Bitcoins and Blockchain – What Are They?

When thinking about some of humanity’s greatest inventions, the World Wide Web is surely somewhere on that list. Technology and the Internet have given us innovations that expand the human intellect and almost always have creative, expressive, and even moral implications that have shaped our lives in ways even yet defined.

What you may not realize is that another groundbreaking innovation has been made in the last ten years that could again disrupt humanity’s current way of life as much as the Internet has. It will change our healthcare systems, our banking institutions, our online experiences, and our privacy laws.

World, meet blockchain technology. Blockchain is being described by many as the biggest thing in technology since the Internet and it’s something that few of us understand. So what is it? Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. Or, in more simple terms, blocks of information that build on each other over the network that can not be altered or erased. It is a technology that holds everyone accountable, can not be controlled by any single entity, and has no point of failure. None. Crazy, right?

And, it birthed the Bitcoin. That’s right, blockchain is the technology behind Bitcoin and it is what makes cryptocurrencies (digital currency that operates independently of a central bank) possible.

So first, what is Bitcoin?

Bitcoin is a peer to peer electronic cash system. Think about it like a foreign currency that is not tangible and lives on the Internet. And yes – it’s a real thing, and yes it has real value, and yes that value massively fluctuates. But, what currency doesn’t to some degree?

Created by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto, this electronic cash system (Bitcoin) was released in January of 2009. It was the first decentralized digital currency in the world. This means Bitcoin allows online payments to be sent directly from one party to another without going through a financial institution. This is a big deal and a huge disruption to how our financial world currently works.

I know it can be hard to wrap your brain around a currency you can’t physically hold or see… until you realize that’s exactly how it already is with debit cards, online banking, wire transfers, and bill pay.

Unfortunately, Bitcoin was initially picked up by users of the dark web and officials panicked, equating Bitcoin with drugs, weapons, and laundering. But this misperception quickly changed as people grew to understand the uses of this technology and the value of cryptocurrency.

Here’s why.

Think about our world. All of our payments require us to trust financial institutions. The bad news is that those financial institutions are fallible. Remember what happened right before Bitcoin launched in 2009? The worst financial crisis since the Great Depression hit – the 2008 global financial crisis. Predatory lending, weak underwriting, over leveraging, unfair debt burdens, and bailouts destroyed our global economy. And it can be argued that it was preventable. According to The Economist, “central banks have now become the most powerful economic actors on the planet.” The most powerful economic influencers in the world are fallible, struggle with breaches of security, and yet require trust on behalf of the consumer. Seems like there is some conflict there, right? The bottom line is that our current system can be viewed as broken, outdated, or not ideal. Enter Bitcoin.

The world now has an electronic payment system based on cryptographic proof instead of trust.

That means math, people. Blockchain enabled Bitcoin only requires that you trust numbers and math, instead of institutions and people. Given our current societal climate, that’s something we can all believe in, right? And, fees are lower (no middle men), you can use Bitcoin in every country (no exchange rate), your account can not be frozen, and there are no prerequisites or arbitrary limits. Bitcoin created a global market where everyone has equal access. #winning

How secure is it really?

In an age where hacking and phishing are common and not even surprising anymore, there is constant speculation (rightfully so) on the security of cryptocurrencies. First, remember – math. Blockchain technology provides cryptographic proof so it eliminates the need for trust. And in case that isn’t enough for you here’s a mind blowing fact:

You would need computer power the size of the sun to break into ONE Bitcoin account.

One wallet, and a computer the size of the sun. Yeah, it’s not happening. Do you know of any¬†other traditional system that can say that?

So, what does all this mean?

Well, Goldman Sachs says blockchain is the new technology of trust and is “literally redefining the way we transact. Blockchain has the potential to change the way we buy and sell, interact with government, and verify the authenticity of everything from property titles to organic vegetables. It combines the openness of the internet with the security of cryptography to give everyone a faster, safer way to verify key information and establish trust.”

Goldman Sachs, y’all.

And investment and development relating to blockchain technology is rapidly moving forward and gaining greater attention day after day. First blockchain’s use was behind cryptocurrency. I can buy things with Bitcoin, I can convert my Bitcoin into dollars, euros, you name it. But, the technology is much more far reaching. Three Atlanta Tech Village startups are using blockchain technology for building disruptive products and services, Bitpay, Storj, and Patientory.

Blockchain is also being used as an alternative way to raise capital, through vehicles such as Initial Coin Offerings (ICOs) or Token sales. For example, Storj recently raised $30 million in 7 days on a Token sale… with no dilution to Founder equity. Wrap your brain around THAT.

Recap

Does your brain hurt yet? And this is just an overview! Here’s a quick recap: Blockchain (think blocks of information stacked on each other) is the technology that enables Bitcoin to be a cryptocurrency (digital money). They are two different things. Both are ground breaking and mind blowing. Blockchain is here to stay. The only question is, how will it be harnessed and how quickly will it change our future? Because trust me, it’s going to rock our world.

Now, go get some Bitcoin. The odds are in your favor.