so, you’ve heard about bitcoin and this stuff called blockchain technology, you’re interested, but where to begin? Simplicity always seems the easiest.
Boiled down bitcoin is a ledger that can’t be changed, that records all transactions publically. The ledger is verified by all of the people who run bitcoin around the world. This is done via a mechanism named ‘mining’
From that very simplified idea, we add complexity in multiple ways. How does all of this work to make a ledger ‘immutable’? I thought bitcoin was: digital cash; digital gold; a payment system; a store of value; a remittance utility; etc? What is mining? Who controls bitcoin? What is a blockchain?
Imagine bitcoin as a multi-tool. Like every multi-tool, it probably isn’t the singular best piece of equipment to get the job done, but given the limitations of the world, it is probably more practical.
The underlying reason that bitcoin functions like a financial multi-tool are because it provides a mechanism of trust that does not require a 3rd party and instead relies on math, or cryptography, to provide that trust. Which is where mining comes in.
Mining is a process where computers running bitcoin around the world are running a cryptographic algorithm very very fast trying to find the next successful match, or ‘block’. Whoever finds this next block gets a reward. This process also acts as the security of the bitcoin network by utilizing all of that computing power to verify the blockchain – or all of the transactions that happen on the bitcoin network.
Bitcoin is a tool of the community. It is an open source software protocol that is actively developed by a world-wide community, no one ‘owns’ any piece of it beyond how much bitcoin they personally have. Traditionally, the software which governs the protocol has been supported by a strong group of consistent developers. 2016 saw a lot of contention about just how bitcoin should grow.
When something, like bitcoin, has such an exceptional utility at such a practical value the idea that it wouldn’t continue to find a growing use would seem counter-intuitive and like all products and services, it will evolve to meet that demand as the ‘free market’ so often has shown us.
There is a saying that imitation is the greatest form of flattery. Well, open source software embraces this as a core principle. Bitcoin and all of its underlying technical pieces have been and will continue to be cloned, edited, and released into the wild with a different purpose. One of the core ideas behind bitcoin is the blockchain, an immutable ledger that records information.
What type of information? Theoretically, any and all. The implications of this are so vast that to imagine blockchain technology as a fundamental business layer in the near future is highly likely. Why? Utility, Security, and Scalability.
Today business has to focus significant resources to accomplish some pretty fundamental tasks like record keeping, accounting, payroll, data storage, backups, computer security, etc. These and many more business functions can be placed onto a distributed, secure, trustless (and even anonymous) network that dramatically reduce the overhead traditionally incurred.
When it comes down to the bottom line, there is no comparison – eventually.
Currently, all of this technology is still high in the R&D phase and still has some maturity time until business critical systems can be confidently placed on the blockchain, but that has not stopped many many businesses and individuals from innovating and attempting despite the risk – this site included!
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