If you've been listening to the show for the past week, one thing is abundantly clear: Glenn knows almost nothing about how Bitcoin works. And to be honest, neither do the rest of us on the team. So Glenn and his EP Tiffany put together a special show where experts explained exactly what Bitcoin was and how it works. Elizabeth Ploshay, a Bitcoin Foundation board member, Jeffrey Tucker of Liberty.me, and Kristov Atlas, the author of Anonymous Bitcoin, all joined Glenn for this special Bitcoin episode.
Before you get started, here is a quick Bitcoin tutorial:
So what were some of the key points from tonight's show?
1) Acceptance of Bitcoin is rapidly expanding
Bitcoin is now an acceptable form of payment at 60,000 merchants worldwide, 50,000 of those added in one year. Glenn said: "I will tell you I love the innovation of it. People are trying to find a way out of the mess politicians and the central banks have created. The free market always wins. Big government can rack their brains all day long, and they will never, ever, ever, be able to duplicate the innovative spirit of the collective American public. One guy has an idea, and it starts like a grass fire."
2) It’s both a currency and a payment system.
Jeffrey Tucker: If you took away the payment system associated with Bitcoin, Bitcoin would be worth zero right now. It’s the payment network that gives it value. It’s both a currency and a payment system. That’s a little strange. We’re used to thinking of those things as separate. You know, we think of like dollars, and then we think of like PayPal or something or Visa, MasterCard. With Bitcoin, they’re both united. Payment system and the currency are one single thing, and it’s the sheer efficacy and brilliance of the payment system that led Bitcoin to have value.
Bitcoin lived on the Internet for ten months at a zero price, and it was only once the payment system was tested and tested and tested again, the market said this is extremely cool, this is amazing. You can transfer stuff from here to there, anywhere in the world, direct peer to peer. That’s a valuable thing to have, and then it obtained value.
3) You can actually use it to buy stuff in the real world
Elizabeth Ploshay: You can use Bitcoin for so many things. You can use it to buy plane tickets. You can buy food with it. You can use it for charitable donations. The best thing about it is you can reach people around the world. There are 2.5 billion people around the world who don’t have bank accounts. You can send money to those individuals without a bank account, so practical things but also helping people in need.
4) There are no central banks like The Federal Reserve
Elizabeth Ploshay: Trustless peer-to-peer system, direct transfer of funds, no trust in one central point of failure.
Kristov Atlas: When it’s centralized, when we have the government or some company doing it, then things are easy. They can mint the units of currency. They can validate the transactions are not fraudulent. When you have a peer-to-peer basis, then you have to make sure that enough honest people are able to do all the stuff that the system is going to work, and that’s the genius of Bitcoin is they figured out ways for people to validate these transactions and to mint the new coins in a fair way that everyone is going to agree on and that’s going to be predictable in the future.
5) It has a limited supply
Kristov: There’s social and economic forces at play basically. So if you wanted to change this limit, there’s about 21 million Bitcoins that are supposed to ever be in existence, and we’ll get to that point, we’ll be mined out of Bitcoins somewhere around the year 2140. If you wanted to change that, you would have to convince all these people running Bitcoin software that they need to agree to this change, they need to run a new version of Bitcoin based on changing this $21 million limit.
But we know that investors all value Bitcoins based on everyone agreeing that there is this $21 million limit. If you try to extend that, it’s going to debase their investment. Investors are going to dump their Bitcoins right away. They want to get out of it. Everyone knows this, and so there’s no way you’re going to convince people to switch over to this new version.
More in the interview below: