Cryptocurrency & The Power of Us
January 11, 2016
I bet you’ve heard of bitcoin. Maybe not very often, since the bitcoin hype rose and died alongside the Silk Road saga. Out of sight, out of mind, right? The idea of money without gold coins and emblazoned notes is simply crazy.
Think again. Even though it hasn’t been on our front pages, Bitcoin has been bubbling away behind the scenes. The past few years have seen private investors, Silicon innovators, governments and universities, delving into the opportunities and shortfalls of the technology. And the results are astounding.
But first, some definitions.
Cryptocurrency refers to all kinds of digital money and technology.
Little ‘b’ bitcoin is one form of digital money, one type of cryptocurrency.
Cryptocurrencies use big ‘B’ Bitcoin, the technology, to transfer value directly from one party to another.
At the core of all of this is the blockchain, which enables the transferral of value to take place.
Confused? Stick with me.
“At their core, cryptocurrencies are built around the principle of a universal, inviolable ledger... In theory, that means we don’t need banks and other intermediaries to form bonds of trust on our behalf. The network-based ledger – which in the case of most cryptocurrencies is called a blockchain – works as a stand-in for the middlemen since it can just as effectively tell us whether the counter-party to a transaction is good for his or her money.”
--Paul Vigna & Michael J Casey in The Age of Cryptocurrency
Image via Amazon at http://amzn.to/1OeILUp
So, essentially what we have here when you add all of this together, is a fully verifiable, transparent record of ownership that has no centralised registry (such as a bank). The system allows people to exchange all sorts of digitised items of value and any manner of useful data with the confidence that the information is accurate.
You can think of the whole thing as an operating system.
just like building apps for Andriod, developers are building ‘apps’ using the
Bitcoin technology, finding new ways to use this tool for commerce and for
managing all types of exchanges.
In the Western world, we’re generally pretty satisfied with using banks. Everyone can open a bank account, our money is safe, and we can rationalise paying fees because of the perceived convenience and potential gains we receive.
The biggest impact of Bitcoin will initially be felt in the developing
Think of countries where women or maginalised populations can’t open bank accounts and thus can’t earn a secure income or save for themselves.
Bitcoin bypasses banks entirely.
Think of countries where the banks and/or governments are corrupt and unreliable, and your assets can never really be safe.
Bitcoin isn't under state control.
Think of all the fees associated with transferring money. Imagine if there were no financial toll-collectors, no fees at all being deducted from your earnings.
The Bitcoin technology is free.
Cryptocurrencies are open to anyone with access to a digital
network, are secured by a verifiable ledger outside state control, and are
But that’s just the first wave…
Because of the blockchain – the digital ledger – Bitcoin can reach far beyond banking and money. Blockchain enables there to be an open, yet anonymous, ledger of any transfer of something of value.
Using the blockchain, contracts can be drawn up and executed without lawyers or courts.
People can vote in elections without any suspicion of miscounts or rigging.
Digitised property deeds can be transferred and verified without the need for real estate agents.
Financial securities can be traded directly between investors.
All kinds of digital or digitized assets can be traded without borders.
All of these applications are in their initial stages of development, and the innovations look promising.
But, to go one step further, think of a future where you could get into your driverless taxi, owned and run by no one, and have payment automatically deducted from your digital wallet.
It’s like Uber on steroids.
Mind = blown.
Isn’t that kind of scary?!
If you think about it, we’ve already seen this kind of thing happening. It’s all borne from the decentralisation of power, a movement that’s been growing exponentially over the past decade. With the concentration of wealth and power at its most intense, this is a battle for the reempowerment of the individual.
Think, for instance, of when the Internet arrived and we watched video stores flounder in the face of online movie downloads. The power shifted from the centre to the periphery, to us.
Now, we’re watching the sharing economy prosper as taxis struggle to keep up with ridesharing. We’re seeing more and more self-made entrepreneurs and startups from Silicon Valley, and now encouraged in Australia by Turnbull’s innovation fund.
And we’re one step away from using solar batteries to easily store energy and live off the grid.
Decentralisation is just getting started.
How will society grapple with the introduction of such
disruptive technologies? What will happen to governments and their sovereign
currency? How will this affect Wall Street and worldwide exchanges? What impact
might this have on international conflict and terrorism?
These are the kinds of things we can only guess at; we’ll just to have to wait and see. But, just personally, I’m a little excited to watch it unfold.