Bitcoin: the people’s network
A lot of attention that Bitcoin receives is on the price action. It covers most of the news online and conversations among peers. That’s unfortunate as it leaves out the fundamentals of Bitcoin. It leaves out what Bitcoin fundamentally is and the innovation it has created.
Bitcoin is the largest digital network of the people. It’s truly global. It’s not confined to a geographic location, not to a tradition, nor to any country, and has no central authority. It’s glued by the minds of the people, by their belief in it, their agreement with each other, the engineering behind the network, and the math the keeps it intact. Before any use cases that people usually propose — transaction medium, brand, store of value etc, Bitcoin is a digital network.
What is a digital network and why it’s valuable?
A digital network is a group of people (or things) that are connected to each other directly or indirectly through the internet.
The value a digital network provides is the people (or things) in it, the connections they have with each other, and the value that can share with each other. The value from the people can be anything from their opinions to their artistic content to their commerce. Their value, whatever that might be, can be sent or received on the network.
A digital network is like a city with roads that connect people. The people can create and send value through roads and infrastructure that city provides.
A popular law in telecommunications — Metcalfe’s Law says the following
The value of a telecommunications network is proportional to the square of the number of connected users of the system [1]
Popular networks like Facebook (social network), Amazon (commerce network) all are valuable networks. The people in the network create value. More the people on Amazon, the more valuable it is i.e. more people can shop and more merchants can offer their products. Both sides need a bigger network. They need more options. The network needs more nodes (people and merchants) to be more valuable. The value is then channeled using “commerce” — buying and selling.
Facebook is not different. Imagine if there were only 10 people on Facebook. it’s a lonely planet in that case. Each person can only friend and communicate 9 other people. Not more than that. How valuable do you think Facebook would be then? Not quite as valuable. To make it more valuable, Facebook network needs to add more people. Having 1 billion+ people on it allows the people on the network potentially talk and make friends with everyone in the world. The network needs more nodes (people and merchants) to be more valuable. The value is then used for “communicating”. Both sending and receiving.
A quick comparison of popular digital networks
Bitcoin is the youngest network among the above. Not only is the fastest growing, it is also a monetary value network. Monetary value to all humans is the most important value. People value their money the most, not their photos, videos, or information online.
What is value of the Bitcoin network?
People in the Bitcoin network represent people and their capital (monetary value aka money). The connections in the network represent their power to bond and share their monetary value. The people’s monetary value can flow through the network and be stored in it indefinitely. People can store it, share it, and collaborate with it. You can imagine it as a bank in cyberspace. It’s the people’s bank without any intermediary. It’s highly secure and immutable. No central authority that can change it or overtake it. It’s the largest “decentralized network” i.e. no one single autority controls it but all the people in the network do. It’s not a company nor it’s a government. It’s a people’s network.
With the bitcoin network we can quantify four aspects:
- The number of people (or institutions) in the network.
- The amount of monetary value (money) in the network.
- Available space and supply (number of Bitcoins) in the network
- The demand from the people. This can usually by estimated using short term price movement.
The possibilities for innovation Bitcoin network offers is strong. When you have billions of people in the network and their contributed and shared monetary value, it creates opportunity to do may things.
Examples of network applications:
- Bank in cyberspace: people and institutions can save their money in Bitcoin for the long duration. The Bitcoin network is capped at 21 million unit of coins that make it deflationary and a great spot for saving your money without dilution over the long term.
- Integrating Internet Application: many of the internet applications such as Facebook, Amazon, Square, Apple, Microsoft etc can integrate themslves into the network. In this way, these applications can take advantage of helping their customers be part of the Bitcoin cyber bank and enable them to do commerce with their apps using Bitcoin as settlement.
- Distribution channel: The Bitcoin network is also a great distrbution network for your product or service. When you announce and integrated your application to the Bitcoin network, you get the acceptance and attention from the people in the network.
Conclusion:
As the Bitcoin network grows bigger, stronger, and smarter — it will fascinating to watch what all it can become. We are today in the early stages of the network. Today, only about estimated 100 million people i.e. 1 % of total world population are part of the network. One day, with ubiqiutious internet access and understanding of Bitcoin network, more than 1 billion people will join it. Hopefully, one day, all 7.8 billion people will.
Bitcoin has proved itself as a bank in cyberspace. Popular fintech applications like Paypal and Square have already integrated it in their application. What will be next? Could Bitcoin something bigger once it reaches a network size of 1 billion people? Could Bitcoin be something we have never imagined when it reaches network value of $10 trillion? No matter what it will end up being, it will be a journey to watch and learn from.
References:
[1] https://en.wikipedia.org/wiki/Metcalfe%27s_law
[2] hope.com
Extras:
Bitcoin organization website — bitcoin.org
Bitcoin institution treasury data — https://bitcointreasuries.org