you what his book explained to me.
Bitcoin is a software program that creates digital money, called bitcoins, and that facilitates untraceable transactions between anonymous parties, using this money. So you see, there’s nothing tactile about Bitcoin. You can’t touch it or feel it, or carry a bitcoin around in your pocket. It’s just a software program. It’s computer code that persists on the internet.
But even though it’s immaterial, if you want to buy a bitcoin you’d better be rich. Cryptocurrency exchanges recently have the price hovering around $24,000 per coin (which is down from its all-time high of over $68,000, last November). $24,000 is still a lot of dough, but if you can’t afford to buy a whole bitcoin, don’t fret. A bitcoin can be broken down into small units. The smallest unit is called a Satoshi, after Satoshi Nakamoto, the mysterious creator of Bitcoin.
There are 100 million Satoshis in one bitcoin. And at today’s exchange rate it’s very affordable, as one penny will buy you about 42 Satoshis.
Suppose you want to buy $1,000 worth of bitcoin. These days, that would buy you about 4,166,667 Satoshis. Wow, that sounds much more impressive than 1/24th of a bitcoin! There will be a transaction fee for this, but I want to keep my explanation of Bitcoin simple, so I’m not going to complicate things by getting into its weird fee system.
To buy the Satoshis you will first have to download some software, called a Bitcoin wallet, onto your computer or mobile device. You can find one at Bitcoin.com, as well as at several other websites. But I wouldn’t advise it, and neither does Kinsey. For all anyone knows, the digital wallets at any given website are perfectly safe. But some aren’t. Some Bitcoin wallets have been notorious for security weaknesses that allow hackers to steal your bitcoins. Especially the ones called “brain wallets.”
Remember, Bitcoin was invented by anarchists who have utter contempt and disregard for laws, government, or traditional forms of accountability. And Bitcoin is not regulated by the government. So it requires a leap of faith to trust the software the inventors and other enthusiasts have written.
Kinsey recommends the safest way to use Bitcoin is to download the Bitcoin Core source code onto your computer, and compile it. He suggests that you make sure this computer is dedicated only to Bitcoin, and is not connected to any other computer in your house, so that it can’t infect other computers with any possible malware.
You can find and download the free source code at Bitcoin.org/en/bitcoin-core/. Compiling involves converting the source code into a usable software program, but don’t ask me how to do this. It’s been a long time since I last compiled source code, and I don’t remember the procedure. I do remember that it requires knowing a few curse words.
If you’re a smartypants and downloaded and compiled the source code into a workable program, you now have a choice to run Bitcoin on what’s called Miner or Full Node. Miner mode does everything that Full Node does, but it also mines for bitcoins. Mining is very complex, so I’m not going to get into it here. We’ll grab our pickaxes and discuss this subject a little later.
But keep in mind that Miner mode requires a lot of juice, if you want to have any chance of winning bitcoins. You need special, expensive computer equipment with massive amounts of electricity-sucking processor power, to be successful at mining. Just one rig with three GPUs can burn more than a kilowatt of power. And some crypto mining businesses have hundreds, or even thousands of mining rigs concentrated in one location. Imagine paying the electric bill!
Full Node, on the other hand, only requires a minuscule amount of CPU power, that most any PC can easily handle.
Like a spaghetti-armed miner, we’ve only just scratched the surface of blockchain and Bitcoin. Come on back in a few days, and we’ll dig deeper below the surface, as we unearth the mysteries of this cryptic technology.