Firstly fair play for being inquisitive and open-minded, you're definitely getting the gist of it. I agree with almost everything you've said in the above comments.
Yes, because the code for bitcoin is open source, it's freely available and it's not copyrighted (https://github.com/bitcoin/bitcoin). What that means is that anyone can copy the code, change the name, tweak a few setting and they have their own separate blockchain, wallet software, mining software etc. The code is easy to copy. What is NOT easy to copy is the whole ecosystem - exchanges and online wallet services, users, miners willing to dedicate resources to your blockchain. In a way the fact that there are 1000s of competing coins, many mostly pump and dump scams by the creators, makes it more difficult for a single competitor to bitcoin to emerge. I don't rule out that it could happen some day, it won't happen overnight and I'll be ready and happy to leave bitcoin for something better if it comes to it.
If 21 million had been created up front, who would have owned them? As I mentioned earlier one of the subtle things about the mining is that it solves the problem of how to fairly award bitcoins. Those who took the risk of supporting bitcoin by spending money on mining equipment and electricity in the early days got coins as their reward, which is as fair a way as any to distribute the new coin supply.
Yes the 21 million is an arbitrary number, and as I mentioned earlier it's actually just a result of starting with a 50 coin reward per block, and then halving it every 210,000 blocks. If you work out how many coins that results in by the time the coin reward halves enough times to become negligible you get close to 21 million.
This is a great point, some aspects of bitcoin in isolation are mathematically enforced, such as requiring the private key to spend from an address and having to brute force the solution to a block, but other aspects rely on consensus or what the economic majority decide to do. The rules can be changed if there is consensus to do so. This has resulted in a bloody civil war for the past couple of years about how to scale bitcoin. Some people wanted to increase the 1MB block size limit, and others didn't, but the majority were on the side of not doing it.
People, even seasoned bitcoiners really struggle with the 'power' aspect of bitcoin. Some think the main devs have the power because they can change the code that the majority are running, but if they abuse that power people can decide to run different code. Some think the miners have power because they decide what they consider a valid block and the network depends on them, but if the miners play dirty the users and exchanges could refuse to acknowledge the coins they mine. They could even do something really drastic like change the mining hashing algorithm so that all the dedicated miner hardware no longer worked! Some say the exchanges have power because when you log into an exchange to buy bitcoin... they get to define which blockchain is bitcoin by which coins they sell you, but if they decide bitcoin is something other than what users actually want, another exchange will be happy to steal their customers and give them what they want. Because the system is open, no group of participants can hold the rest to ransom.
So overall, I believe nobody has absolute power over bitcoin, what bitcoin is defined as (which may change) will always be what the economic majority decide it is. And by economic majority I mean the influence any actor has is relative to their economic power in the system. A large exchange or miner or someone holding 100,000 coins (with the possibility to dump them all on the market at once) have more influence than someone holding only 1 coin, and they should, because they have more at stake by bitcoin failing.
2. It is not though some unique mathematical object. According to Antonopolous there are 1,000 competing alt coins so one wonders just how relevant is the artificial scarcity.
Yes, because the code for bitcoin is open source, it's freely available and it's not copyrighted (https://github.com/bitcoin/bitcoin). What that means is that anyone can copy the code, change the name, tweak a few setting and they have their own separate blockchain, wallet software, mining software etc. The code is easy to copy. What is NOT easy to copy is the whole ecosystem - exchanges and online wallet services, users, miners willing to dedicate resources to your blockchain. In a way the fact that there are 1000s of competing coins, many mostly pump and dump scams by the creators, makes it more difficult for a single competitor to bitcoin to emerge. I don't rule out that it could happen some day, it won't happen overnight and I'll be ready and happy to leave bitcoin for something better if it comes to it.
3. The mining thing is key to understanding it. As fpalb explains, mining is a completely artificial game albeit its rules are adjusted automatically and outside centralised control. The rules target to settle transactions every 10 minutes and to reward the miners with BTC for confirming that settlement. The objective is presumably to let the monetary supply grow in pace with the number of end users - creating 21m BTC day one wouldn't work at all. The game is extremely crude - the asymmetric cryptology is very clever I'm sure but the game itself is pure brute force. The miners have to make their header so its code is of a certain smallness (as a number). They keep tampering slightly with the header until they pass this test. This is done, as I say, by brute force not by clever strategies. The rules keep changing to target that 10 minute settlement. These days it might take around 80 million tries to get the answer. This needs massive computer power way beyond your humble PC and consuming large amounts of electricity. But I emphasise this is all completely artificial. As Antonoplous explains it is like setting a massive Sudoku puzzle. The asymmetry is that it takes an awful lot of effort to solve the puzzle but is very easy for all the players to confirm that it has been solved. However, nothing of any aesthetic value is being achieved here, even for nerds.
If 21 million had been created up front, who would have owned them? As I mentioned earlier one of the subtle things about the mining is that it solves the problem of how to fairly award bitcoins. Those who took the risk of supporting bitcoin by spending money on mining equipment and electricity in the early days got coins as their reward, which is as fair a way as any to distribute the new coin supply.
One thing I am struggling with is the artificial limit on the money supply and how the consensus works.
I originally thought that Bitcoin was a mathematical object of which, mathematically there was limit of 21M. I thought miners were really pointy headed guys who found these increasingly difficult objects.
Yes the 21 million is an arbitrary number, and as I mentioned earlier it's actually just a result of starting with a 50 coin reward per block, and then halving it every 210,000 blocks. If you work out how many coins that results in by the time the coin reward halves enough times to become negligible you get close to 21 million.
But none of this is sacrosanct. By consensus the rules could be changed any time in any way. There could be a consensus to stop the creation of new money now, or to greatly increase the artificial limit or to double everybody's balance as a one off.
This is a great point, some aspects of bitcoin in isolation are mathematically enforced, such as requiring the private key to spend from an address and having to brute force the solution to a block, but other aspects rely on consensus or what the economic majority decide to do. The rules can be changed if there is consensus to do so. This has resulted in a bloody civil war for the past couple of years about how to scale bitcoin. Some people wanted to increase the 1MB block size limit, and others didn't, but the majority were on the side of not doing it.
For a conventional currency these powers of course reside with the Cèntral Bank and one of the big claims for BTC is that the consensus will ensure that their currency is not abused. All the same there seems to be some conflict here - miners want to increase their productive capacity, non-miners would like there to be no further money creation. How is the consensus arrived at?
People, even seasoned bitcoiners really struggle with the 'power' aspect of bitcoin. Some think the main devs have the power because they can change the code that the majority are running, but if they abuse that power people can decide to run different code. Some think the miners have power because they decide what they consider a valid block and the network depends on them, but if the miners play dirty the users and exchanges could refuse to acknowledge the coins they mine. They could even do something really drastic like change the mining hashing algorithm so that all the dedicated miner hardware no longer worked! Some say the exchanges have power because when you log into an exchange to buy bitcoin... they get to define which blockchain is bitcoin by which coins they sell you, but if they decide bitcoin is something other than what users actually want, another exchange will be happy to steal their customers and give them what they want. Because the system is open, no group of participants can hold the rest to ransom.
So overall, I believe nobody has absolute power over bitcoin, what bitcoin is defined as (which may change) will always be what the economic majority decide it is. And by economic majority I mean the influence any actor has is relative to their economic power in the system. A large exchange or miner or someone holding 100,000 coins (with the possibility to dump them all on the market at once) have more influence than someone holding only 1 coin, and they should, because they have more at stake by bitcoin failing.
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