Where is All the Bitcoin?

People are intimidated by Bitcoin, and how can you blame them when answers of this level of ambiguity are the standard:

Where is Bitcoin actually stored? Everywhere, but nowhere in particular.

When you send it, what path does it travel? It doesn’t travel.

When it’s lost, where does it go? Nowhere.

Hopefully, by the end of this article, those answers will make sense to you.

Mailing value

The year is 2000 B.C. You are travelling by boat down the River Nile in Egypt. You work for the world’s first postal service, and a Pharaoh needs you to send gold to one of his contemporaries — alongside a letter specifying where to store it.

Let’s unpack this situation a little more and see if we can better understand the preconditions that landed you here. Why does the Pharaoh send the letter all the way down the river Nile just to talk to his contemporary? What he is endeavouring to achieve is communication, and it just so happens that — given his situation — he can’t achieve communication without employing transport. After all, communication is essentially just the transport of information between two parties.

What about the gold? Well, gold is afforded a position of high value in the human mind, hence why it’s so sought after. But the gold cannot grant this perceived value position unto itself; that placement remains under the perceiver’s authority — the mind. Since the mind operates entirely in the realm of information, it follows that it isn’t the gold itself that’s the precondition of value, but rather the information we know about it. After all, why spend precious time and energy sending heavy gold to your contemporary if you didn’t trust that they would perceive it as you do — a transfer of value.

Earlier, we established that communication is the transport of information between two parties. Since the value of gold is a property of the information we know about it — and not the gold itself — we can conclude that sending gold is, in fact, communication.

Emailing value

It was four thousand years before the next-biggest revolution in communication technology came about: the internet. The internet revolutionised the postal service by removing friction and gravity — the two biggest hindrances in transport — from the information transportation equation…tion.

Understandably it was only a matter of time before money — a technology for facilitating the communication of value — was to have its inherent qualities translated to the internet in the form of Bitcoin. ‘Bit’, meaning information, and ‘coin’, representing money.

But being in the realm of information, where is this Bitcoin stored? And when you send it, what path does it take? And when it’s lost, where does it go? These questions are symptomatic of the ‘River Nile’ understanding of communication, but now we have f*cking lasers.

No, seriously. Lasers produce electromagnetic waves, a discovery of the 19th century — only two grandmas ago. These waves are constitutive of light, WiFi, Bluetooth, radio and pretty much every other form of wireless communication worth mentioning — and I’m going to use them to explain where Bitcoin is.

Bitcoin Laser eyes

Picture the River Nile situation. Now we are going to add lasers to it. Instead of transferring the gold between Pharaohs, what if we stored all the gold in the city in one place, at a long-enough distance where everyone could see it, and above it, we erect a massive white cinema screen the size of eighty football fields.

With your laser pointer, you direct the beam of light at the screen and begin writing the details of the transaction you wish to make, followed by your signature to verify the authenticity of the communicated transaction. On the other side of the city, the person to whom you addressed your transaction calls forth his professional message interpreter, who pays close attention and copies down precisely what you write.

It is not only your contemporary who sees and records the transaction; it’s a publicly visible screen, so everyone does. Basically, no takebacks. If you try to convince everyone that they didn’t see what they all saw, you won’t find many allies to back up your claim. It’s all public, transparent, and thus: entirely incorruptible.

Everywhere and nowhere

Now, how does this relate to Bitcoin? Like the pot of gold, Bitcoin is a store of value; and you use it in a similar, equally public way. What many people are yet to realise is that Bitcoin doesn’t even use encryption — the process of codifying information to prevent unauthorised access — for the same reason that the Pharaoh doesn’t encrypt his message; if he encrypts the message then nobody will see it, and it won’t be a valid transaction. Everything that happens in the Bitcoin system is entirely public for all to see — just like the massive cinema screen — and it’s called the blockchain.

But if the blockchain is analogous to the cinema screen, where is the pot of gold? In Bitcoin’s case, it’s almost like a civilisation that has used the laser-screen system for so long that they’ve forgotten about the gold. Instead, they predicate the transport of value entirely on the long-listed history of transactions written to the screen.

Thus, you don’t send Bitcoin anywhere when you make a Bitcoin transaction. What you do send, however, is a message. The message is a transaction sent through the internet to the blockchain, just like the transaction you sent through the air to the screen with the laser pointer. This is a message specifying your intent to transfer ownership of your Bitcoin to somebody else, verifying that it is indeed you from whom the message is sent by adding a personal digital signature.

Everybody can see this message, and once everyone agrees that you did indeed send the message, the transaction will be complete. In a similar fashion, the recipient of the transaction will now have it within their rights to spend the Bitcoin they received.

So, in conclusion, to answer the three questions posed at the beginning of this article:

Where is this Bitcoin actually stored? Everywhere, but nowhere in particular.

When you send it, what path does it travel? It doesn’t travel.

When it’s lost, where does it go? Nowhere.

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Angelo Morgan-Somers

Angelo Morgan-Somers

Content Creator at FastBitcoins. Philia Sophia & dia-logos