When first wrapping your head around the idea that Bitcoin is money, but that it’s effectively stored entirely on personal computer hardrives, it’s important to understand that, for the first time ever, we have a system of digital information wherein all the information is verifiably unique.
Simply put, a unit of Bitcoin that is used to transfer value between different parties, is nothing more than digital information. Yet it cannot copied.
Making information digital is great and there are many benefits. Large amounts of information can be easily stored and moved around. Take books for example. If it’s digital I can keep a 1,000 books in my pocket and send them all (instantly) to the other side of the planet, no problem. This was unthinkable before the digitization of information.
This can however also be problematic. Because as soon as information is made digital, keeping the original version unique (thus preventing illegitimate copying) is very difficult, if not practically impossible. Just ask Microsoft, one of the biggest and most powerful software companies on the planet. And yet, pirated copies of Widows are more common than legitimate ones.
Sometimes we want people to quickly and easily copy and share information. But other times we need information to stay original. We could keep it to ourselves, that’s one way to make sure no one makes a copy, but what if we wanted to share it, without it being copied?
Let’s say I’m writing a book and I have a rough draft that I want to share with a friend to get some feedback. If I send them a copy there is simply no way to be absolutely 100% certain that they won’t make a copy of it before returning the original back to me.
And that is why Bitcoin matters. Because it solves this problem. In the context of Bitcoin it’s known as the ‘double spend’ problem and until the invention of Bitcoin there was simply no practical solution. Widely shared digital information can be protected, to varying degrees and in various ways, but none of those methods are bullet proof.
Units of Bitcoin however, despite being nothing more than digital information, have proved impossible to copy. You can buy Bitcoin, you can earn it, and if you’re a crook you can steal it, (and there’s plenty of that happening) but one thing you cannot do is make copies of the information that denote individual units.
And with the valuation of Bitcoin being what it is, 1 BTC ~ $10,000 or more, there is plenty of incentive to try. It hasn’t happened, because it simply isn’t practically possible.
This is why Bitcoin has value. The units of information that are stored and transferred on the network are all (provably) 100% unique. And you don’t have to take my word for it, if you know where to look, you can verify this for yourself.
In the eleven and a half years since the launch of Bitcoin, its core network, the so called ‘blockchain’, which is the only place where units of Bitcoin really exist, have never seen the integrity of a single Bitcoin compromised.
This is why Bitcoin works.
Because there is just absolutely no way that two or more people can simultaneously own (or even think they own) the same Bitcoin. And for something that’s nothing more than a piece of digital information, this is a major technological breakthrough.