Many newbies when asked about Bitcoin will call it a revolution but will have a hard time explaining it to their friends.
Some might say it’s internet cash (is it?), but will have a hard time justifying a currency that can’t be used to buy at most stores.
Some will say that Bitcoin brought us blockchain technology but will not be able to explain what it is, how it works and why is it important.
In this series of articles I would like to explain what I have learnt about the Bitcoin blockchain, this is mostly for me to enhance my understanding.
But first I want to start with the obviously simple (not really) question above.
Bitcoin was first introduced in a white-paper by a man or a group under the nickname Satoshi Nakamato, its introduction and further implementation in 2009 was the first implementation of a revolution in Accounting.
We all know the way accounting is done personally or on a business scale.
Personally you track and your income and outcome, list them in a spreadsheet, and know how much money you got and how much you owe. This type of accounting exists for over 6000 years, it’s error prone, easy to cheat and can easily be lost.
On a business scale you have books, this is called two-way accounting as you keep track of it and you also handout receipts that can later be verified by a certified accountant. This type of accounting exists for over 500 years and as we all know it’s easy to cheat, companies regularly “cook books” and change their balance, sometimes they do get caught
but at a tremendous cost for honest investors. I recommend watching The Dishonesty project on that matter.
Bitcoin is the first implementation of 3-way accounting. This type of accounting consist of an immutable, publicly verified, timestamped ledger. It is an automation of accounting, that is far cheaper and more scalable than current accounting. It replaces the lawyers, accountants, bureaucrats with an army of robots that can’t be sought to cheat. It is easily scalable as computer hardware is very cheap compared to trained personal.
A breakthrough in accounting is a huge revolution as history teaches us that these revolutions created wealth and growth. One way accounting allowed kingdoms to trade, two-way accounting allowed companies to do global commerce and the 3-way accounting will allow individuals to trade assets globally with no intermediaries.
Bitcoin is not just money. Its first prototype was a cash system but it’s not just cash.
Fiat money has no other use but cash, Bitcoin has an intrinsic value as it’s a protocol for global communication.
Much like eBay allowed sellers and buyers to exchange goods on a global scale, Bitcoin allows people to list their assets on a public and global ledger and trade them safely through the Internet with no need for lengthy contracts, lawyers and notaries.
In addition, Bitcoin is completely neutral and allows people from all over the world to:
Safely store their wealth
In recent times we witnessed governments confiscating funds for all kind of reasons. Recently, that was done in India and Venezuela, before them in Cyprus and in Argentina.
Billions of people are unbanked and can not trade globally. Bitcoin allows anybody to start a business with no need to pay high fees to banks and credit card companies.
In many countries corruption is rampant and starting a business requires paying bribe and both funds and property ownership can be confiscated on a whim.
A fairly stable and valuable currency
Bitcoin is not yet stable but it’s becoming a stable currency. Currently, talented businesswomen in many countries can not trade on a global scale due to currency fluctuation.
This will be a tremendous boost to the global economy and allow more and more talented businesswomen (and men) to develop new ideas on a global scale.
Me holding a blockchain communication device.
Internet Security revolution
Nowadays with the current centralized security model we have many experts in charge of securing companies' and government's information security. Though, this task is impossible for a human to do with high certainty.
Bitcoin, through its proof-of-work, integrity and authorization, removes the need to secure financial assets. This is an automation of Internet security, instead of hundreds of people in charge of securing the financial network (regulators, police, lawyers, investigators…) we have computers securing it in a decentralized manner.
Companies no longer need to have large databases with credit card information that they must keep secured, they no longer need to incur losses when customers cancel payments, no need for encrypted payment processing and it’s far easier to secure their funds using multi-sig wallets.
I hope this article will make it a little easier to explain Bitcoin to your friends. Bitcoin is not just a single revolution and will change the way we do accounting, business, store wealth and trade.
On the next article I will explain the Byzantine General Problem and the way Bitcoin achieved a real world solution.
Please comment, ask questions and correct any mistakes I may have made.
Peace and Love to all :)