What is crypto, what is Bitcoin?

If you understand ledger systems, take double-entry accounting. Every transaction has two sides, like buying equipment or selling a product is recorded in two ledgers, one as debit and one as a credit. This ensures that the total value of debits always equals the total value of credits. It's like a seesaw, if one side goes up, the other must go down by the same amount to maintain balance. The Medici popularized this system as they ran the entire show. They could check if someone stole something, who ordered it and which transaction was to blame because the final result between the two ledgers did not self balance, did not negate to 0.

Luca Pacioli, a Renaissance mathematician and Franciscan friar, invented the system in 1494. His book, Summa de arithmetica, geometria, proportioni et proportionalità, included a detailed explanation of the double-entry method, making it accessible to a wider audience and helping to establish it as the standard for business accounting.

The Medici family use of the double-entry accounting system, specifically Giovanni di Bicci de' Medici (founder of the Medici Bank) implemented it extensively in their banking operations during the 14th and 15th centuries.

Bitcoin is also a ledger, termed distributed ledger accounting. It creates money by tracking the exchange of something limited. Recording all transactions in a ledger termed a blockchain. Transactions are simultaneously a withdrawal from one wallet and a deposit into another wallet, and all must equate to the rules of the ledger or be excluded as a fraudulent transaction. For example, if you have 20 coins, they can all accounted for in the record, ledger, blockchain. The blockchain cannot validate to a total of coin more than 20 and past and present owners of the coins are all recorded in the chain. Everyone gets their own personal copy of the entire ledger.

The cryptography allows everyone's personal wallet that holds coins to be out in the open without any possibility of theft, and this part is what certain types are vehemently against. The incapacity to steal the money, and they are building big computers to break the code that makes theft improbable.


Bitcoin defines a currency as a set of transactions in a ledger rather than issuer, by design as Bitcoin intends to make cooking the books impossible by distributing the ledger (the blockchain) to everyone so that one party cannot dispute the ledger and along with a finite amount of coins for ongoing system integrity and reconciliation. You never really send bitcoins, instead the ledger says so.

Expanding on Bitcoin - Ethereum

Of many attempts to expand on Bitcoin, the most successful is Ethereum. Ethereum invents something called "smart contracts". You can record more stuff on the ledger, right? And not just the transactions of a currency. Ethereum stores financial contracts on the blockchain. These contracts are immutable, they cannot be contested. They not only stipulate the contract, they execute the contract automatically according to the stipulations in the contract. No humans are allowed or required other than submitting their contracts to the blockchain.

Take a last will and testament, you can set up a contract that issues a limited amount of Ethereum to a beneficiary each year rather than the entirety, if there are concerns that the beneficiary is an idiot. The contract will auto-execute every year (after you are gone) until there are no more funds in the account.


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