You’ve probably heard investors and techies alike rave about bitcoin, blockchain and cryptocurrency in recent months, but have you wondered what exactly all the noise is about? The bitcoin exchange rate has soared from $627 to $4,832 in the past year, and over $2.5B has been raised through ICOs. What exactly does all this mean? Should you be investing financially in cryptocurrency, or considering a blockchain career? What is next for this revolutionary technology, and how can you get involved? The Dayton Innovation District is the new home to many exciting developments in business and technology, and last Friday, BitQuick.co founder Jad Mubaslat presented “8 Years of Blockchain in 1 Hour” at 444. His lunchtime talk explained the concept of blockchain, the history of bitcoin, and potential opportunities in this burgeoning industry. Attendees also participated in a live demonstration where they exchanged bitcoin on their own phones. The entire session can be viewed at https://www.facebook.com/miletwollc/videos/1203543696412518/, and I have recapped the highlights here.
What is bitcoin?
Bitcoin is the world’s first cryptocurrency, and it appeared on the scene shortly after the 2008 financial crisis. It is an alternative, global currency that doesn’t depend on the security and stability of any particular nation’s finances. Anyone can exchange, send or receive bitcoin anonymously via a mobile app for a small transaction fee.
There are many reasons cryptocurrency has risen in popularity over the last 8 years; fifty percent of the planet has no access to the banking system, and bitcoin is must cheaper and faster than services like Western Union. Its value isn’t dependent on a government, and it is considered to be an anonymous system, with decentralized trust, meaning you don’t have to trust the integrity of a third party, or provide them your financial information (See Equifax breach). In Venezuela, people are currently using bitcoin to meet basic survival needs. It is illegal to send money outside the country, so brave and resourceful Venezuelans are using bitcoin to order Amazon shipments of food to neighboring countries. They then smuggle the food across the border to be distributed to starving populations.
What is blockchain?
Blockchain is the technology and concept upon which bitcoin is based, and its uses extend well beyond the crypto currency application. It was invented by anonymous developer Satoshi Nakamoto, who also developed its initial open source program. Blockchain is essentially a decentralized value exchange that transfers trust from a single third party to a collective of parties that are financially incentivized to maintain system integrity.
How does blockchain work?
Just like a bank, blockchain keeps a digital ledger of historical transactions. Unlike a bank, however, a copy of the blockchain ledger is kept on each node of a distributed computer network. Transaction requests are issued to the entire network, and each node updates its copy of the ledger. To make a transaction, you need to have a digital or paper wallet. Each wallet has a public and a private key. To send bitcoin from one wallet to another, you need both the public and private keys of the source, and the public key of the destination.
What are cryptocurrency miners?
Unconfirmed cryptocurrency transactions are submitted to a pool for processing, where each node on a distributed network of “cryptocurrency miners,” or transaction processors, compete to be the first to compile a block of transactions and add it to the existing blockchain. Miners are essentially high performance computers running computationally intensive algorithms needed to verify transactions. The first miner to complete a block is awarded its transaction fees.
What is Ethereum?
Ethereum is the next generation in the evolution of crypto currency. It’s a platform that allows developers to combine the power of crypto currency with computer language scripting. Ethereum can be used to create a smart contract that will automatically transfer money from one wallet to another, based on a set of conditional outcomes. For example, it could be configured to execute the terms of a bet based on the outcome of a sporting event. The combination of code and cryptocurrency has far-reaching possibilities, and it enables the creation of entirely new cryptocurrencies.
Other blockchain applications
The possibilities for blockchain technology are not limited to financial applications. With the option of public or private access, blockchain can be used to send and receive any information of value. Filecoin, for example, is the Airbnb of hard drives, allowing anyone to farm out their unused disk space in exchange for some cryptocoins. Many potential uses of blockchain exist in healthcare, where integrated delivery networks (IDNs) could enable hospitals, pharmacies, and insurance companies to access a patient’s full medical history with permissions transferred via blockchain. Real estate law is another area where blockchain shows potential; physical land title records, often held in a single building by local government, could transition to a more secure, distributed, digital solution.
Isn’t cryptocurrency for criminals?
Because of the anonymous nature of blockchain transactions, mentions of cryptocurrency bring criminal activities to mind for many. Just like every other currency, bitcoin has been used to commit crimes. However, law enforcement is quickly developing methods of using blockchain to track and prosecute criminals. The possibilities blockchain and cryptocurrency technology represent extend far beyond the criminal element.
How can I get involved?
Blockchain technology is very much in its infancy. Mubaslat compared its current status to the Internet of 1992; adoption is limited to niche users and investors, but mainstream use is predicted within five to ten years. The most obvious and easiest way to get on the blockchain bandwagon is to invest financially. However, many financial analysts have warned of a cryptocurrency bubble, and any investment in bitcoin or Ethereum should be considered purely speculative. It’s probably not a good option for funds your retirement relies on.
An alternative investment into cryptocurrency and blockchain technology is with your time. As new blockchain applications evolve, many technical hurdles and challenges with privacy and security will arise. Each challenge, however, should be seen as an opportunity for developers and entrepreneurs to make their mark.
Lastly, advancements in blockchain and cryptocurrency will require industry experts who can work with developers to understand and solve domain-specific problems, and communicators like Mubaslat, who are able to articulate complex concepts in ways that the layperson can understand. Like any other technology, as familiarity and understanding increase over time, everyday people will eventually become comfortable with blockchain in their everyday lives.