Are you foolish enough to purchase 1.5 billion dollars worth Bitcoin? Elon Musk is! Just kidding. Elon Musk means business and he is pretty occupied shaping the future. Now, Elon has his eyes on Bitcoin. What does that mean? It evidently means Bitcoin is not going anywhere in near future.
At the beginning (2007 to be precise), Bitcoin was a just a revolutionary experiment with zero guarantee of favourable outcome. Now Bitcoin industry took a giant leap from a tiny little experiment to a billion dollar project. It could perhaps be the most revolutionary technology you are likely to witness in your life time. So,
Who invented Bitcoin?
Before going deep, let’s get familiar with its birth.
Unfortunately, what we only have is a name – Satoshi Nakamoto. In fact, we don’t even know whether this is a real name or not. Or Mr. Nakamoto can be a group of person. Apart from the name, Nakamoto is a ghost!
On 18 August 2008, the domain name bitcoin.org was registered. Later that year, on 31 October 2008 (Halloween day), a link to a paper authored by Satoshi Nakamoto was posted to a cryptography mailing list along with a note– “I have been working on a new electronic cash system that is fully peer to peer with no trusted third parties”. That Bitcoin Whitepaper (link) had all the information necessary to run the system such as Bitcoin’s advantages, its protocol and proof of work.
So, what is Bitcoin?
Let’s put it this way – Internet changed the way world communicate. Bitcoin changes the way how money works. Atleast some of us are familiar with the dark side of our financial system. I am not pointing out the transaction charges and service costs. Those who are most benefited from our financial system are those who stays higher in the pyramid, not common people (iykwim).
What we have now – Centralised Financial System
In old days, when humans wants to trade outside their village. They needed something everyone could agree that had value, something scalable. That’s what Currency is. What currency allows us is to buy and sell commodities. But currency and political power is forever linked. So we say our currency system is ‘centralised’. We have a bunch of banks and many middle men to help complete our money transactions.
For instance, we usually put our paycheck or savings into a bank account and withdraw from it as per the requirement. The bank are just a custodians of our money. Right? Ok, wrong! According to the bank’s balance sheets, our money is now a property of the bank. They can do anything with it. They can lent it to another person if they wish to. At that point, your money just became digital. It never exist in your bank account anymore – virtually, yes – in reality, no! None of that paper currency you think you have in bank – it never did.
Reporters say, Bitcoin is first digital currency. But actually we use digital currency while we make each transaction through our bank or credit cards. The digital currency which created by the banks.
Technology must be used to liberate individuals. The idea of Bitcoin is to create money whose value cannot be manipulated by a central authority. Through this, global decentralisation of money (that is what happening here), literally, we can carry a bank in our pocket.
So, how is Bitcoin different from this?
To understand this, we must get to know how Bitcoin works.
Bitcoin works using Blockchain technology. Blockchain is a technology that enables the existence of crypto currency. Blockchain is a decentralised peer to peer system. Millions of computers across the world agree to keep a global record of the history of all transactions that have ever taken place in the system. This is called a ledger. Consider it a notepad of all transactions, and everybody can read it whenever they want. So tampering and cheating will not be possible. When you transfer money or service inside block chain, everybody can know about it. We don’t need a middle man to make rule for us, if the computer does it all. So we are free of all the additional charges! Our money cannot be misused without our permission, because it is recorded in a global platform to which anyone in the system have access to.
Next concern is the security!
Science and mathematics have essential truth that stands alone irrespective of its inventors and their motives. We don’t necessarily need to know Pythagoras was a good man or not, to use Pythagoras theorem. Likewise the source code of Bitcoin won’t change if Nakamoto is a man, woman or an alien!
It can be hacked? Answer is NO! Not inside the block chain system.
Bitcoin is not a file on your computer to get hacked. It is an entry in the publically distributed ledger called block chain. Just like bank records each transactions as + OR -, like a balance sheet. Here we use digital wallets instead of bank accounts, that too you alone controls. Since the block chain is public, it cannot be controlled by one person or a computer. So a bitcoin cannot be forged! Credit card databases have hacked in past, Bitcoin wallets have never been hacked from the block chain!
Another major difference is,
In case of normal currency, nobody really knows how much dollars or euros are in circulation, but amount of Bitcoin in circulation is finite. – 21 million Bitcoins. No one in the world can create more!
These facts make Bitcoins stand out from normal currency,
- We don’t need to go through a bunch of process or formalities (bank account, authorization) to send and receive money. For Bitcoin transactions, what we only need is a phone, internet connection and the software- to take part in global economy. 1.8 billion People in world have cell phones but still no access to banking system. This can change.
- It’s harder to hack unlike banks and credit cards.
- Don’t need to pay transaction fees or service charges.
- Faster to transfer money internationally – Within minutes we can send Bitcoins across the world. It takes 1 to 2 days to transfer money internationally in our current system.
- It is as transparent as it can be – so can control corruptions.
- In these point of view Bitcoin is much safer than the most secure portals of some banks.
Perspective of a Technology Optimist
If we keep using bank accounts and normal currencies, government can seize the money out of your bank account (taxes, charges) or they can even print new money any time. They can use this money for whatever they want like for development, war or even for constructing new statues all around the nation. If we are using Bitcoin, we can decide whether we need to give government money or not, according to the requirement.
People have a mythology about money and our financial system based on very little facts. New entrants, such as Paypal, have also brought new pools of customers into the crypto ecosystem, which is exciting. But Bitcoin is something else – revolutionary. What I especially appreciate about Bitcoin revolution is – at least Bitcoin forces people to ask questions about the fundamentals of money and the system. This is huge and it’s going to change the economic culture.
History rhymes, very badly
We have witnessed many times in the past, how common people was manipulated by banks and corporates in a huge way. History may not repeat itself, but it rhymes, very badly. Remember Cyprus? Blockchain works like we own our bank – free from taxes and all charges. This area is just so new, no one knows what could happen. But as I said earlier, at least Bitcoin necessitates people to ask questions about the fundamentals of our current system. This is the largest innovation in monetary science after Issac Newton’s gold standard. But what we have discussed are the upsides of Bitcoin. It have some potential risks too. If you want to know more about how Bitcoin, I have a few stories to share, in my upcoming articles.