Bob is a normal guy like you and me. And, well, if you're a girl, your just like Bob but a girl. But that's neither here nor there. My point is; Bob's just a normal guy.
It's September 2016 and Bob just spent all his money on bitcoin. He spent his savings, which was only a couple hundred bucks. Then maxed the credit card. He also used money from another avenue, something which he'll deal with quite soon, not with the landlord but his wife; he used the rent money to buy bitcoin. Needless to say Bob was on a roll; and soon his head would do the same.
He calculated he'd be able to cover all bills with his next check but bitcoin was starting to go up. It's currently hovering around $515 and it looks like it's ready to go up—way up, according to his research and, most important, his gut feeling. But I'll get into all this in a minute. First, a little bit about the situation.
Bob heard about this thing called Bitcoin quite accidentally. As many people are prone to do, he was clicking around YouTube one day and, as many know, one video can quickly lead to another video of very different content. And he was looking at all those conspiracy videos as this is a fun pastime for him, and he kept running across this reference of the Dark Web and illicit traffic. Silk Road was one of the things that came up and the whole story behind it. But one thing he couldn't figure out was this electronic way they paid for it. It was called Bitcoin. He became a little curious of what this was. Just an idle curiosity mind you, but curiosity nonetheless.
He searched YouTube for Bitcoin and found much confusing and conflicting information about this electronic, and seemingly illicit, online currency. Many new words and terms were involved with it as well, but there seemed to be something about it that was so interesting. Mainly a way to opt-out of the current financial system which, as anyone with a brain would see it was rather corrupt and didn't seem to be getting any better but gave this Bitcoin thing little to no chance of ever achieving what it claimed to be striving for. Bob kept watching and learning. The more he learned and understood that this was more than just a new currency. It was a technology of epic value! He was no computer scientist, in fact, he never took algebra in school. The technology was way over his head but that was not important the way he saw it. It's what the tech could do—what it stood for. And it was growing in popularity with some very smart people. He also noticed it was being attacked by some very powerful people. This may be the game changer it purports to be!
Bob watched every video he could find and learned his way around the terminology and he wanted to know how he could possibly get some of this bitcoin. It was confusing!
He finally decided on Coinbase as it was the only way that was the easiest in the U.S. to get some. He did, however, look at other companies that were out of the country. He was not going to use exchanges as they seemed very risky at the time what with the Bitfinex hack just recently and the Mt. Gox a couple years ago.
After sign up and the whole KYC debacle intrusion, he finally could buy bitcoin. Unfortunately Coinbase limited him to $200 per week! What the hell it this? he thought. Just another way for the man to keep him down!
This was unacceptable to Bob as he was an all-in kinda guy. That's the best way to get in deep trouble and Bob was most certainly ready for a fight. $200 per week—that's bullshit! he thought.
He decided to go ahead and get $10 to try it and to get used to it. He was quite nervous his first time and his wife was going to kill him when she found out.
His marriage had been OK, no real problems but his wife knew him and the "Oh honey this is a great investment." schemes he'd come up with in the past, which cost them in the long run, and he knew she would see this as just another hair-brained idea.
He entered the amount and hit "Buy". The next thing he knew he had $10 in bitcoin in his Coinbase wallet! And around $20 total taken from his bank account! "What?" Then he realized that was their fees and such. OK, that wasn't too bad but Bob was exhilarated. He'd just bought into something big, he thought, and he wanted more!
He quickly went and downloaded a wallet for his desktop as he learned—if you don't own your keys you don't own the bitcoin! That's what Andreas said and he believed him.
After the small amount of bitcoin was in his wallet Bob backed away for the day and let the experience simmer. It was difficult for him to process how transferring funds from one currency to another could be so exciting!
The next day he told his wife, Sonya, he had transferred $10 to his desktop wallet. He received the reaction he expected: "Oh, Bob, another get rich quick scheme—really?" she said annoyed then continued. "Honest, babe, I don't know if I can go through this again."
"But this one's different! Its a technology that's gonna bring down the bankers! No more control! We control our own money. It can't be taken away. It's on the blockchain, which is so cool!" he sort of rambled.
"And where did you learn about this cool technology?" she asked knowing the answer.
Bob sunk a little in his chair. "YouTube," he murmured.
Sonya, knowing this whole scene as it's played out this way many times before with her wonderful but slightly naive and impressionable husband, continued. "YouTube. You learned about the next greatest technology on the entire planet through YouTube? YouTube—where idiots and scammers abound—YouTube, huh?"
Bob couldn't help but see her point as it was true—kinda.
"Let me guess, the guy with this technology is really bright and a good speaker and has many followers and has all kinds of neat 'proof' on his wonderful little YouTube channel."
Bob took his cue. "But that's just it—the guy who created it isn't around. He got out before it really took off!" As he said it he realized maybe that wasn't the best tack he could take as it could be misconstrued another way. And sure enough—it was.
"So the guy who created it isn't even around. So who's running it?"
"Nobody—everybody!" Bob realized he'd needed to work on his selling skills. He decided on a little back story as this was important. "Look, the guy's name was Satoshi Nakamoto—actually that's not his real name. No one knows his real name. Actually no one knows if was even one guy—or girl for that matter!
The more he explained the more he could see how crazy this sounded. But he persisted.
"This Nakamoto person came out with this technology of digital currency that was not issued by anyone but was a program. And this program was spread through many computers worldwide. Nobody owns it and nobody controls it. It was started and it runs itself—mostly."
"Mostly? So someone does run it. Say, the people who profit from it! Hm?"
"No, no. There is a team of engineers that write some code for it but they can't really change anything major without a consensus vote. Everyone has to agree to any major changes!"
"And how does this happen? How do people vote?"
"Well, the miners vote with their hash power-"
She cut him off. "What—miners? You mean guys that go underground with lights on their hats to dig—for a digital currency? Bob, what in the world?" she said quite dismissive.
"No, no. The miners have computers that solve an equation the program puts out and when a miner solves it it gets a predetermined amount of bitcoin. And the hashing is the crunching of numbers that the computer does and that takes a lot of power to accomplish. That's the secret. The use of electricity is what secures that the work gets done properly and the problem is solved and the miners get their bitcoin. That's what they call mining. Anyway, they get a vote by agreeing or not to mine new changes and the merchants get a vote basically by support of what their customers want. If the customers of whatever their business is don't like a certain thing the merchants will put pressure on the engineers to not implement it. Then there's the nodes. Those are people at home, mostly, businesses run them too, who run the entire blockchain and verify transactions and if they don't like the new changes they have the option to not run the new software."
"Blockchain? What's that?"
"That's basically a tally of transactions that are placed in a block—a block is the amount of transactions between the solving of one problem from the other. So all the transactions from the last time the problem was solved to the next time the problem is solved is called a block. And a block cannot be made without relying on data that is contained within a previous block. The new block is verified with data from the previous block—hence the chain."
"So what good is a blockchain? What does it do? I don't get it."
"It's there to secure the digital money—bitcoin. It means no one can go in there and change anything. Once a transaction happens and its confirmed on the blockchain—meaning all the nodes agree this transaction happened—that's it! Done!
"I still don't get it. What's there to stop someone from copying the coin and using it over and over?"
"But that's the point of the blockchain and proof of work. It prevents a double spend!"
"Yeah, I have no idea what proof of work or double, what is it, double-"
He cut her off. "Double spend," he said. Bob realized he needed a little more back story here. "You see that's been the whole problem with cryptocurrencies." He thought fast and figured he'd keep defining as he explained. "OK—cryptography is used to create cryptocurrencies—hence the name, and they've actually been around for a while but no one could figure out how to prevent what you said—why can't a coin just be copied?—and they were. This is why we haven't had any cryptocurrencies that worked until now."
She stopped him. "So this is a digital currency right?"
"We have that now. It's called online banking, debit cards, PayPal—should I continue?"
"Yes we have digital currency—that has to go through a third party, like a bank or PayPal or Visa. Bitcoin makes you the bank. You can send someone in Malaysia bitcoin right now and it will be received immediately and confirmed in roughly 10 minutes—it needs to confirm with the miners and nodes first and that can take about 10 minutes for the next block. Sometimes it takes a little longer as the network can get a little busy." He paused to collect his thoughts. "But let me go back to the copying thing. This Satoshi guy solved the double spend problem with the proof of work. The proof of work is the mining process. The mining process burns electricity—a lot of electricity and can get expensive. As the transactions happen and get put on the blockchain and as new blocks are built off of the old block and the chain gets longer it would take another computer massive amounts of computing power to go back and change data just in that one block. Then it would have to change every block after that until it caught up to the current block and while it's doing that new blocks are being created. All to change just one transaction! While it is possible, why would you attempt to change one transaction to use that bitcoin for another transaction somewhere else when it would probably cost you thousands to do it? That is basically proof of work in regard to the double spend. In a nutshell, it costs money to make a bitcoin. And the reward for spending money to make a bitcoin is the bitcoin.
The proof is you burned electricity to solve the problem to get the bitcoin—proof of work. With that you can't double spend and bitcoin is earned honestly.
"I see there is some logic to this but why? What makes it valuable?"
"We do! The people who want it and use it give it value."
"Yeah, and there's your catch, baby. No one's going for that one. There's nothing to back it. Like you said, no one runs it or is responsible for it. In other words—who cares! And what about this mining for bitcoin? It just continues forever? Just an endless supply of coins being made?"
"No, there's a predetermined 21 million coins to be mined. The last coin will be mined in the year 2140 approximately if mining stays constant and as planned."
"They know when the last coin will be mined?"
"Of course—its all math. One block approximately every 10 minutes and, currently, 12.5 bitcoins are rewarded with each block. And in 2020 only 6.25 coins will be mined every block."
"Wait, what? It gets less in four years? Why?"
"It's a deflationary system. There's your value. The reward halves every four years which help drive the price up. Adoption by the general public and businesses drives the price up as well. A bitcoin was worth virtually nothing in 2009 when the program went online. Today one bitcoin is worth around $515.
Sonya's eyes lit up. "Are you kidding me? This thing is worth that much—or people think its worth that much? There's no way that's gonna last. It's not real!"
"Well a whole bunch of people think so and there's a bunch of businesses starting to invest in it. It's at the very beginning of adoption—I mean very early beginning. And once it catches its growth will be exponential."
"I don't know Bob. What you told me and what I understand of it looks interesting but I wouldn't throw any money—any more money at it."
Bob left it at that. He'd informed her and brought her up to speed a little. Tomorrow he was going for the Hail Mary and buy as much as he could as fast as he could. He then went to fiatleak.com and watched the coins, that looked a lot like pumpkins with their orange color, fly across the screen. He would do this for hours with music in the background. He found it fascinating.
The next day Bob was up bright and early and had no work so he waited for Sonya to leave for work and went straight to the computer. He pulled up the coinmama.com site and began the task of registering. After all the crappy KYC and upgrading his status as far as he could, he made a small purchase of $50 to make sure all went well with his credit card. While he was waiting, he went to Coinbase and purchased the max $200 for the week. This was instant and he had his bitcoin fast. Coinmama took her sweet time but the transaction, with a hefty fee, went through OK.
This was it—time to go for broke—literally! Bob carefully calculated how much bitcoin he could get with his card and, somewhat nervously, ran the entire balance of the card. As soon as he did this he knew he was in deep in more ways than one, yet he was excited! This was fun and he really felt like he was doing the right thing, then he was nervous hoping Coinmama didn't rip him off! He waited and waited and tried to keep himself busy. He had to walk away from the computer 'cause everyone knows a watched Coinmama never boils—or something like that.
Bob came back to his computer and had an email stating he needed to confirm the payment! He'd forgotten about this part and it's been an hour! He confirmed and hoped there was no timeout on this thing. A few minutes later—he had the bitcoin in his wallet! Bob was exhilarated—and nervous as hell. He knew this was not going to fly with Sonya. It's a good thing they just made a payment so he had time before he would tell her because he wasn't done yet and he had to find a way to get the last bit of coin with the rent money! That's $1200 he had and he wasn't about to give Coinmama his banking information as they're in another country and his Coinbase limit was maxed for a week. He would have to string it out six weeks to do this and the price of bitcoin is going up! He searched around for more options. There was LocalBitcoins but he wasn't too keen on meeting someone plus the fees were high there as well. He did find Liberty X. They were out of Canada and had local stores you could transact in. Bob found one that knew how to do this as many stores had no clue about the service they offered. So he went with cash in hand and a new wallet on his phone and talked to the guy there who knew all about how this was done and had performed many transactions before. He walked Bob through the process and Bob gave him the $1200. The guy did his thing and Bob did his thing and moments later he had his bitcoin in his wallet and just like that, Bob was now done buying bitcoin! And was just starting, what he assumed, would be a long and painful argument with his wife and possibly throwing the marriage on the rocks.
Bob let a few days pass then told his wife all he had done. Needless to say she hit the roof and, in fact, threatened divorce. Bob knew she was not serious, he hoped, and proceeded to calm her and explain how he would work double shifts if needed to pay the credit card off and cover any other things that needed financial attention—this was that important to him.
He then explained in detail all that was involved with owning bitcoin and the community. He downloaded a wallet to her phone and they practiced moving their bitcoin safely. They learned together how to store their bitcoin. And though his wife was a little reluctant, he got her to watch the Andreas Antonopoulos videos on Bitcoin—all of them.
There were nights where they sat and watched fiatleak.com and BitBonkers and other visual sights for fun. They watched the prices rise sharply and then fall sharply experiencing what every new Bitcoiner experiences. Sonya soon began to call herself a bitcoin owner and supporter. She even bought more bitcoin on her own for their future.
Ten years came and went and Bob and Sonya sat on some tropical beach sipping exotic drinks. Bob looked at his wife and said: "Did I make the right decision or what?" as he grinned a sheepish grin. Sonya, refusing to acknowledge his self-gloat, leaned her head back and covered her face with her hat. Bob too, leaned back and continued his self-gloating.
art source: pic