If you’ve been paying attention to the news, you might have heard that digital currency Bitcoin is currently the talk of Wall Street after skyrocketing in value to trade at over $1,000. That’s no mean feat for a virtual currency with no real-world representation that is, in effect, the collective hallucination of the world’s hackerspace.
But if Bitcoin isn’t real, how does it work? There are some incredibly thorough write-ups about Bitcoin on the web, but if you want to learn about the world’s first all-digital currency, there are few ways more enjoyable than this beautifully animated three-minute short. It makes learning about Bitcoin as fun as dropping a tab and hitting the planetarium for a Pink Floyd laser show.
That Bitcoin Explained is so beautiful should be no surprise. Created by director Duncan Elms, recipient of an Honorable Mention at the 2013 Kantar Information is Beautiful Awards, the film’s design pedigree is top-notch, with a cyberpunk visual style that looks like Neuromancer come to life. That’s a wholly appropriate aesthetic, as the idea behind Bitcoin itself is something that seems like it came out of a William Gibson novel.
So what is Bitcoin? Essentially, Bitcoin is a digital currency created by a decentralized network of millions of computers. In this network, setting your computer to the task of solving increasingly complicated mathematical problems creates Bitcoins. Every time a computer solves the algorithm, its owners are awarded a certain number of Bitcoins. But there’s a rub: the math problems Bitcoin asks computers to solve become more complicated roughly every 10 minutes, while the rewards for successfully solving those problems halves roughly every four years. Add to that the fact that only 21 million Bitcoins can ever be created, and what you have is a digital resource that acts like a natural resource: Bitcoins are not only in finite supply, but they are increasingly difficult to mine.
In the end, the idea of Bitcoin is one of a self-stabilizing currency that cannot be tampered with by banks and governments. If the United States doesn’t have enough money to pay its bills, it can simply print some more, but that results in economic instability that can lead to extreme deflation. A Bitcoin can never become unstable this way, at least in theory, and because Bitcoins are theoretically anonymous, they are a favored way of paying for goods and services by those who are distrustful of traditional financial institutions, such as libertarians and techno-anarchists.
Money is a collective hallucination of mankind that has allowed us to build a civilization upon the back of a concept that is, by its very nature, ephemeral. It’s only worth what people think it’s worth. What makes Bitcoin so interesting is that it is transparently ephemeral and openly hallucinatory. How appropriate, then, that someone finally designed a primer on the currency that is just as trippy. If you want to learn about Bitcoin, or just appreciate how phantasmagoric money is in general principle, watching Elms’s video is three minutes well spent. Just be warned that Bitcoin is especially volatile right now, making some of Elms’s exact figures a little out of date.