Re-engineer your logic to understand the cryptocurrency Bitcoin
May 8, 2016
Your current logic will collide with the logic and concept of how the cryptocurrency Bitcoin works and in order for you to see the light at the end of the tunnel which hopefully will not be a train! Be prepared to learn from scratch and expect a long adventurous and exciting journey of discovery ahead – even if you are not new to Bitcoin. For me Bitcoin would fit well into the analogy of switching from Windows to Linux and the early days of the Internet relating to its still young beginning in the nineties. Tools that we use on the Internet have ripened and become easier to use as these have matured over these last 20 years, Bitcoin is just starting!
Nearly two years ago as from todays date of May 2016, I wrote my first article on Bitcoin:
→ How do cryptocurrencies such as Bitcoins work?
Writing this article back then was a good way to learn and research about the basics of the Bitcoin cryptocurrency for my own understanding. If you are new to Bitcoin, you should read it first. I just quickly went through it again a few minutes ago and after 2 years, I actually understand with deeper insights what I wrote back then. It’s nice when different elements that make up the bigger picture are understood and this believe me will take you a while! I actually had great trouble understanding many aspects of the cryptocurrency such as what is the blockchain, how do keys work etc. even though I wrote about them, my logic kept colliding against Bitcoins logic and I had great trouble understanding how can Bitcoins be stored on a blockchain and not in your wallet… what do you need the wallet for… I kept watching YouTube explanations and my logic just felt overwhelmed, I just couldn’t grasp it at a glance. I had to break it down and learn it. And this took me a while. What helped me more to understand Bitcoin is trying to understand Wallets!
When I wrote my first article, I thought I knew a bit about Bitcoin then, only to realise quite shortly after when I communicated with a friend who understood Bitcoin since a longer time that I kind of still knew …nothing! When words such as full node came up I was overwhelmed and demotivated, I thought I had figured it all out, but I hadn’t. So, I started learning again and as time went by, it became more and more fascinating. Why Bitcoin is so fascinating is another topic of its own about which I would like to write, but in short I would say it’s fascinating because it deals with us humans directly as a network and empowers us in many ways allowing ubuntu to happen! It should interest you to.
→ Andreas Antonopoulos also mentions in various of his speeches that he still hasn’t figured out what Bitcoin is. Bitcoin is not just the cryptocurrency, it is way more than that!
My two goto Persons currently to listen to are Trace Mayer who regularly hosts podcasts about Bitcoin on
→ Bitcoin Knowledge Podcast – Learn about blockchain and fintech
You should check out his podcasts to learn more. He speaks a clear English that is easy to understand.
Then also check out
→ Andreas Antonopoulos youtube channel
to listen to his speeches. He has also a speech style that is easy to understand and makes many aspects of Bitcoin clearer.
Though I would suggest to you, before you listen to them, that you read my first article about Bitcoin and watch several videos on YouTube about the basics of Bitcoin. It is way easier then to understand what these guys say and it will also be way more interesting! Maybe you are a fast learner or a slow learner, take your time to learn and discover.
There are of course way more persons in the Bitcoin arena that you can listen to and that could be listed but for the time being these were the ones I personally found to be great resources. If you want more technical depth of details around Bitcoins environment you can also listen to persons that are part of the development of Bitcoin Core. You can see here a list of the
→ Bitcoin Core contributors
You can look up on YouTube for example Gavin Andresen & Peter Todd. It also needs to be noted that persons who contribute to Bitcoin do not necessarily all the time do so and might at some stage also stop doing so or even change their mind about Bitcoin. It’s ever evolving!
Various words or terms used in Bitcoin can mean either one or many other things which can be quite confusing in the beginning. So when you start learning and discovering about Bitcoin, try to get the bigger picture of what it is and then start zooming in on the various terms. Research will be easy on the web, there are so many articles and videos that will describe the various aspects of Bitcoin.
For example the term Wallet can by quite confusing in the sense that its actually a Keychain. And you have various types of wallets, such as
→ hot wallets
→ cold wallets.Image attribution: By Zach Copley (http://www.flickr.com/photos/zcopley/8705948289/) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons
Your Bitcoins are not stored in your wallet but your logic will say, hey its a wallet, it must have something in it, storing coins, but here you see, logic collides and you will need to relearn that in Bitcoin things operate a bit differently. The Bitcoins are stored on the blockchain and you can sign a transaction with your key through your wallet. Your wallet is like a bank in which you can have several accounts for which you can have various keys, even multi-sig or multi keys are possible, ideal for companies or an organisation such as NGOs receiving donations.
The term Wallet is most likely here to stay but you can have a look here to get the idea about the different meaning of wallet and how some people suggest to change its name…
→ Proposition to rename ‘wallets’ to ‘keychains’
→ There are many Bitcoin wallet providers, for mobile, desktop, hardware and web.
You can have a look at various providers at bitcoin.org which also describes each wallet and their security aspects. You’ll see on their website that it also says to take time to educate yourself.
Then another term I found quite confusing was NODE. What is a Node and when am I a NODE? What is a Full Node? How can this help me to understand Bitcoin better? If you zoom down to its meaning, it doesn’t mean just one thing, it can mean several things from the miners who process blocks on the blockchain who could be full nodes or nodes part of a mining pool, you could be a node when running a wallet that downloads the complete blockchain that is of today around 70GB! And if you use a cold wallet such as Armory which builds a database of that blockchain another 70GB get’s used which makes a 1TB hard disc drive look pretty small in perspective of the ever growing blockchain. But this is another topic more relating to the
Image screen-shot source: Bitnodes by 21.co
Have a look at their great live map!
The way usually a full node is described and understood by most what it is: The Decline in Bitcoin Full Nodes << http://bravenewcoin.com/news/the-decline-in-bitcoins-full-nodes/
In the perspective of a wallet: “Most full nodes also serve lightweight clients by allowing them to transmit their transactions to the network and by notifying them when a transaction affects their wallet. If not enough nodes perform this function, clients won’t be able to connect through the peer-to-peer network—they’ll have to use centralized services instead.”
→ Support the Bitcoin network by running your own full node
If you are planning to help the Bitcoin network in running a node or wallet node also take notice of opening your Port 8333, read here more about it:
→ If you are running Bitcoin-QT and you do not have port 8333 open from the outside world to your node (the machine running bitcoin-QT), then you are not helping the bitcoin network.
Now, what follows; this is where you could get confused so I would advise you to stick to the definitions of above for the time being and discover how terms used can evolve and eventually change in meaning or function or see how complex, vast and diverse Bitcoin can be, have a look here at Ben’s article on
→ What is a “Full-Node”?
It addresses the aspects of mining pools, decentralizations and various suggestions of word combinations with the term Node such as:
Full mining nodes
And indeed they are different from each other…
Check this website to see some visualization references for the blockchain:
→ “With Bitcoin we finally have a currency that not only links people (or: nodes) together in financial transactions, but the network is transparent. But experts argue that the currency is just one of many applications that can be built on the Blockchain algorithm and database powering Bitcoin. This way of linking nodes can be used to weave authentification layers in all sorts of networked applications e.g. the Internet of Things.”
While you will easily be able to understand that Bitcoin is
→ “The Internet of Money”
,and there are more and more companies out there offering services to make it possible to trade with this currency you should make it your homework to learn as much as you can before you do anything with Bitcoins. To give you an idea or image, when you use a Bank, it is their work and responsibility to store your funds safely for which you pay them. Sometimes banks get robbed… or go out of business… When you manage your Bitcoins, you are your own bank, therefore you need to store them securely and learn how to do that. So, a place where you will start with to use your Bitcoins is the Wallet. That keychain that I mentioned above. I had great trouble to understand keys and how wallets work. Here my logic had a bad collision and this is where Bitcoin kind of ended for me for a while. I gave my Bitcoin research and interest a break here for several months. I even thought, if it’s that complicated, forget it!
Unfortunately it is, there are various programs out there that will not yet make it main stream as they are not easy to use and many are still in Beta. If they break and you are not very computer savy you might go nuts trying to get them to work. And its time consuming to.
If you start with Bitcoins now you would be still an early adopter. A technology of such a dimension takes its while to ripen. If you listen to Andreas Antonopoulos in some of his speeches he also says that various Bitcoin tool interfaces need a better design and become more user friendly. It should be SIMPLE. Currently it is NOT that simple.
We could also say that I, subjectively have gone the more tougher path, willing to understand how things work, such as wallets. And the more you learn about Bitcoin, the more you will think and analyse and realise it might be just better to observe, learn more, test the waters until you have a good sense of what you are actually doing. Do not just install a wallet app on your phone and think that’s it, so easy and simple it was. Get first a good understanding of the meaning of your KEY/s. What is the difference between hot and cold storage and study thoroughly what are all the aspects about keys – your Bitcoins! If someone has access to your keys or gets to hack into your computer or phone and retrieves them, they can use your Bitcoins – that is steal them. You are your own Bank Manager with Bitcoins – make your bank secure!
What helped me a lot in understanding Bitcoins is by reading the FAQ, Tutorials and watching all the Tutorial videos of Armory. Anything that you do not understand, research and learn more and then piece by piece you get closer to understanding how this stuff works.
If you want a structure or bullet point list of what to learn about Bitcoin to understand it better you could have a look here at the
→ Common Body of Knowledge for the Certified Bitcoin Professional certification
While the list there doesn’t give you sources where you can learn about each topic, it does state that you will find enough information on the Internet about these topics.
The book to read
I have another SOLUTION for you, check out the book “Mastering Bitcoin: Unlocking Digital Cryptocurrencies” by Andreas M. Antonopoulos
As the author mentions in many of his speeches, the book does get quite technical. It might be a great read to get an overall idea of Bitcoin and then to look back into the book a while or a year later after a long discovery journey of Bitcoin!
How do you fare so far with your adventure in discovering more about the cryptocurrency Bitcoin?
Re-engineer your logic to understand the cryptocurrency Bitcoin by Dietmar Reigber