Bitcoin becomes more valuable as bitcoin transactions become more secure. That is an important thing to keep in mind when trying to understand why the hell bitcoin is being launched into space.
Why? Because what's a more secure place for the computers processing bitcoin transactions than in orbit several miles above the earth? That's why core bitcoin developer and founder of Dunvegan Space Systems Jeff Garzik has developed the BitSat program, which plans to launch computers on small, (relatively) cheap satellites in 2016.
In order to have a truly comprehensive understanding of the concept of bitcoin in space, it helps to have advanced degrees in computer science, mathematics, economics, finance, engineering, and law. In order to simply understand enough to sound smart at dinner parties, it helps to understand that bitcoin is both money and a tool for carrying out financial transactions.
Think of a taxi driver and passenger. On one hand, they're both people traveling in a car, just like bitcoin and other currencies are both money. But unlike the passenger, the taxi driver can go anywhere he wants because he's driving the taxi. That's bitcoin — it doesn't need the help of intermediaries like banks because it's driving the taxi.
That said, bitcoin has problems. Many people do not accept it as money, and critics of bitcoin point out that it's not "real." But money in general isn't "real" — what makes it an effective medium of exchange is how many people will agree to accept it in exchange for something else. I don't know what 20 cases of cigarettes will buy me in prison, but I do know they'll get me something because they're a tradable currency there. If, on the other hand, I try to pay the IRS in cigarettes, prison is where I'll end up because the IRS doesn't consider them a currency.
One way to get more people to use bitcoin is by making it a more useful tool for financial transactions. Another approach is to increase the security of transactions, which is kind of equivalent to cutting down on the ability to counterfeit hard currency.
If big companies are using bitcoin to move money around internally or between themselves and their vendors, they're going to be a lot more receptive to taking bitcoin at the cash register.
Doing one or both of these things increases the usefulness of bitcoin as a medium of exchange, thereby increasing the number of people who will use it, which in turn makes it a stronger and more attractive currency.
And this is why bitcoin is going to space: Doing so will make it more secure and more useful.
"The way the bitcoin algorithm works, if 99 out of 100 connections to your [ground-based bitcoin machine] are malicious, that one honest connection will be discovered and honest data chosen over others," Garzik told VICE News. So the security of the whole shebang is increased if you can make just one bitcoin computer super-duper secure.
Putting one in space accomplishes that: Physically breaking into it is now beyond the reach of even a Mission: Impossible-type raid, and a heist requires shooting down a satellite.
And because of the way bitcoin works, Garzik said, "bitcoin miners, payment processors, and other high-value sites will find value from having a guaranteed backup if the internet to their site is interrupted or under attack."
In addition to making bitcoin more secure, satellites offer a spectacularly good way to transmit a signal to a whole bunch of people at once — something GPS satellites do all the time. This vastly simplifies the task of staying connected to the bitcoin network, particularly in remote places. Garzik explained that accessing BitSat would require a 6-foot satellite dish, a USB cable, and a couple thousand dollars worth of equipment. Sure, it's more than you can tackle during your lunch hour, but it's doable.
What this means functionally is that it would make sending money to your Mongolian yurt-dwelling buddy far more efficient. Normally, doing that would mean going to a bank, which would then transmit money across a global banking network run by the Belgium-based Society for Worldwide Interbank Financial Telecommunication to a Mongolian bank. Somewhere along the way, that payment would get converted into Mogolian tugriks. At each step, bankers would take their time and take a cut off the top for their troubles. Zapping over bitcoins cuts down on the time and eliminates the middle-man costs, which means you'd get your shipment of Mongolian horse milk cheaper and quicker.
But space-going bitcoin nodes can do much more. Since bitcoin is also a system for executing financial transactions — remember, it drives the taxi rather than simply riding in it — the nodes could in theory eliminate a lot of lawyers, banks, and other overhead costs involved with contracts. After all, the nodes can hold and distribute money, and verify information. And they're a whole lot more trustworthy than lawyers and bankers.
What if corporations could fire half their lawyers because the corporations didn't need them for a jillion different contracts involving moving money from place to place? Then a lot of those corporations would find themselves positively enthusiastic about using bitcoin. And if big companies are using bitcoin to move money around internally or between themselves and their vendors, they're going to be a lot more receptive to taking bitcoin at the cash register.
So putting bitcoin nodes in space can make bitcoin more secure, enable bitcoin transactions anywhere, and facilitate cheap and easy contracts. If a nation did all of that for its own currency, it would probably be hailed as an impressive financial infrastructure development.
But really, BitSat is just a proof-of-concept demonstration. The point of putting computers in orbit isn't actually to do financial things in space per se, but to show that there can be very powerful advantages to running computers in space.
"These satellites are applicable to any cryptocurrency — and more generally to any data processing, data storage, or data broadcast use case," Garzik said. "SnapChat could use these satellites as an encrypted message medium, a use case wholly unrelated to bitcoin or cryptocurrency."
So ultimately, BitSat is kind of like GPS, in that it's leveraging space in a new way, and in that people will take some time to fully realize all the cool things they can do with the technology. When GPS first went up, people didn't do much with the signal. Today, a glance at your smartphone will tell you the case is very different — the GPS industry is expected to be worth $26.2 billion in 2016. NASA's current budget is $18.4 billion.
In 2012, the world's total flow of goods, service, and finance reached $26 trillion. That could triple in the next decade. It's impossible to say what widespread adoption of space-based cryptocurrency tools will do for global financial flows, but getting even a tiny slice of that pie is going to make a big impact on finance, computation, and space, far beyond BitSat.
Follow Ryan Faith on Twitter: @Operation_Ryan
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