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Issue #596: Quality explainers on how Bitcoin works

Oct 22, 2019
Marty's Ƀent

Issue #596: Quality explainers on how Bitcoin works

Bitcoin is such a hard concept to tackle that I am always ecstatic to share clean and concise explainers when I come across them. Luckily for us, there were two particularly good Twitter threads that arrived on the Internet over the last few days that tackle a couple of basics that I'd like to share here.

The first is from our friend StopAndDecrypt and in it he does a good job of describing the relationship between users who run full nodes and the miners who confirm their transactions in blocks. I've always liked the framing of miners being contractors that exist to provide a service (include transactions in blocks while following a certain ruleset) for users who are attempting to send messages (transactions) to each other. Miners exist to serve a very specific purpose under a very specific ruleset dictated by the consensus among full nodes. If they produce a block that falls out of the ruleset, their work is rendered useless.

Therefore, due to the capital intensive nature of their businesses, miners are incentivized to produce blocks that fall into the ruleset of the most demanded implementation. Miners will only get paid when they deliver this very specific product to the market. Tell your son this.

The second thread, as you freaks may be able to tell by now, is about one of my favorite subjects, the fact that Bitcoin mining will usher in an era of energy production efficiency the likes of which the world has never seen. Our friend Alexander Liegl dives into the inefficiencies that currently exists within the energy production industry and how Bitcoin mining can help. While many will contend that Bitcoin does not technically store energy (myself included), the gist is the same. Bitcoin mining makes it possible for energy producers to be insanely efficient. For instance, last week the New York Times published a blog post about how much oil and gas is not being flared, but instead sent aimlessly into the atmosphere. Harming the environment far worse than it would have been had that energy been capped and consumed. Here's a snippet:

BP and Exxon are currently capping and consuming LESS THAN A QUARTER of the excess oil and gas they produce on site. This is deplorable. We need to pump these stats and Bitcoin mining is the way this happens. As you freaks know all too well from having read this rag for too long, the biggest problems these producers have is the storage and transportation of this excess supply. Bitcoin fixes this by cutting the distance needed for this excess supply to travel down to feet from hundreds of miles. Put a few mining sleds and a generator close to an operation's flare site and that excess supply can be consumed immediately and turned into the hardest money the world has ever known. That hard money can then be liquidated to cover costs and any leftover sats can be held for future investment or consumption.

It is only a matter of time before those in the oil and gas industry, which is filled with operations that took out insane loans with the assumption that oil prices would be way above where they are now, realize how much money they are leaving on the table by not taking advantage of this efficiency gain. The economic reality is too strong.  

The future is bright! Onward!  

Final thought...

One time, in grade school, I made my parents by me a bird. We named it Midnight.


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