A summary from 100 hours of learning about Bitcoin

Hannah Do
6 min readSep 29, 2021

Does Bitcoin have intrinsic value? The case for its energy usage and four real life applications.

Does Bitcoin have intrinsic value?

Imagine this: If people globally were to hire an army to guard a vault full of gold and staff to count the gold coming in and out, making sure the truth is maintained, and gold could be sent in and out of the vault to anywhere in the world, at the speed of light, does this “gold vault in the sky” have value?

If there are only 3 guards with a few guns guarding the vault and one person keeping count of the transactions, would you trust your life savings in it?

When you hear on the news that Bitcoin is using more energy than Finland, what they actually mean is: If Finland were to spend a huge amount of money to buy mining rigs and divert all its energy to attack this Bitcoin vault, Finland would lose. The truth will still be kept, your money is intact.

The “Bitcoin vault” has one of the strongest defence “armies” in the world in the form of energy. It also has hundreds of thousands of computers keeping count, so value can go from one place to another 24/7/365 at the speed of light.

“Wouldn’t it still be a huge waste of energy though?”

Yes, so here’s the “catch”: The vault has been using a lot of its defence energy from common sources such as coal, gas, solar energy, wind, etc, very similar to what we are using in our home today, but it doesn’t have to be.

There is a lot of “trapped” energy too far away from towns and cities for humans to make use of. Think about geothermal energy sources close to volcanoes as one of many examples. If we were to harvest electricity there and build power cables to lead the electricity all the way to our cities, there would be very little power left when it arrives because of the long distance travel. Now imagine you can “hire” that renewable energy army to guard the vault.

That’s what the recent and near future of bitcoin defence will look like. One of its “core” values is the army of defence whose size is equivalent to nations, to make sure no one can tamper with the record and the value it’s holding inside.

What real life applications are there?

There are four main applications that I know of

A store of value

For normal middle class people like you and me, if we are lucky and live in a well managed country where inflation is about 2–5% a year, after 30–35 years of working and saving, our life savings in cash would lose about 50–80% of its value.

For 1.4 billion people who are currently living in not so well managed countries where inflation is about 10% a year, after working and saving their whole lives, their savings would lose 98% of value at retirement.

Note that many people like myself can access ETFs and other investment vehicles, many people in less developed countries can’t. The more money their governments print, the more diluted and valueless their bank accounts become. People’s life savings are chipping away in their sleeps.

Fiat is money governments can print but you and I can’t. Bitcoin is money you and I can’t print, and no one else can print either. There are 21 million coins and that’s it. 21 million coins under the best defence army in the world. It could help act as a store of value for many people, especially people living in high inflation or hyperinflation countries.

Big payments, country to country, think of the “huge shipping boat with thousands of containers” kind of payments.

It is tough to manage big payments in the tens and hundreds of millions of dollars. Imagine a company in Vietnam selling to a company in Finland, many banks need to work very hard, and trust one another because it is hard to convert trillions of Vietnam Dongs into tens of millions of Euros, then move it across the globe. This naturally costs a lot of money.

One transaction in Bitcoin costs about $5 today for any amount, even a billion dollars worth of value. Because of the above-mentioned army of security and hundreds of thousands of computers keeping watch, no trust is needed among banks; a billion dollars can move from Asia to Europe within 10 minutes or less.

“$5 is a lot of money for a small transaction though. Wouldn’t it make bitcoin impractical for small transactions?”

Yes, you are right, layer 1 of Bitcoin is not practical for small transactions, this is what you might have heard a lot on the news: “only 7 transactions per second, not usable for everyday use, too high fees, etc”

What many people missed is: layer 1 is not meant to be used for everyday transactions. Just like the Visa or Mastercard networks are layer 2 that were built on top of layer 1 which are clearing banks/houses. Clearing banks handle millions at the end of a few days or weeks among banks and nations. Visa and Mastercard operate on top of this layer and keep count of small transactions.

The lightning network has been acting as Bitcoin layer 2 that is powering everyday transactions. While Visa is said to be capable of handling 24,000 transactions per second, lightning can handle millions. It is also borderless and decentralised, with the capability to power micro transactions at zero cost.

Bitcoin the network, growing at exponential speed just like the internet in its early days.

Micro transactions, powering new business models

Jack Dorsey, CEO of Twitter said that if he had bitcoin and lightning back in the day, he wouldn’t have run Twitter on an advertisement model. Why?

It was close to impossible to charge people 1 cent for watching a video or for using Twitter for 5 minutes. It was impossible to do that when the users are in many different countries. The solution was then to sell ads, every time you watch an ad, Twitter charges the business that runs the ad 1p, at the end of the day after showing ads to tens of thousands of people, Twitter charges the business a few hundred dollars.

Bitcoin and lightning change this. Imagine what this can do to the creator economy. Watch what is happening right now as Bitcoin and the lightning network are being integrated into Twitter to enable global tipping at zero cost.

That’s not the only application of micropayment. Michael Saylor, CEO of Microstrategy gave a much more powerful example of another application that could solve one of the biggest problems that companies like Facebook, Apple and Google are facing today: spam bots. If they were to integrate their networks into the lightning network and were able to charge some users £0.01 to verify that they are real humans, I wonder how many spam bots will be deterred by this.

Imagine the new business models that could be powered by micropayments. The ideas are still a few more years out, but Bitcoin lightning adoption is growing so fast, I would not be surprised to see them mature very quickly.

Last but not least, bank the unbanked

I have been rather lucky to live in a big city in the UK that is served by many banks. However, it is not always the case in poorer and more remote areas in the world. Some people I know in rural Vietnam have never had a bank account in their lives, some never will. They are deemed too poor and too unimportant to be served by banks.

Bitcoin and the lightning network mean that anyone in the world today with a phone and internet access can own a bitcoin “bank account”, can participate in the “gold vault in the sky” without discrimination, without having to prove that they are credit worthy to be served, all within about 2 minutes.

Bitcoin and the lightning network mean that small business owners can start charging and receiving payments for their little street side business almost instantly without applying at the bank, providing credit proofs, without installing and paying for any card machines.

To close it off, I quote Jack Maller (Strike CEO), the “youngster” who helped bring Bitcoin & lightning to El Salvador and the Strike API to Twitter (not in his exact word): “Nayib, president of El Salvador. I am not a politician, I’m not speaking on his political efforts, just on his Bitcoin effort, he looks like a genius! Why? Because Twitter has just made his country better. There are developers in London right now, working on the Bitcoin protocol, making his country better.

El Salvador has a population of 7 millions, smaller than Manhattan. Do you think they have the resources to continue being on the bleeding edge of financial infrastructure? No! Who is doing it for him? Jack Dorsey (Twitter & Square CEO), Bitcoin core developers, MIT professors… So now people in El Salvador can save 400 million dollars by remitting money over Twitter, instead of Western Union. You know how much work he did for that? f*****g ZERO.”