The Real Value of Bitcoin and Cryptocurrency Technology

in bitcoin •  9 months ago

What if there are technological advancements so powerful that they can transform the very basic pillar of our society. The technology which can fundamentally influences the way our systems function and could change the conceptual understanding of such words as trade, ownership and trust. This technology already exists and it's called cryptocurrency.

People often think of Bitcoin as of only virtual money or transactional system. But if you look closer you will see that monetary aspect is that just the top of the iceberg. That's because Bitcoin is a groundbreaking internet technology for which money is merely one of possible applications.

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Money exists to facilitate trades. Through the centuries trade has become extremely complex. Everyone trades with everyone worldwide. Trade is recorded in bookkeeping and this information is often isolated and closed to the public. For this reason we use third party which we trust to facilitate and approve our transactions - think of governments, banks, accountants, notaries and the paper money in your wallet. We call this "trusted third parties". This brings us to the essence of Bitcoin.

Bitcoin software enables a network of computers to maintain a collective bookkeeping via the Internet. This bookkeeping is neither closed nor in control of one party. Rather it is public and available in one digital ledger which is fully distributed across the network. We call this - "the blockchain".

In the blockchain all transactions are logged, including the information on the time, date, participants and amount of of every single transaction. Each node in the network owns the full copy of the blockchain. On the basis of complicated mathematical principals, the transactions are verified by so called Bitcoin miners who maintain the ledger. The mathematical principals also insure that these nodes are automatically agree about the current state of the ledger and every transaction in it. If anyone attempts to corrupt the transaction the nodes will not arrive at the consensus and hence will refuse to incorporate transaction in a blockchain. So every transaction is public and thousands of nodes agree that certain transaction occurred at date X and time Y. This way everyone has access to the shared single source of truth. This is why we can always trust the blockchain.

The ledger does not care wether the Bitcoin represents the certain amount of Euros or Dollars or anything else that has value. Users can decide for themselves what the Bitcoin unit represents.

A Bitcoin is divisible in 100 mio units. Users can decide if Bitcoin represent a Euro cent or a share in a company, a kiloWatt of energy or digital certificate of ownership. Because of this - Bitcoin is much more than simply money and payments. A Bitcoin can represent a many types of property: a thousand barrels of oil or a vote during elections. Moreover Bitcoin allows to make our currencies smarter and to automize our cash and money flows.

The programable and open character of Bitcoin allows us to completely rebuild and innovate our financial sector and our administrative processes - make the more efficient and transparent and significantly decrease bureaucracy. But there is more. In the Internet of things our economy will be dealing with machines that are actively participate in the economic traffic. In fact they are already here. Think of vending machines or drones delivering packages. These machines are unfamiliar with the concept of trust, but Bitcoin is not. Because of Bitcoin the drone can be hundred percent sure that the package will be delivered to the write recipient and for sure it's been paid for. We can also program the vending machine in a such way that it will automatically keep track of its supplies and pay for them automatically.

That's just the beginning of changes, however it is time to explore this new technology constructively and critically and openly discuss potential applications.


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