Updated! Does Bitcoin replace governments and banks?

What is bitcoin?

Bitcoin is similar to a religion

Bitcoin is a cryptocurrency, made possible through the blockchain technology. It has its own bible and a saint no one has ever met in person, Satoshi Nakamoto. This a very common name in Japan, like John Smith in the US.

The bible is called Bitcoin: A Peer-to-Peer Electronic Cash System and was published in 2008 on the cryptography mailing list 

Myths

Because is hard to define what bitcoin is, bitcoin-wiki lists 35 myths so far

1. Bitcoin is just like all other digital currencies; nothing new
2. Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve
3.  Miners, developers or some other entity could change Bitcoin's properties to benefit themselves
4. Bitcoin is backed by processing power
5. Bitcoins are worthless because they aren't backed by anything
6. The value of bitcoins are based on how much electricity and computing power it takes to mine them
7. Bitcoin has no intrinsic value (unlike some other things)
8. ...

and so on

Background

This  one of the many explanations on Internet

"To build an electronic cash system like this that's fully decentralized. we need two address two big issues a fully decentralized digital cash system

How to introduce new coins into the system? Obviously a viable payment network needs some way to create new coins, but if you let anyone create new coins whenever they want, the currency will quickly become worthless.

The second challenge is known as the double-spending problem. The rules of bitcoin say that each transaction output can only be spent once. If someone tries to spend the same output twice, the bitcoin community needs some way to detect this double-spending attempt and reject the later transaction.

The obvious solution is to have a company manage a shared record of all transactions. That's how conventional payment networks like MasterCard and PayPal work. But bitcoin inventor Satoshi Nakamoto wanted to build a network that wasn't controlled up by any single organization".

 A rebellion started against any centralized control of institutions of fiat money. Money that represents the confidence in economies managed by people, and made of worthless pieces of paper. Fiat money has no intrinsic values. In making the bitcoin, no treasury, no PayPal or Visa, no government, in general, should be allowed to manipulate us.

The blockchain

A shared ledger called the blockchain that is maintained by computers, called nodes, operating on a peer-to-peer network. Thousands of computers around the world keep separate copies of the entire blockchain, storing every transaction that has happened since the network was launched in 2009. The network rewards nodes who help to create the blockchain by allowing them to create new bitcoins—solving the coin-distribution problem while simultaneously creating an incentive to help solve the ledger-updating problem.

Bitcoin poetry

This is not a metaphor. There are actual poems written by people who get emotional. 99.99% of people who trade in bitcoin have no idea how it works and why it has such wild increases in value over a short period of time

Here is a poem sample

Are you sick of governments having far too much control?

With the power to print money to fill the debt black hole.

The power to control you and tell you what to do.

Like Iraq, Afganistan and quantitive easing 2.

The system of control they use to keep you in line

is worthless fiat money and inflation over time.

Instead of blaming bankers step up to the plate

take responsibility for rolling back the state.

The power of the internet is an incredible tool

for learning, sharing and trying to look cool.

It’s free from all the bureaucrats and effectively lawless

But look at how amazing it is and all that it has brought us.

 Charles Kindleberger opinion

Not many people heard of him, except bankers with a Ph.D. degree.  Charles Kindleberger designed the Marshall Plan 

His books contain everything that happened before. The idea that a computer code shared by many people is 100% objective and free from people manipulation is a salt statue. From Economist

The developers behind distributed ledgers,  often talk as if governance is something they are beyond. They are not. Computer code is just a set of rules. Code is governance. And it can change.

Take bitcoin: if a supermajority of the computers running the bitcoin distributed ledger run an upgrade, the upgrade becomes the new code. But behind each computer is a human, making decisions. Distributed-ledger developers talk about a consensus-driven model, where you improve the system by bringing everyone on board. So do central bankers. 

 Different humans have different interests. In bitcoin, the people who own the computers verifying transactions—the “miners”—want code that increases fees for miners. People who use bitcoin want code that keeps those fees low. 

Then the existence of a computer code that is impartial and can not be manipulated by people is hard to imagine.

It like saying we do not need humans to run a driverless taxi service. But of course, we need humans to monitor the safety, make software patches and add new computer applications and manage the whole operation.

Future will tell whether  the poet fears "The system of control they use to keep you in line is worthless fiat money and inflation over time." can be indeed eliminated

Dec 27 , 2017, bitcoin one-day variation