A bunch of anarchocapitalists walk into a venture capitalist’s office wanting to perform their act. The venture capitalist asks what the act is and they reply:
“A new block of transactions is created every ten minutes or so, with 12.5 bitcoins — BTC — reward — plus any fees on the transactions — attached. Bitcoin miners apply as much brute-force computing power as they can to take the prize in this block’s cryptographic lottery. Unprocessed transactions are broadcast across the Bitcoin network. A miner collects together a block of transactions and the hash of the last known block. They add a random ‘nonce’ value, then calculate the hash of the resulting block. If that number is lower than the current mining difficulty, they have mined a block! This successful block is then broadcast to the network, who can quickly check the block is valid. They get 12.5 BTC plus the transaction fees. If they failed, they pick another nonce value and try again. Since it’s extremely hard to pick what data will have a particular hash, guessing what value will give a valid block takes many calculations — as of October 2016 the Bitcoin network was running 1,900,000,000,000,000,000 — 1.9×1018, or 1.9 quintillion — hashes per second, or 1.14 x 1021 — 1.14 sextillion — per ten minutes. The difficulty is adjusted every two weeks — 2016 blocks — to keep the rate of solved blocks around one every ten minutes. The 1.14 sextillion calculations are thrown away, because the only point of all this is to show that you can waste electricity faster than everyone else.”
The venture capitalist says: “Holy crap, that’s the worst idea I’ve ever heard! What’s the act called?”
The anarchocapitalists reply: “The Blockchain!”
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