Mental models for bitcoin

[paxmao]

I just re-read one of Charlie Munger´s sentences:

 

I think it is undeniably true that the human brain must work in models. The trick is to have your brain work better than the other person’s brain because it understands the most fundamental models – ones that will do most work per unit. – Charlie Munger

There is an immense number of what they call "mental models" (I particularly dislike that term, for me they are simply "models"), you can see a few on this page. As is says, it is important to have the right models and, IMHO, the right maps of life and the world.

what are the "metal models" to understand bitcoin?

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[Ucy]

To make sure sense of the Bitcoin Network, I sometimes compare it to a living human body composed of lots of living cells acting as nodes and working together in harmony. They work to keep the body alive and functioning. No anarchy or choas because they guided the right rules/principles

[Hydrogen]

what are the "metal models" to understand bitcoin?

Not the easiest question. Cryptocurrencies like bitcoin span different fields of study: finance, encryption, software, history, et cetera. All of which could be necessary to put it into perspective.

Fiat currencies of past eras were backed by gold. Bitcoin is backed by enormous amounts of processing power from crypto miners, encryption standards, integrity of its algorithms and respectable quantities of electricity. That could be the missing link behind the "bitcoin creates money out of thin air" claim not holding up under scrutiny. Bitcoin is intrinsically backed to a degree, although not by a traditional form of collateral like gold or precious metals.

The revolutionary "trust less" design of bitcoin, eliminates many middle men who are necessary in traditional finance, which relies heavily on a "trust" based format.

In business we have similar examples of a shift towards "trust less" design. Walmart eliminating middle man to make its supply and distribution chains more efficient, represents a quantum leap allowing them to compete successfully against sears, sams club and other retailers. Amazon took this a step forward by eliminating physical locations entirely.

Bitcoin's "trust less" design reduces human labor necessary for traditional financial institutions to operate. Which translates to a reduction in fees and costs.

This is just off the top of my head. Rambling. A good overview of bitcoin mental models would probably be much better than this short post.

[Kong Hey Pakboy]

To make sure sense of the Bitcoin Network, I sometimes compare it to a living human body composed of lots of living cells acting as nodes and working together in harmony. They work to keep the body alive and functioning. No anarchy or choas because they guided the right rules/principles

But the Bitcoin Network is decentralized right? And the human body isn't because it has the brain that regulates function and at the same time makes the bodily functions be harmonious, I don't see how it's similar to the Bitcoin Network.

[Darker45]

I don't have a specific model to understand Bitcoin. And I don't think any of the ready-made models enumerated in the article could perfectly fit Bitcoin's function. But, as in all things in life, whatever proves to be inefficient will have to replaced sooner or later.

Evolution happens not just in the environment but also in other aspects of society, including the financial or monetary aspect. Along the way, a technology or an invention or a tool becomes less efficient. Something will eventually rise up and proves to be a better version. That's seen in the evolution of money. And at this juncture, it seems the fiat technology is running faulty and Bitcoin appears to be the better alternative available.

[Xinarae*]

Bitcoin is decentralized so it runs according to the network's system and is associated with the human body. It heals every activity of the human body that acts as an accessory to bitcoin the business needs regular attention and improvement of strategy even if your bitcoin model continues to make money year after year, market development may change at any time. Be prepared for failure and loss be open to further customization and improvement get ready to trash the model and move on to the new one if you keep losing money and can't find any more favorites.