Bitcoin has been dismissed by economists, news agencies, banks, politicians and countless other skeptics around the world as a ponzi scheme, a joke, “fake money” and more. But what they all fail to realize is that bitcoin is just an open-source software that doesn’t care what they think. It is the most influential math experiment in history and it does what it wants. This is exactly why bitcoin will change the world.
If Bitcoin Fails, Nothing Happens
Bitcoin is primarily recognized as the world’s first form of digital cash. This is not to be confused with digital payment systems like we already use today but we will touch on that in a minute.
There have been numerous attempts to create a digital form of cash but they have all failed to create something that is digitally scarce. With each failure, programmers have come one step closer to discovering the blueprint for a system of digital cash that actually works.
In 2009, that blueprint was finally uncovered by an individual or group of individuals using the pseudonym Satoshi Nakamoto. Satoshi delivered to the world a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” and this was the first system in history that enabled two parties to transact value between themselves without the need for a trusted third party.
If bitcoin fails, nothing happens. It will be just like all of the other attempts to create digital cash that came before it. But what we are seeing is that it is not failing at all. It is changing the way the world works just as the internet has.
The Birth of Digital Money
The first record of a digital form of money being used in the United States was in 1872 when a popular telegraph service named Western Union used a series of passwords and code books to send the first “money by wire”.
This was a breakthrough in the transference of money not only because money could now be sent across an entire continent in seconds but also because it created a huge leap forward in reducing the risk of moving money. A process that used to take up to 110 days and was at constant risk or being stolen was now almost instant and immune to hijack.
Money had just taken its first step toward being digital.
If Bitcoin Succeeds, It Will Change The World
Western Union had discovered a new system that would forever change the world. The problem with Western Union and other similar services is that anything centrally owned and operated can be centrally obstructed. These centrally controlled systems require you to trust them with the custody of your money. Bitcoin, however, is radically different.
Bitcoin’s revolutionary innovation is trust; not money.
Up until the advent of bitcoin, in order to send money, you needed a trusted third party like Western Union. In modern times, this means using a service like Visa, MasterCard, PayPal, etc. All of these systems require that you trust the transfer system to not steal your money and bitcoin removes the need to trust these third parties in order to transact value. This is monumental.
Bitcoin has managed to bring together three crucial elements for a digital cash system to work. Cryptography, compensation and distribution. Without any one of these three elements, the system would not work.
Banks and payment networks rely heavily on strong cryptography and encryption technology to keep transactions secure. Remember those passwords and code books that Western Union used? That’s cryptography and it is very important not only for banking but for all information flows.
Encryption technology has come a long way since the early days and has become incredibly complex but to get an understanding of some of the underlying technology behind bitcoin, this video does a great job explaining something called Public-Key Cryptography.
These strong cryptographic mechanisms can be very costly to operate and maintain which is why banks charge a small fee to store and transfer your money. Compensation is necessary if you want a system to operate. The problem with bank fees is that they are disproportionately high compared to bitcoin fees. For example, to send $1,000 with Visa or PayPal, it would cost about $25 but to send the same $1,000 with bitcoin, would cost about 8¢. The difference in price stays in your pocket.
This is where the magic happens. Distribution is what makes the bitcoin network so resilient. There is no single point of failure. Since there is no single central point of failure, it is practically impossible to attack in the same way that governments and corporations have been unable to stop illegal file sharing and “piracy”.
In short, bitcoin removes the need for these other mechanisms by replacing trust in a central third party with trust in a distributed network that is secured by math. This is monumental.
No matter what you think about bitcoin, it is already changing the world. It is the topic of discussion with governments, banking institutions, corporations, freedom advocates, entrepreneurs, venture capitalists and disruptarians around the world. It wouldn’t be such a topic of discussion if it wasn’t making changes in the global economy. It has subverted power over global money flows and is enabling more individuals to have more control over their daily lives and futures.
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