An industry once viewed by the general populace as a haven for criminals and online scammers, and still somewhat marred by fractious in-fighting, Bitcoin and blockchain are gradually casting off their outdated negative reputation; as the focus shifts to the increasing number of applications for the innovative technology at its heart.
For someone new to the industry, this is the essence to understanding Bitcoin - one could view it as a kind of ‘digital gold’, a substitute for fiat currencies to be traded and invested. And, arguably, it can be used for that, as a lot of people have made a lot of money through speculating on its value. But that would be to miss the most exciting essence of Bitcoin. Its actual value is in its utility - in the infrastructure on which Bitcoin sits and through which it runs. We’ll be discussing this more in our upcoming webinar, which you can sign up to here.
Bitcoin and blockchain technology stems from a white paper written in 2008, written by a developer called Satoshi Nakamoto. In it, he proposed a new digital money, with all the advantages of cash, but without the need for third-party interventions.
Here’s the Technical Bit
The paper went on to extrapolate how this can be achieved and solved the long-puzzled-over problem of ‘double-spending’. A self-executing, economic incentive system lies at the core of solving the riddle, by creating an unbiased network to secure the system. Network nodes compete to solve a mathematical formula to win the right to publish the latest block and receive the correlated reward. Before submitting a new transaction for publication, these independent nodes verify its validity through the use of a continuously maintained public ledger. The nature of the network renders tampering and fraud virtually impossible, which in itself is an incredible prospect. Any unauthorised edits to the ledger are rejected by the other nodes and that ‘block’ of the ‘chain’ is removed. Transaction privacy is also catered for by detailed encryption keys used by both the sending and receiving parties. The first Bitcoin blocks were mined a year after the whitepaper was released and the network grew from there.
There are now three different networks that lay claim to the Bitcoin name, due to various secessions, or ‘forks’ within the industry since 2017 - Bitcoin Cash (BCH), Bitcoin Core (BTC) and Bitcoin Satoshi Vision (BSV). The only one with the potential to scale for building future business infrastructure is Bitcoin SV, which follows the original design laid out in the 2008 whitepaper. The differences mostly come down to a matter of block size - data is processed in 1MB block size under BTC and an 8MB block size for BCH. In what was named the ‘Genesis’ upgrade, which took place in February 2020, Bitcoin SV removed the block size cap entirely and now leaves it up to the miners of the network to determine the size of blocks they’ll accept. The size of the block is directly related to the speed at which transactions are processed, and therefore the capabilities of the blockchain.
Bitcoin’s Applications in the Real World
From a financial perspective, were blockchain technology to be adapted within our existing legal framework, one could imagine tokenisation of national currency (e.g. USD, GBP or EUR) on top of Bitcoin. This tokenisation would give us the ability to transfer value across borders, without the issue of conversion or exchange rates. The result would be the creation of more liquid markets, as currently, conversion rates are dependent on bulk volumes - whereas Bitcoin-based transactions could be as small as a fraction of a penny. The implications are revolutionary and you can read more about how bitcoin could plug the holes in the current legal system over on our blog.
There are also many ways in which this technology can be used to improve our day-to-day lives, which are unrelated to banking or financial services. Voting systems, verification of legal contracts or property rights, programmatic advertising, logging accurate medical records (like in a pandemic), or anywhere a chain of custody needs to be recorded; these are all systems which could be exponentially improved if they were run on a blockchain.
The Investment Opportunity of Bitcoin
What is needed now, for the Bitcoin and blockchain industry to deliver on the promise of this technology, is investment. Patronage of individuals and companies advocating for, and working towards, integrating this technology into existing systems will be vital in the years to come if we are to harness the true potential of the brilliance of Bitcoin.
To find out how you can be a part of this, join us for a webinar next Wednesday 03 June 2020 with Bitstocks CEO & Founder, Michael Hudson.
Bitstocks was founded in 2014 as the City of London’s first Bitcoin market advisory and investment firm, with an over-the-counter (OTC) arm, providing services to individual, retail investors and institutions alike. Since then, we have evolved into a trusted education and media house in the digital asset space, with an ethos to Educate, Empower and Evolve. Gravity, our connected Bitcoin banking ecosystem enables users to benefit from everyday financial products and services, backed by the power and scale of Bitcoin Satoshi Vision