Foundations · 01 / 86 · 3 min

What crypto is

A coin is a record on a network. It is not a share in a company, and it is not a promise that anyone will pay you.

A worked case

Someone buys a coin because the logo matches a famous one. The ticker matches too. The contract address does not. They hold a copy. The price they saw was the last trade in that copy, not a value printed on it.

The record

When people say they have a coin, they mean a network has a record their keys can move. There is no pile of metal in the app.

The price on the screen is the last trade, or the price someone is offering now. It is not a true value stamped on the coin.

The name is cheap

A name, a ticker, and a logo cost almost nothing to copy. Two coins can share a ticker. A familiar face on a site does not make the record real.

• Say which record you would be holding.
• Say which network it lives on.
• If you cannot, you are holding a story.

The paper, and the exchange that was not the coin

On 31 October 2008 a writer using the name Satoshi Nakamoto published a short paper, Bitcoin: A Peer-to-Peer Electronic Cash System. The paper does not describe a company, a share, or a customer account. It describes a public list of transfers. A coin, in that design, is an entry other people's computers will accept. There is no pile of metal, and there is no balance that exists only because a website says so.

That distinction became expensive at Mt. Gox. The Tokyo exchange was, for a time, where a large share of bitcoin trading happened. Customers saw balances on the site. In February 2014 the site went dark. The trustee and later investigations described missing bitcoin on a scale of hundreds of thousands of coins. The number on the screen had not been the same thing as a record their own keys could move. Years of bankruptcy proceedings followed. A displayed balance was a claim on a firm.

Read the paper for what the thing is. Read the Mt. Gox record for what a website balance is. Neither document tells you to buy anything. A familiar ticker still does not prove you are holding the record you think you are holding.

Read it yourself

• Bitcoin: A Peer-to-Peer Electronic Cash System (2008)
• Mt. Gox, the exchange collapse

These links are the record. They are not a recommendation, and they are not instructions. A news story or a court paper can still be wrong about a detail. The check does not change because a famous name is in the story.

Apply the check

Open a question. The line is about this topic. It is not a verdict that anything is safe.

Check yourself