The most disruptive system in the current Financial Industry
So, you seen Bitcoin on the news and you have a friend that own some Bitcoin. But it all sound like a scary thing. You feel better sticking with what you know….
The fact of the matter is you want to know more but does not want to ask too much. You have seen the words “Drugs”, “Criminal”, “porn”, “gamers” and “hackers” and don’t like to be associated.
If you believe that then you right. It is no different than Fiat Money. We have the same “Drugs”, “Criminal”, “porn”, “gamers” and “hackers” using our normal Dollar, Pounds, euro’s and the rest of the worlds money. The presumption is anything that has value and easy to use will be used by unethical or ethical industries.
Now that we are clear – all money is used by all industries.
With that out of the way. WHAT IS BITCOIN?
Bitcoin is a digital currency. It is a mathematical formula that are solve by opensource software running on server’s worldwide. We can Delph into this deeper over the next couple of days.
The creator/s of this digital currency Satoshi Nakamoto designed the concept back in 2008 when he released the Whitepaper. In this Whitepaper Satoshi address the trust issue we as society have with 3rd parties looking after our money.
“Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.” –https://bitcoin.org/en/
So, lets look back at 2008, a worldwide recession (PC name is Credit Crunch) when banks collapsed and had to be bailed out by the Tax payers. Some of you who read this might remember Lehman Brothers. Society and industry trusted this 158-year-old bank (at the time the 4th largest investment bank in the USA) with their funds. This bank declared bankruptcy on the 15th of September 2008 causing the global market to crash.
You can read more on that athttps://en.wikipedia.org/wiki/Lehman_Brothers
Now the clients trusted this bank with their money they had in stocks and other investments.
I use Lehman Brothers as an example, to illustrate – our trust we put into 3rd parties, like Banks. The current systems we have in 3rd parties works well, however we have an inherent weakness of trust in 3rd parties.
Satoshi Identified it in his whitepaper. He based the need on trust of an electronic payment system on cryptographic proof. With other words we don’t trust others with our money except ourselves.
By using cryptographic proof, this allows you and me to transact directly with each other without a 3rd party like a bank. For us to complete this transaction we rely on computational structure by the use of reclaim of digital signatures for our transaction, a recorded time stamp, proof-of-work by incremental, a network of nodes, incentive to keep the nodes honest, once this is done it will reclaim the displace. This leads to a simplified payment verification; the verification is only reliable if the node are reliable, and list goes on. Now this sound like a very complicated and long way of sending money between us.
A bitcoin transaction complete between 20 min to an hour, during our transaction. This works great when sending money abroad for instance as it beats the transaction time of the conventional 3rd party systems (of about 3 to 5 Working Days).
Bitcoin is not new to us any more, as this year Bitcoin is 9 years old. The development and the industry around Bitcoin and its blockchain are growing. Yet, it is still in its infant shoes as its about 1% for the current financial system in the world.
However, it features more and more on the news, Bankers opinions, large corporate investment in the improvement of Bitcoin payment systems and Large Bitcoin Mining farms.
To end my explanation of Bitcoin. It is a Disruptive Technology that is here to stay.
By Shaun Schoeman Link to Original Article