Bitcoin is everywhere today and yet very few understand what it is.
To put it in simple terms, bitcoin is like the Rai Stones in the Yap Islands.
Thinking about how one can compare bitcoins to stones?
Well, even I thought so.
Let me first tell you the story of Rai stones and the Yap island. Maybe then you will be able to relate to what I am saying.
There is an island nation in South Pacific by name Yap, and it uses Rai stones as money.
Rai stones are huge, circular disks made out of carved limestones with a hole in the middle. The stones can be as big as up to 4 m (12 ft) in diameter, and the smallest can be as little as 3.5 centimeters (1.4 in) in diameter.
They can weigh up to 8,800 lbs! Nobody wants to carry it around and neither it is possible to do it everytime a transaction is carried out.
Well, you must be thinking when no one wants to carry it around, how is it used in trade or transaction as money?
I will answer that in a minute but before that one should ask why they are regarded as money and from where they come from?
Rarity Of Rai Stone Made It Money
Rai stones were brought from other islands which were as far as New Guinea, and their value is derived from its size and age.
The Yap residents historically started valuing Rai because it was difficult to find them anywhere in Yap and the Rai disks looked like Quartz, as the shiniest objects available around that time.
Hence, the Yapese people started using Rai stones as money as no more disks could be produced or imported.
And if even someone tried it will involve cost and effort which will give value to the stone. Hence it became the preferred form of money due to its rarity on Yap island.
To quarry the stones, Yapese adventurers had to sail to distant islands and deal with local inhabitants who were sometimes hostile. Once quarried, the disks had to be transported back to Yap on rafts towed behind sail-driven canoes. The scarcity of the disks, and the effort and peril required to get them made them valuable to the Yapese. (Source-Wikipedia)
Now coming back to your original curiosity that when it wasn’t possible to move Rai stones again and again then how were they used as money?
Well, simple, stones were not moved around.
As the residents of Yap understood the rarity of the stone, they knew that the money supply is fixed and hence just transferred the ownership of the stone to one another without moving the stone.
Whenever people made a transaction, the ownership was orally transmitted publically.
Pretty cool. Isn’t it?
Ahhh… You might be thinking why this story for explaining Bitcoin?
It is required because it turns out that this analogy of Rai stones is quite helpful in explaining Bitcoin.
Let us assume that just like Bitcoin there are on 21 Rai stones on the Yap island.
And these 21 bitcoins/Rai cannot be taken out of the Bitcoin ecosystem and hence remain only on its blockchain, much like the Rai stones in Yap.
And while transactions merely the 21 bitcoin/Rai change their ownership from one person to another and the change of ownership is broadcasted to Bitcoin’s network which then records it.
But I know some of you who have used Bitcoin might argue that Bitcoin moves from one address to another.
Well, the irony is that it doesn’t, and change of address means a change of ownership.
I know some of you might be wondering how new bitcoins are introduced to the system.
Well, to find out new Rai stones one needs to work hard and go on an adventure by putting in one’s resources and time.
In Bitcoin’s realm, this is called Bitcoin mining. I will not go deep into Bitcoin mining because it is a separate topic altogether.
However, I can leave with a link to read about it in detail: Bitcoin Mining: A Basic Guide For Beginners
And just like finding Rai is difficult, to introduce new bitcoins to the system Bitcoin miners put in their time, energy, and resources to solve an energy-intensive maths problem to get new bitcoins as a reward.
That’s all from my side.
Now you know bitcoins well than anyone else, so don’t hesitate to explain !!
If you like this article don’t forget to share it with your friends!
Some more BTC explainers to read:
- Bitcoin by analogy
- Still Don’t Get Bitcoin? Here’s an Explanation Even a Five-Year-Old Will Understand
- How to Explain Bitcoin to a 7-Year-Old
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