What is Bitcoin for J.K Rowling

J.K. Rowling's tweet asking what Bitcoin and cryptocurrencies are prompts this explainer video, made in memory of the Edinburgh cafe near where she worked as a waitress before writing Harry Potter.

The explanation traces back to a course from over seven years ago called Bitcoin or How I Learned to Stop Worrying and Love Crypto, which began with the question of what money actually is.

Money has three core properties: a means of exchange that solves the double coincidence of wants from bartering, a unit of account like pricing something in dollars or pounds, and a store of value, the same measure used to describe the wealth of people like Bill Gates or Elon Musk.

Good money also needs fungibility, durability, portability, and divisibility, unlike a priceless one of a kind artwork such as the Mona Lisa, which cannot function as money because no two units of it are interchangeable.

Money's link to debt and credit, since poor and middle class buyers need loans to convert future income into big purchases like a house or car, feeds into an old debate among economists and central banks about what makes good money, from inflation and reliable pricing to the added complexity of cross border exchange, like buying on Etsy from England while living in California.

The Bitcoin experiment launched in 2009 by taking ideas about money and connecting them to new technology like proof of work, blockchain, and cryptography, all aimed at putting the individual in charge instead of a middleman.

Today's digital money model relies on a trusted third party, typically a bank, to create a digital representation of your cash and move it through a network via a wire transfer or a PayPal payment, an expensive middleman that proof of work and blockchain technology are designed to remove.

Satoshi's technology lets Alice send value directly to Bob just like handing over cash, with bitcoin as the only token that lives on the Bitcoin network, leaving open the experiment of whether the underlying blockchain ledger would actually hold value and the network would grow stable enough to last.

When Charles joined the space in its early days the answer was still no, with a volatile hash rate, miners coming and going, and bitcoins that were basically worthless and not accepted for many products or services.

Within a few years the answer turned to yes as Bitcoin stabilized into a usable global phenomenon and launched an entire blockchain industry that generalizes its technology to self sovereign identity, rights management for authors like J.K. Rowling's own books, property and land registries, and remittances such as sending money from London to Addis Ababa, Ethiopia.

Blockchain solves cooperation between parties who do not trust each other, the same way competing cell phone carriers still let your phone roam onto a rival's network when you travel abroad.

A decentralized voting system addresses how political parties have a personal incentive to corrupt elections even though the parties must still cooperate for the whole system to be credible.

The COVID pandemic and climate change show what happens when nations, corporations, and individuals act in their own interest instead of the common good, from broken medical equipment supply chains to fights over who gets a ventilator.

Disintermediation is the key word for the blockchain industry, replacing any centralized middleman, whether a broker, a voting authority, or an identity issuer, with a decentralized network.

Bitcoin began as an experiment born of passion for rethinking money and frustration with the 2008 financial crisis, stepping into an old argument among economists over what makes good money, from Modern Monetary Theory and Keynesian and neoclassical economics to the Austrian school's case for gold backed money.

Bitcoin took a neo Austrian view by capping its supply at 21 million units, a stark contrast to the discretionary money printing policies of the Bank of England, the Federal Reserve, and the People's Bank of China.

That scarcity is meant to make Bitcoin's value rise with demand rather than fall like inflationary currency, and it has, surging from under a dollar to $20,000 a token in under a decade while the dollar has lost 98 percent of its buying power since the Federal Reserve was created, illustrated by his grandfather's first home costing ten thousand dollars against a smaller, pricier home bought decades later.

Satoshi's Austrian economic ideas took shape as a fixed money supply secured by proof of work, blockchain, and cryptography, all built to get rid of banks and exchanges in favor of cash like payments directly between people.

The experiment succeeded: hundreds of thousands of products and services, from airline tickets to food and medicine, can now be bought with Bitcoin, proving the network grew large and durable enough to stay.

Being your own bank through self sovereign identity and property is a movement that is hard to reverse once people experience it, since nobody wants to give up autonomy and privacy for a system that often costs more anyway.

The consequence of a system where everybody is equal is that the least among us gain access to the same markets and infrastructure as the wealthiest, making blockchain the technology of trust and coordination among people who do not trust each other, and in Charles's view one of the greatest inventions in history, the missing manual for liberty, closing with thanks to J.K. Rowling for the inspiration her books have given millions.