09 Two Analogies For Bitcoin

Two analogies of bitcoin

In order to understand how the bitcoin network functions, I will give two analogies with the aim to take the ‘tech’ and ‘complexity’ out of the process. I will try to use real world analogs that we know and have grown up with.

Where is the money held

The first analogy will seek to answer the question of ‘where are bitcoins?’. Before we speak about Bitcoin, lets talk bout our current money. If I were to ask you “Where is your money?”, you might reply by saying “It’s in my wallet, in my hand, in the cashiers till, in an envelope”. This would be referring to the physical paper and coins you may have. But if your money is in the bank, then where is it? Its in the database of the banks, on their computers. If all of their computers were wiped out without a trace, maybe due to some malicious virus, and there were no backups of that data, then your money would be gone as it only exists on their systems. So with that in mind, where do Bitcoins live?

The analogy

Think of gold bars and coins. Think of a treasure chest filled with them. That’s your money. You want to store it. It’s already stored in the chest, but where would you put that check to keep it safe? You may dig a hole in the ground and hope that someone doesn’t find it, maybe put it in a cave somewhere remote, maybe in the cellar of your home or the attic. So with gold coins, they need to be put somewhere. So lets imagine that Bitcoin is like a golden coin. They need to be put somewhere. Because real gold has a physical presence, they needs to exist in a physical location. Bitcoin is digital, and its information, so its location is a number. So the analogy if ‘where’ bitcoin is stored is in a location which is a number. If you can find that number (ie location) then you can find the ‘loot’. So when it comes to gold, digging a hole in some random place is pretty secure, because if I wanted to find it, I would have to dig up the whole planet earth to find it. If I had the ability to go to mars or venus, and I could dig a hole there also and put my gold there, that’s make the likelihood of me finding it even more unlikely. If I were to have the ability to transport to any planet in our galaxy, the milky way, and dig a hole and put the gold on any of them, the likelihood of someone finding is even more impossible. Now imagine I had a machine that could convert any amount of gold bars and coins into the size of an atom and hide it on top of any atom in the known universe, that would be as close to impossible as you can get. There are estimated to be 10^80 atoms in the known universe. That number looks like this: 1,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 So if I said to you: “Think of a number between 1 and 10^80, and that number is where you can save put your money”, That would be same as me saying: “Choose an atom anywhere in the known universe, and that atom is where you can store your loot” So just like a pirate who has his loot that he wants to secure somewhere save, if he could store it on any atom in the known universe, that would be magnitudes more secure than any system we’ve ever come up with. Bitcoin works like this. There are 10^72 number locations where you can store your Bitcoin, which is almost as many atoms as there are in the universe. So if someone asks you “What if someone was to guess your location?”, how would you answer?

Transactions

Now that we’ve explained how you store your Bitcoin, how do you transaction? Send and receive? So the second analogy is of a small village. People in this village use gold coins and bars to transact. But they find that carrying around with them these heavy pieces of metal to be tiresome. So they all agreed to just leave it with the Shaykh of the village. Someone trustworthy who will not steal or mishandle their wealth. So one day Abdullaah wanted to buy a car from Sufyaan. Sufyaan says “I’ll give you the car for 2 bars of gold”. Abdullaah agrees and says “Agreed, but as you know I don't have the bars with me. But let me send my son to the shaykh and tell him to give it to you”. So Abdullaah writes a message stating this transfer, signs it and seals it, and gives it to his son to take to the shaykh. His son goes to the shaykh and gives it to him, and the shaykh takes this piece of paper and puts it on his table. On his table are 100’s of other transactions from other people saying the same thing, giving instructions to transfer the ownership of their gold to other people. What the shaykh has to do now is update his records on his personal ledger of who owes what buy keeping record of every transaction. This is essentially what happens on the bitcoin network, except that there is no one shaykh, there are 1000’s of ‘miners’ who all receive these transactions and all put them in their records. Instead of you giving your transaction letter to your son, you broadcast it to everyone on the bitcoin network, and they hold these transactions until the miners add it to the records. They act like the shaykh’s ‘table’ that all have the transaction papers on it. Once he updates his records, he removes it from the table. So just like in the analogy above, nothing moves from hand to hand in reality, all it is is records of ownership is updated. Bitcoin is data, and they exist on a database that exists everywhere in the world. Anyone can download the entire database (blockchain) and have a copy themselves, and there are 1000’s of people who do. Here is a map of all the ‘nodes’ that exist in the world that we know of.  https://bitnodes.io Each node has a copy of the entire blockchain, and even you can become a node by simply downloaded one piece of software and downloading a copy yourself. Become a node