How to read a hair test

Please note that this post is not intended to provide health advise and should only be used for educational purposes. The following explanation is based on the work of Andrew Cutler, PhD, who is specialiced in the field of heavy metal toxicity. More information about hair testing can be found in Hair Test Interpretation: Finding Hidden Toxicities.

Introduction

Hair tests are historically used to determine the health status of a patient. It can be used to determine whether certain minerals are depleted or whether there is heavy metal toxicity. The problem with the former is that hair mineral levels might not represent body mineral levels. Either way, we are not really interested in that. What we want to know is how to determine when a hair test points in the direction of heavy metal poisoning.
The most common hair test is the ‘Toxic and Essential Elements’ test. This hair test measures the availability of toxins as well as the different essential elements in a hair sample.
There are a wide range of heavy metals that can be the cause of a certain health condition. The metal that can cause the most problems is mercury. Mercury interferes with the process that is responsible for the regulation of mineral concentration and how your body transports minerals. While other toxins can cause certain mineral transports, mercury causes a ‘general’ impairment. This is what can be called ‘deranged mineral transport’.
The hair test of people who are chronically mercury toxic usually show a mercury level that is within normal ranges. This is because these people have a hard time to get rid of mercury toxicity. Especially people who have detoxification problems will have a normal result for the toxic metals. This is why it can be hard to determine whether someone has mercury poisoning through a hair test.
Because it is hard to determine mercury toxicity based on the concentration of toxic metals in a hair sample, it has to be determined based on the concentrations of the essential elements. Because mercury interferes with the process of mineral transport, the concentrations of the essential elements will look ‘odd’.

Toxic metals

The first part of a hair test contains the toxic metals. Because we are talking about toxic metals, there is only an upper bound. If one of the toxins is in the red part of the chart, it may indicate toxicity. The scales that are being used are comparisons with what is seen in the general population. The lab will make a distinction between different sexes and ages. This means that the concentration of a certain element may be higher than the concentration of anther element, but is categorized in a lower percentile. A quotation in the 95th percentile means that this specific element has a concentration in the upper 5% which means that only 1 in 20 people have a similar or higher result. Please notice that this is not a linear scale. The 95th percentile is much wider than the 68th percentile. Next example is a hair test I have done myself in 2014.
Toxic Metals
As you see, there is nothing special to see. Only Uranium is in the 68th percentile and mercury and lead are somewhat elevated.

Essential and other elements

The second part of a hair test contains essential and other elements. The difference here is that there is also a lower bound. It’s important to notice that the concentration of the elements in hair samples don’t necessarily resemble the concentration of that element in the rest of the body, but it may be an indicator.
Toxic Metals
How can one recognize ‘deranged mineral transport’? As mentioned before, the result of each element is compared with the overall population. This means that we can calculate the probability that a certain phenomenon can happen. There are a few phenomena that can happen in a hair test.

  • A lot of bars to the left or right.
  • A lot of bars in the red.
  • A small amount of bars in the green and white area.

Whether a certain count of bars in a certain area is significant is determined by basic statistics. Take for example the amount of bars to the left/right. The chance that a certain bar is located in either the left or right side is 50 percent. Assume that you have a hair test of 5 elements. There are 25 different kind of results. The chance that all bars point to the right is 1/25, since there is only one way to have 5 bars to the right. The chance that 4 bars point to the right is 5/25, since there are 5 ways to have 4 bars to the right. Saying that there are 4 bars to the right is the same as saying that there is 1 bar to the left, which obviously has the same chance of 5/25. All those chances should sum up to 1.
Obviously just calculating the chance that a certain amount of bars are to the left/right doesn’t say all that much. In the case of the hair test, there are 22 elements. 11 out of 22 elements to one side has a probability of 17% even though the hair test is perfectly normal. What we need to know is the probality that less than x amount of elements point to 1 side (or more, depending on how you want to calculate it). Which means that we have to count all the probabilities lower and equal to that amount. For 11 out of 22 this is exactly 0.58 which makes sense. This means that there is a 0.58 chance that there are less than 11 bars pointing to one side. If there would be 23 elements in total, the chance for 11 (or less) bars to 1 side is exactly 0.5. Think about why this is 🙂
Similar things can be done with the calculation for the bars in the red and in the green or white. The chance that a certain hair test appears with x bars in the red is 0.95(amount-x)*0.05x with ‘amount’ the total amount of elements. The chance that a certain hair test appears with x bars in the green or white area is 0.67x*0.33(amount-x) with ‘amount’ the total amount of elements.
When is a certain result significant? Cutler doesn’t really talk about percentages, rather about the amount of bars that are ‘off’.

  • For the amount of bars to 1 side, 5 bars meet the counting rules (this means deranged mineral transport), 6 bars are suspicious, 7 are unusual, 8 not uncommon and 9 or higher is normal.
  • For the amount of bars in the red, 4 bars or more meet the counting rules, 3 bars is unusual, 2 is uncommon and 1 or less is normal.
  • For the amount of bars in the middle band, 11 or less meet the counting rules, 12 is suspicious, 13 is unusual, 14 is not uncommon and 15 or more is normal.

All these numbers are based on the fact that there are 23 elements in total, while the hair test we are trying to analyze has 22 elements. A quick lookup teaches us that the probabilities between 23 and 22 elements aren’t much different, which means that these numbers can be used for a hair test with 22 elements. For those interested in the exact numbers for 23 elements, 5 bars or less to one side equal a chance of 0.6%, 4 bars or more in the red equal a chance of 2.6%, 11 bars or less in the middle area equal a chance of 4.5%.
As we see in the example, one can quickly see that the amount of bars in the red (1) and the amount of bars in the middle (14/18, depending on whether you want to include the borderline cases) isn’t going to offer a statistical significant result. The amount of bars to 1 side is interesting. We see 7 bars to the right side which would be ‘unusual’. As you see, 5 of the 7 bars to the right are just slightly to the right, especially iodine. I have been supplementing with molybdenum and iodine in the recent past which may increase the levels of these elements. Because of this we only count 6 bars. This leads to a ‘suspicious’ hair test which has a probability of 2.6% (so it only occurs at random in 1 in 40 people). To represent it graphically:

One Side

The high levels of zinc may be caused by a zinc displacement by other metals like cadmium, lead, copper and mercury resulting in a paradoxially elevated hair zinc. Zinc hair levels may not be reliable because a lot of shampoos contain zinc.
The numbers that are published by Cutler are based on a hair test with 23 elements. More recent hair tests only include 22 essential elements (barium has been moved to the toxic metal area). Because of this, I’ve written a generic script that will calculate the probabilities of your specific hair test.
The results of the hair test we discussed in this post are available here.
If there is a history of chronic conditions, mercury poisoning would be a very good explanation in this case.
If your test comes up positive, it’s really recommended to read Amalgam Illness, Diagnosis and Treatment by Cutler.

How to reach the dark web

There is a part of the internet that is known as the dark web or deep web. It cannot be reached through a normal browser and is hidden for most internet users. I’m going to explain you how it works and how to browse the dark web.

How it works

Classical secure connections are set up between two endpoints. If you connect to websites like Gmail or Facebook, the connection is encrypted. Anyone listening to your connection will only see gibberish and not the things you do on this website. Only the people at the endpoints, which is yourself and the server you are connected to, can read everything in pain text. This kind of scheme composes a privacy problem. The other side knows who you are and what you do. And don’t forget about the fact that the US government potentially has access to every corporate server in the US.
What we want is 1) an encrypted connection and 2) an anonymous connection.
How can we achieve this?
There are two popular tools that provide true anonymity. TOR and I2P. There are minor differences between those two technologies, but the basic idea behind them is the same.
The network of TOR and I2P is made up with a bunch of nodes. This means that there are servers on the internet who have TOR or I2P software running and participate in the whole network. Now, if you connect with the network, you connect with 1 of the nodes. An encrypted connection is set up between you and that node, the same way you have end-to-end encryption with Facebook or Google. Once you have connected to the first node, you will connect to a second node. The principle is the same. This connection will also be encrypted. Depending on the software that you use, you will connect to 3-6 nodes in total. The last node you connect with is the exit node. From this server you can connect to any server on the internet you want. Every time you send something over the dark web, it will go through multiple nodes and through multiple layers of encryption. The end user will have to decrypt every layer in order to see the cleartext. That’s why this technique is called onion routing.
Assume that 1 of the servers on the network is corrupted. Let’s call it the NSA server. That node doesn’t have any information about you. The entry node (the first node you connect with) knows who you are, but not what you do. The exit node (potentially) knows what you do but not who you are. All the other nodes don’t have any information besides that fact that there is someone on the network.
So, we now have a network on which not a single node knows where you are and what you do. Great. We also know how to connect with the regular internet. But that’s not really what we are interested in. We are interested in the dark web.
It’s possible to run a website on the dark web. It works in a very similar fashion as a regular website. But now the server on which the website runs is connected to a node on the darkweb. This means that a visitor of your site can browse it anonymously. The location of your webserver is also hidden from the public.

How to browse the dark web

As mentioned before, there are two popular tools that have this kind of technology, TOR and I2P. I feel that TOR is easier to set up and to work with, although there is much more future potential in I2P.
Tor can be downloaded from their website. It’s pretty easy to use. Once you downloaded tor, all you have to do is open it. Tor Download This opens a seperate Firefox browser. It’s possible that Windows users need to install the software first. If you surf to a normal website, it will use the tor network to reach that service, and exits through an exit node. The website you connect with will see the ip of the exit node, not the ip of your internet connection. The left image is the original ip. The right one is the new ip.
Original IPTor IP
Websites on the tor network itself are only accessible on tor. These addresses have an *.onion domain. Facebook has recently announced to support tor to make their service available in nazi countries that block Facebook. It can be accesses by surfing to https://facebookcorewwwi.onion/ in the tor browser. The result looks like this:
Tor Facebook
Obviously this is boring, unless you live in a nazi country. There are a bunch of other websites you can visit. Deep.dot.web has made a comparison of so called underground markets. One of them is shown below.
Tor Facebook
The only thing you need are bitcoins.
Be careful about a lot of these markets. Ever since the Silk Road has been taken down, a lot of new markets emerged. Some of them have a very short livetime and might steal your coins.
Luckily another platform is being developed, called OpenBazaar, on which the market itself is also distributed. This means that a market of any sort cannot be taken down.

I2P is more difficult to set up. I’ll just leave a link here to how to do so. It’s up to you to roam around and discover stuff. The big advantage is that you can just leave it running in the background and use your default webbrowser to go to *.i2p websites. All you have to do is point your browser to use the localhost proxy for these types of ‘websites’. I’ve tried it for a while and there is not much to find. A lot of stuff seems offline. But it’s obviously entirely possible that I didn’t put enough effort in it.
Anyways, the home screen of i2p can be seen below.
I2P

Marijuana potentially cures cancer and the government knows about it

The use of cannabis is known go back more than 7000 years ago and it was legal to use it until the beginning of the 20th century. The hemp variant of cannabis has an incredible number of uses. For centuries, the plant has been used for food, clothing and rope. Even the Contitution of the United States and the Declaration of Independence was written on hemp paper. Only in recent history marijuana was made illegal. Not because of scientific reasons, but mostly because of racist and later political reasons.

How it all started

During the Mexican revolution of 1910, a lot of Mexicans flooded the borders in the US. Mexicans were a very cheap workforce. During the depression of 1910-1911, tensions increased between small farms and large farms that used those cheap Mexicans. Many Mexicans smokes the plant and brought the plant with them. Most likely because of this event, California passed the first anti-marijuana law. Later, more states followed with marijuana prohibition laws which tended to be specifically targeted against the Mexican population. Between 1915 and 1937, marijuana was prohibited by a 27 states. One Texas legislator even said that “All Mexicans are crazy and this stuff is what makes them crazy.”.
In 1930, a new governmental department was instated, the Federal Bureau of Narcotics. The head of the bureau was known for his controversial quotes.

  • “There are 100,000 total marijuana smokers in the US, and most are Negroes, Hispanics, Filipinos, and entertainers. Their Satanic music, jazz, and swing, result from marijuana use. This marijuana causes white women to seek sexual relations with Negroes, entertainers, and any others.”
  • “The primary reason to outlaw marijuana is its effect on the degenerate races.”
  • “Marihuana leads to pacifism and communist brainwashing”

Only in 1937, the first national law was enacted, called to Marihuana Tax Act. It put regulations and restrictions on the sale of cannabis. Some critics believed that the point of this law was to reduce the size of the hemp industry which was primarily a threat to the paper industry. The Americal Medical Association opposed prohibition because a tax was imposed on the sale of medical cannabis. After the enactment, anyone in possession of cannabis could be arrested.
Today, Latino and especially black communities are still subject to unreasonable drug enforcement and judicial practices.

President Nixon

In 1971, president Richard Nixon established a commission, lead by Raymond P. Shafer, to investigate the effects of marijuana and other drugs.
The result of the commission was:

  • “No significant physical, biochemical, or mental abnormalities could be attributed solely to their marihuana smoking.”
  • “No verification is found of a causal relationship between marihuana use and subsequent heroin use.”
  • “In sum, the weight of the evidence is that marihuana does not cause violent or aggressive behavior; if anything marihuana serves to inhibit the expression of such behavior.”
  • “Neither the marihuana user nor the drug itself can be said to constitute a danger to public safety.”
  • “Marihuana’s relative potential for harm to the vast majority of individual users and its actual impact on society does not justify a social policy designed to seek out and firmly punish those who use it.”

Nixon demanded that the commission changed its conclusions. Shafer ignored the demands and Nixon declined to appoint him to a pending federal judgeship.
Nixon wasn’t happy with the results of the report and wanted a larger budget for his war on drugs. The main reason why he wanted to imprison pot smokers is because these were the people that were protesting against the Vietnam war. He thought he would get the support he wanted if he could prove that cannabis caused lung cancer like cigarettes do. He gave the Medical College of Virginia the order to investigate the effects of THC. 2 years later the study was completed. It turned out that when THC was ingested in highly concentrated forms, it will attack any mutated cells in your body while strengthening and rejuvenating the healthy cells.
Nixon was outraged. He immediately classified the study.

Recent times

In 1999, the National Institute of Mental Health (which is a government institution) filed patent US6630507 which is titled “Cannabinoids as antioxidants and neuroprotectants”. The patent was approved in 2003. It states that

Cannabinoids have been found to have antioxidant properties, unrelated to NMDA receptor antagonism. This new found property makes cannabinoids useful in the treatment and prophylaxis of wide variety of oxidation associated diseases, such as ischemic, age-related, inflammatory and autoimmune diseases. The cannabinoids are found to have particular application as neuroprotectants, for example in limiting neurological damage following ischemic insults, such as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease and HIV dementia.

and

The invention also includes methods for using the antioxidants in prevention and treatment of pathological conditions such as ischemia (tissue hypoxia), and in subjects who have been exposed to oxidant inducing agents such as cancer chemotherapy, toxins, radiation, or other sources of oxidative stress.

So it basically states that cannabinoids can be used to prevent and cure neurological and heart diseases. It is also an excellent drug to counter the symptoms created by so called “anti-cancer” drugs like chemotherapy.
“Sixteen years ago, when I was diagnosed with multiple sclerosis, my doctor told me I’d be in a wheelchair in four years and dead by 56. The only reason I’m even able to even write this today is because my doctor, a world class neurologist, recommended medicinal marijuana.” – Montel Williams
It’s a bit ironical that the US government owns a patent on the medical properties of marijuana, but makes it a Schedule I drug, which means that it has no medical properties. The current drug laws are not based on science but are the result of politics.

Pharmaceutical companies have tried to mimic the behavior of THC by making syntethic variants that do not produce the ‘high’ without any success. Natural products cannot be patented, hence cannabis is not an interesting subject for the pharmaceutical industry. Pharmaceutical companies obviously rather want to sell their extremely expensive chemotherapy drugs.
People who are not insured usually have to use all their life savings or even have to sell their house in order to pay for chemotherapy drugs. Even then, a huge part of the patients die from the damage that has been done to them.
The major reason why marijuana is not legal is the fact that big pharma will loose billions doing so. Marijuana is a safe substitute for painkillers and sleeping drugs. As a matter of fact, marijuana is successfully being used by a lot of people who have chronic pains, inflammation and oxidative stress. There is not a single drug that is as effective long term. Furthermore, most painkillers and sleeping pills are addictive. Hemp, the cannabis variant with almost no THC is a more cheaper way to produce paper.

Other cures

Marijuana is not the only potential anti-cancer drug that is prohibited. Almost all alternative approaches that are a threat to the pharmaceutical industry are being surpressed or prohibited.

Here is an excellent article about vitamin B17.

A modern view on ‘Anatomy of the State’

This is a clarification of the most important sections from ‘Anatomy of the State’ by Murray N. Rothbard.
The original masterpiece can be downloaded for free from the Mises Institute and is released under the Creative Commens license. The changes and additions to the original text are highlighted in light yellow. Some changes might be added later on.

The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are. – H. L. Mencken

Krugman Is Evil

This post is a response to a post made by Paul Krugman for The New York Times.

Krugman starts with why bitcoin is not a good store of value.

To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why bitcoin should be a stable store of value. Brad DeLong puts it clearly:
“Underpinning the value of gold is that if all else fails you can use it to make pretty things. Underpinning the value of the dollar is a combination of (a) the fact that you can use them to pay your taxes to the U.S. government, and (b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year (yes, I know).”
Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.
Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?

What Krugman refers to is the fact that usage increases the value of a currency. He is right about that. Forcing people to use the dollar to pay taxes is what gives the dollar more stability. Usage increases value. This is because the free market works in both ways. If you buy a good or a service, its cost is the result of supply and demand. It’s pretty obvious to see this. But what gives currency value? It’s the same principle of supply and demand that gives currency value. If you need to use a currency for a certain purpose, you need to store it for a certain amount of time before you can use it. The fact that you need to store a unit of currency, is part of the demand. Look at it this way: Assume you have a million units of a currency. Distribute them over the whole population of a country. The value of one unit is directly correlated to the amount of units that are in circulation. How much do you want to pay someone for a service? It depends on how much you earn yourself, but also on how much money you have in possession.
If your government forces you to use their preferred currency, it raises the value of that currency. But, taxes are just a small part of the demand for currency. In the same way, the usefullness of gold (in for example electronics and jewlery) is only a small portion of the current value of gold. The major value of a currency is contained in the usage beyond taxes. For gold, these are private owners and central banks who believe in the long tradition of gold as the sole provider of money (which is actually a form of speculation).
Of course, Krugman is not just talking about value here. Krugman is talking about stability. How about that? If you demand that taxes have to be payed in a certain currency, it sure raises the stability of that currency, how little the effect is. The fact that there is a certain bottom of a currency doesn’t mean that it has high stability. As a matter of fact, there is always a bottom as long as there is demand. But if the dollar crashes to its current bottom, what insurance do we have that people will continue to pay taxes? There is no way anyone can determine a bottom or “underpin” a currency. History tells us that such a bottom does not exist and in the long term, the free market always decides the right price of a unit currency.
Like in the Weimar Republic and Zimbabwe, the supply of the dollar has been increased dramatically over time.
US dollar money supplyIt’s not a wonder that the purchasing power of the dollar has dwindeled since the introduction of the Federal Reserve.
Value of the US dollar
I believe the international character of bitcoin is a much stronger argument for stability than the fact that you have to pay taxes with it since international markets are much more complex. The value of the dollar is pegged to the U.S. economy. A few bad economical decisions can cause a serious blow to its value. Bitcoin is immune to this.
Krugman also mentions that the Federal Reserve can act as a potential dollar sink. It’s not really clear what he means by this. I guess he refers to the fact that the Federal Reserve can exchange dollars for government bonds. It’s still to see if that will solve the potential problem of hyperinflation.
The only reason why bitcoin might not be a good store of value is the fact that is not widely used. Not because it is not backed by a central bank.

I have had and am continuing to have a dialogue with smart technologists who are very high on BitCoin — but when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how it’s a terrific medium of exchange. Even if I buy this (which I don’t, entirely), it doesn’t solve my problem. And I haven’t been able to get my correspondents to recognize that these are different questions.

Krugman fails to see that the future ease of use of bitcoin and the massive applications that could possibly be built around the blockchain technology actually makes it so valuable. Let me explain why. Just forget about bitcoin as a store of value for a moment. Think about the possibilies of the blockchain technology. Krugman refers to the fact that bitcoin is terrific medium of exchange (which he doesn’t entirely believe, but it is). You can build smart contracts with bitcoin, automate payments or pay for anything with just scanning a qr code without the interaction of a financial institution. This is quite revolutionary. Bitcoin is a standardized, independent payment system that allows immediate transactions between individuals without the intervention of a financial institution. When the technology around bitcoin matures, it will be easier to pay with bitcoin than it is to pay with conventional methods, even for the biggest technophobes. You can compare it with the beginning of the internet. You had to enter an ip address in order to connect with a website. Now you can just enter the name of the website you want to visit and lately you can call up a website with a simple voice command. The same thing will happen with the bitcoin technology. Your bitcoin wallet will be connected with an exchange of your choise, so if you spent bitcoins you can immediately buy them back. It will be connected to address books, social networks, online marketplaces, video messengers, etc. Spending/giving/donating money will become a no brainer.
Since bitcoin can be sent directly from person to person, anyone can use it. Therefore, bitcoin is massively interesting for the unbanked, which are estimated at a 2.5 billion [2012].

To be a medium of exchange, bitcoin doesn’t need to be stable. Exchanging dollars or euros for bitcoins just requires temporary stability. Even long term this doesn’t really matter. People who are concerned about stability can always rebuy their spent bitcoins. It doesn’t need stability to survive. The value of bitcoin is defined by its use, and since the supply of bitcoin is limited the value will be huge. Because bitcoin is not backed by a central bank, it will always be somewhat volatile. But that doesn’t matter. Gold is also quite volatile and it is still seen as a good store of value.
Gold in US dollarTo make the analogy with the internet, what if the internet would be centralized in one place. It would not be possible to expand the internet. The internet would just be a certain network somewhere in the world that has a fixed amount of routers, cables and data storage. Anyone in the world can connect to this network and it is the only network that will ever exist. In order to participate, you must buy a piece of this network from someone else. Everytime you use it, you have to sell a piece of your share to another participant on the network. There is no bottom on the price of a piece of this internet, nor is there a ceiling. Still, it would be an excellent store of value.

You may not forget that no one can take down bitcoin. Even not the developers. Bitcoin will be around in 100 years, whatever the value.

Then Krugman continues about the economics behind bitcoin.

BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions.

First of all, it is perfectly possible to collect taxes on wages that are earned in bitcoin, the same counts for products that are payed for in bitcoin. There are two kind of taxes that are hard to collect. The first one is taxes on the wages of jobs that can be payed for in cash. But these taxes can easily be evaded anyway. And as a matter of fact, bitcoin transactions are less anonymous than cash transactions. The other tax that is hard to collect is the tax on capital, since bitcoins can only be accessed by a (combination of) private key(s). But this is an evil tax anyway. Bitcoin is a completely transparent system that can be very helpful in preventing fraud. It is clear that a statist like Krugman doesn’t like the idea of a fair and transparent monetary system.
Gold in US dollar

What is bitcoin?

Bitcoins
There are a number of ways to explain bitcoin. A lot of posts and blogs explain bitcoin in a non-technical manner. It uses terms as ‘decentralized’, ‘sign’ and ‘blockchain’ without explaining exactly what they are talking about. As a result, people have a hard time understanding these basic concepts and hence bitcoin. They therefore don’t seem to understand the real value behind bitcoin.
In order to understand what bitcoin is about, you have to get acquainted with basic notions of cryptography. Don’t worry, it isn’t difficult. The worst ways to explain cryptography to rookies is dry text. Next video explains exactly what you need to know.

What you have to remember is the fact that you can use ecryption to sign a message with your private key. Your public key can be used to verify a signature. Because only you have the private key, only you could have signed that message.
This kind of scheme is used all over the internet. When you log into your email client or social network or when you want to do a wire transfer.

How is bitcoin different?

Most fiat currencies are controlled by a central bank. This means that the supply (the amount of money) can change over time. Money just adds another layer of bartening at the exchange of goods. Instead of exchanging a laptop for 1000 apples, you’ll exchange that laptop for money so you can buy 1000 apples when it suits you. In essence, everything can be considered money. But some forms of money qualify better as such. There are four basic characteristics on which a candidate for money must satisfy: durability, divisibility, transportability and noncounterfeitability. Fiat currencies have issues with durability and noncounterfeitability. Because of the various actions by central banks worldwide, the value of fiat is very questionable. The moneysupply of various currencies have been seriously inflated.
Most fiat currencies are quite easy to counterfeit and therefore the central banks continuously have to issue new versions of their currency. Some might even say that printing of money by central banks is another level of counterfeiting. One could disagree on this fact in a transparent system. 1Central banks are not transparent. The problem is rather that it is very hard, even impossible to use alternative currencies. Either way, you have to pay your taxes in the currency that is issued by the government.
Bitcoin does a much better job at all the above properties than fiat currencies. Therefore bitcoin is a better form of money. The supply of bitcoins is limited, which means that the value of bitcoin is mostly decided by the demand side.
Bitcoin is not issued or controlled by a central bank. Instead, bitcoin is controlled by a protocol, just like email and html are controlled by a protocol.

How does bitcoin work?

In bitcoin, the public key is the bitcoin address. It is derived from a private key, which will give you access to your bitcoins. When you open your bitcoin wallet for the first time, a new private key will automatically be generated for you. 1ntzE97j9Ht5GkdMw1XbZcHUqjvLKkQXq The person who has the private key in their possesion, can sign transactions. Everytime you want to do a transaction, you enter the receiver of the transaction (this can easily be done by scanning a QR code or even by wireless protocols), the amount of bitcoins you want to transfer and you sign this message with your private key. This message is broadcasted over the internet. Because your public key is added in the transaction, the signature can easily be verified. Of course this system alone would be an empty box. There is no cohesion in the system. How does someone receive bitcoins if there is no central authority involved? How can you make sure that the balance of someone changes when a transaction is made? In essense, bitcoin brings a solution to the Two Generals’ Problem. The solution bitcoin offers is what makes this technology extremely interesting.
Bitcoin transactions are stored in a chain of transaction blocks, also called the blockchain. A block consists of transactions that are made during a certain time period. In the bitcoin protocol, such a block is released roughly every 10 minutes. In order to make sure that a hacker just don’t spam blocks all around the internet with his own transactions, a block must be the result of a complex computation.
Every computer in the network is involved in a race to find a certain hashresult. To find a block, pure luck is involved. The more computing power you have, the higher the chance you find the right hash. Every time a hash of the correct form is found, a block is released and chained behind the previous block. Each block contains the hash of the previous block. This way, the blockchain gets expanded.
Assume you are a client. How do you know which blocks are honest and not broadcasted by an attacker? The beauty of the bitcoin protocol is that you don’t know this. But the chances of this happening are extremely low. Why? Simply because the bitcoin protocol makes sure that clients trust the longest chain. If you trust the longest chain of blocks, you trust the majority of the computing power. Although it is possible that an attacker accidently finds a block, it is very unlikely. That is why it is common to wait at least a certain amount of blocks before a transaction is accepted. (If an attacker has 1% of the computing power, there is 0.01^6 chance the attacker will find 6 blocks in a row.) In that case, the attacker can fool a merchant by doing a double spend attack, which means blocks are issued that contain ‘fake’ transactions that will not be present in the real blockchain. Later, when more honest blocks are found, the fraud will be discovered and the receiver will lose their coins. In practice this problem can be dealt with through insurance (similar to credit card insurance), trusted addresses or longer wait times for expensive items. Either way, pulling of an attack is quite expensive in general and therefore not worth it. Furthermore, the attacker loses all its trust.

Obviously, calculating all those hashes will cost you electricity and hardware. People are not willing to do this for free. This is why a decentralized blockchain does not work without bitcoin. The blockchain without bitcoin is just a centralized database. This is why rewards are awarded to the node that finds a block. The first transaction in a block is a special transaction. It starts with a new coin owned by the finder of the block. This is also how bitcoins are issued.
Once and a while, the rewards are halved. Over time, the network will switch over to fees as incentive for ‘mining’, assuring that only 21 million bitcoins will ever be mined.
Because of the rewards, it is always more profitable to play by the rules, because attackers will never be rewarded with coins. The blocks they might produce will, in the end, never be part of the blockchain.
Please note that there are no restrictions on the contents of a block other than that the block needs to contain valid transactions. It is possible for a miner to release empty blocks and ignore all incoming transactions. Remember that there is no central authority! That’s why it is recommended to include a very small transaction fee, because miners are greedy. The fee will go the the miner that finds the block. For transactions that are not urgent, you can leave out the fee but it can take an unknown amount of time before the transaction will be confirmed.

Ethical problems

The network won’t accept malicious transactions as long as more than 50% of the miners are honest miners (because they will create the longest chain over time). This means that transactions are validated with a democratic majority vote. Greedy miners will always try to validate as much transactions as possible, since they usually contain fees. This might lead to two ethical problems.

  • Bitcoin can be used for ‘criminal activity’. This might be activity that should not be criminal in the first place, like the sale of drugs or guns or business with people in countries that are ‘banned’ by international organizations (read: the US) like Cuba or Iran. But it might also include the financing of terrorism.
  • Another problem is the total other way aroud. It’s government interference in the mining process. This requires the majority of the mining power to be in the hands of the government. This can only be done with a serious investment. This is because under ‘perfect market conditions’, mining will generate no profit or loss. If it would create profit, more miners will enter the system. If it would create a loss, miners will flee the system. This is a simple free market principle. If the price of bitcoins stays stable, an equilibrium is reached. Therefore, governments can gradually increase their share in the bitcoin hashing power. This will happen at a quite serious loss, but since basically everything the government does happens at a loss, I guess that this is not really an issue.

The latter is obviously much more harmful than the former. Simply because this form of government interference disturbs the marketplace without achieving anything. Illegal activity can always shift towards other cryptocurrencies (the so called ‘alt coins’) that do offer true anonymity. Anything that is possible in cryptocurrencies is in essence also possible in cash, except for transactions that happen between two persons on different sides of the world. Furthermore, tax money is wasted.
Luckily, this is difficult to achieve, mainly because of political reasons. Bitcoin is an international phenomenon. Which government will be in charge? Either way, one entity that buys up massive amounts of bitcoin mining equipment will not go unnoticed.

Alt coins

One might argue that bitcions are worthless because there is a large amount of alternative cryptocurrencies available, which have similar properties as bitcoin. Most of them are simple copies of the bitcoin protocol, with just minor changes (like shorter release times of a transaction block). Therefore, there are an unlimited supply of coins, and thus bitcoins are worthless.
This kind of argument is silly. Assume you are a payment processor. Are there any reasons to accept bitcoin alternatives? It gives no benefit and it will only cost you more to maintain your payment system. The fact that alt coins have the same properties is actually an argument against them. There is no reason to use them, except for media attraction. Furthermore, there is something called the network effect. It’s something that also happens in social media. Everyone subscribes to a service, because most people are already subscribed to that service although there are most likely services that do a much better job. It exceptionally creates a market generated monopoly. (Most monopolies are caused by government.) Why dealing in alt coins if no one accepts it?

Working in a pool

Every miner in the network is involved in a race to find a the next block. The chances that this happens are very low, the rewards are significant. If you don’t have a lot of hashing power, there is a risk that you never find any block. Finding a block is like winning the lotery. Low chances with high rewards. If you have a lot of hashing power, this doesn’t really matter. The chances of finding a block are much larger.
Miners with low hashing power can decide to try to find the next block together, called a pool. If such a block is found, the profit is divided equally amongst all the participants. Over time, the rewards associated with mining will correlate very good with the hashing power.
This obviously increases the chances that a 51% attack can be successful.

Privacy problems

All transactions need to be confirmed by the mining algorithm. It is vital that a block can be verified by all the participants of the bitcoin network. Therefore, all transactions have to be public. This might lead to privacy problems. A lot of times, misinformation is spread by the mainstream media that bitcoin is anonymous. It’s actually the opposite. Once you can connect a bitcoin address to an identity, all anonymity disappears. Therefore, bitcoin is pseudonomous. The more bitcoin will be used, the easier it will be to connect identities to addresses and transactions.
There is something you can do against this; there is nothing that prohibits you to continuously exchange bitcoins with other participants. This is called coin mixing. There are a number of these services avaiable. One of the interesting tools that are being developped is Dark Wallet. Although this is out of the scope of this article, the interview with of one of the developpers might be an interesting read.
Another privacy problem is the use of thin clients. Most people are only interested in their own bitcoin balance and therefore don’t need to download the whole blockchain, which is currently 25GiB. A thin client can connect to nodes that have the whole blockchain and check their balance that way. That node will inevitably know the bitcoin address of the thin client.

You can read the whole whitepaper for more information, but I think this post covered most of it.