Imagine a world where there was no commissions on global trade? No custom bloc levies, no banking transactions fees. Imagine if an individual/entity in Namibia could purchase a truck from an individual/entity in Indonesia directly without having to worry about currency exchange and bank transfer charges? What if there was no need for a middleman, no bank, no lawyers, no credit unions, no central banks. What if there was only a price offered and the value paid, straight between bidder and purchaser? What if we could use the internet like a giant accounting ledger and the transactions that occur within that ledger like IP addresses? What if that Namibian and Indonesian fellow with the truck that we mentioned earlier could use this giant ledger to make that transaction occur instantaneously, without a middleman charging wiring fees and no central bank forex levies? When the transaction occurs it will be stored in this ledger, it can be looked up like an IP address or a web page. It couldn’t be faked or deleted because each of the ‘IP addresses’ had a record of the whole ledger and for the ledger to be updated with a new transaction or ‘IP address’ the whole ‘network’ had to reach consensus on what happened when, where and how?
The stuff of cryptic utopian science fiction novels you might say. The thing is, it’s hard to imagine that this is a future we won’t be experiencing soon thanks to Bitcoin. Bitcoin is a ‘crypto-currency’ which for this articles purposes means it exists on the cloud we all know as the internet. It is already employed by hundreds of thousands around the globe as a means of exchange for goods, forex, commodities and many other types of commercial options. It is being considered as a serious financial instrument with Bloomberg soon releasing a ticker for Bitcoin (XBT) on its financial charts. It has now received media coverage on all major news outlets and governments and financial institutions around the world are frantically scrambling to figure it out so they can react to it. Bitcoin is either bought by using a valid forex instrument(basically you use your credit card to buy them) or it is ‘mined’ on a computer. Once they are stored in your electronic wallet of choice, you can use them to make further transactions.
WeUseCoins.com is pretty much the official authority on bitcoin first time orientation although a simple web search will lead to hundreds of articles that attempt to explain bitcoin.
Bitcoin is something new altogether, it is a product of myriad computer science and mathematics concepts that have been around for less than 50 years and which are little understood by most people. It is a product of the zeitgeist of the current times as much as it is a cumulative historical inevitability in that, something like it was going to come along sooner or later. Many attempts at a viable ‘virtual currency‘ have been made since the 90’s but none have gained close to as much traction as bitcoin currently has got. I personally have been observing and interacting with bitcoin since it’s inception in 2009 and while that doesn’t make me any kind of authority on it, I do have an opinion which I would like to elucidate on this blog piece. I believe Bitcoin is here to stay and once enough people really start understanding its technological and socio-economic dynamics, it will fundamentally change how humans interact with each other. Bitcoin is much more than just a means of exchange for goods, the technology it’s based on makes some pretty wild ‘utopian science fictiony’ things possible TODAY. Things like a truly decentralised financial system or why stop there, how about a truly decentralised political system? With a little imagination and some research you can co-opt parts or all of bitcoin’s technological infrastructure to prototype such things. We have barely scratched the surface of what bitcoin technology makes possible.
As a financial instrument in today’s climate, I can understand why it baffles so many people. The concepts it’s based on are hard to understand but it’s by no means impossible to understand them. At times it seems though, this might as well be the case, when you consider how many people in the world are not computer literate and expecting people to make bridge the gap between the technological know how and the economic theory which bitcoin is built on is a stretch any day. But like any thoroughly new invention, which bitcoin is, history tells us these are always met by some mix of lack of understanding, fear and dismissal. This is what we see today by most people who come across bitcoin, it’s usually only tech geeks and financial specialists who see merit in it although this is rapidly changing. While there might be some arguments to be had about the social stratification that could occur through the rise of a new techno class I believe the entry barrier to understanding the technology will fade with the passing of old and birth of new generations.
Bitcoin is not a ‘currency’ in the classic sense, although it can act as one and when it does it’s the most efficient form of currency we have ever witnessed. Bitcoin is a new way to establish trust and verification between parties that cannot be faked. This has many, many implications for the financial markets and for the way we record and exchange data between any institution you can name. Ultimately THIS is why it’s a valuable commodity to have today and into the future.
Now, imagine a world with error free reporting systems. A world where no election, bank or any transaction fraud is possible NOT because there was a shadowy Orwellian central authority making everyone tow the line through legal coercion, power and fear BUT because there was TRUE CONSENSUS amongst EVERYONE on EXACTLY what EVERYTHING is EVERYWHERE at ANYTIME? (You can do the ‘Mind Blown’ gesture now.)