Introduction to Bitcoin and the Blockchain
Why should you care?
If Bitcoin and the Blockchain succeed, they will save us all a lot of money (except the existing financial companies) and help us solve many problems the current financial system can’t.
What are they?
You may know Bitcoin as smart digital money that you can send around the world for a tiny fee in minutes. If you’ve heard of it before, you may also be wondering why it still exists when the media, governments and banks told you for years that it can’t be trusted and will die.
On the other hand we have the widely praised promises of the Blockchain, the underlying technology of the Bitcoin network. The Bitcoin Blockchain is a global bookkeeping that anyone can use, but nobody can manipulate. It allows you to transfer ownership of something (like money) without relying on a middleman that takes a fee and controls the network.
The Bitcoin Blockchain is secured by the most powerful computer network in the world and has never been hacked since it was created over 7 years ago. Those who use their computer power to help protect it earn bitcoins to cover their costs. We need both bitcoins (something with value) and the Blockchain (a global network owned by nobody) for it to work safely.
Realistically, a 5 minute blogpost won’t make you understand how Bitcoin and the Blockchain work and what you can do with them. There is simply far too much to say about them, so all I can do here is try to give you an open mind about them.
To make you understand why Bitcoin and the Blockchain matter, I’ll compare them to something similar that you’re using right now, probably without understanding how it fundamentally works: The Internet!
“The Internet can’t be trusted and will fail”
Imagine it is the 90s, when the world’s information streams were owned and closely guarded by large corporations. Suddenly there is relatively new, wild idea to challenge them. This new network is not owned by anyone, has no boundaries, works much faster and cheaper than anything we have and most importantly, anyone can use it and innovate on it without having to ask for permission first.
For the organizations in power, this is the biggest threat imaginable. They start doing anything they can to stop the Internet from becoming a success.
The Internet was invented many years before most people heard of it and when they finally did, most of them laughed it away.
“I predict the internet will soon go spectacularly supernova and in 1996 catastrophically collapse.” - Robert Metcalfe, Infoworld 1995
This did not change anything about the fact that the Internet is one of the most amazing inventions of our time, and so the fighting began. Corporations were building their own intranets, praising the potential of connected networks, but dismissing the disruptive power of open innovation through the Internet.
History has taught us which of the 2 types of networks ended up being the most interesting. Intranets are useful, but the Internet is really changing the world.
It didn’t all go flawlessly. The Internet had a bubble around the year 2000 after getting too heavily hyped up. Many enthusiasts believed in the network, but it wasn’t ready yet and too little real value was created. The Internet was declared dead over and over and some expected a logical evolution to be reverted back to the old way of doing things. Except it didn’t, because despite the hype, the Internet was still a fundamental breakthrough that opened up countless opportunities and solved many problems. Soon after, many of the largest Internet companies we know today took off.
Bitcoin has the same story.
If we look at Bitcoin, we see the exact same story. First it was ignored and then laughed at for years, but once it became clear that it wasn’t going away, banks and governments started warning people that it could not be trusted.
Since about a year ago, the fighting began. Almost every financial business on the planet is trying to turn the Blockchain into something that will strengthen rather than weaken them. They say Bitcoin as a currency has no future, but the underlying technology, the Blockchain, will “revolutionise finance”. They want to build closed networks (Intranets) that don’t have all the things that make Bitcoin great, like better security, censorship resistance, cheaper transactions, open access and open innovation.
If we have things their way, we will end up with “Dropbox for finance”. Dropbox is a very useful service that many of us use to store and share files with each other, but it’s only a blip on the radar of the massive Internet and its countless opportunities.
If Bitcoin is so great, why isn’t everyone using it yet?
As mentioned before, it is like the Internet in the 90s: People don’t understand it, don’t see how it will change the world and those who are disrupted by it are doing everything they can to stop it. 10 years later the Internet was mainstream and 20 years later even my grandparents started using it.
Bitcoin is only 8 years old and still needs a lot of development. Every day thousands of people around the world are working hard to develop improvements for the network, like more transactions, even better privacy and totally new ways of using it like automated contracts.
The only thing that we’ve tried like this is the Internet, which was about information. Bitcoin is about money and this is so embedded into our lives that it takes time to change.
What really determines Bitcoin’s success is how often people are using it. Like immigrant workers sending money back home to support their families, without paying a 5-20% fee or waiting days. Like businesses sending and receiving money globally, almost free and instantly. Like the consumer trying to buy some shoes online without paying 3-5% extra in (invisible) fees. Like the person without a bank account who still has access to financial tools, even on a ‘dumb’ Nokia phone.
These are the things that matter, and just a few of the problems we can solve with this fantastic new technology.
Bitcoin is the next logical evolution in transferring value
It is 2017, we live increasingly internationally and everything in our lives is getting smarter. It’s about time the way we transfer value does too. Bitcoin and the Blockchain are young technologies that require a lot of development before we fully get there, but they have the potential to make the world a better place and are already doing so today. I hope that after my post, you have an open mind about them too.
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If you’re interested in learning more, I give presentations about Bitcoin and the Blockchain. I’m also working on filling up my site with lots of information to help you better understand them.