Why Bitcoin Matters More Than Just Its Own Currency
Episode #7 of the course The basics of Bitcoin by John Saddington
In many ways, the birth of bitcoin is very much like advent of the internet. Can you imagine a world without it? As difficult as it may be to comprehend the value created by the internet, it is equally as difficult to scratch the surface of what bitcoin will bring to us individually and collectively.
But for starters, there are two high-level areas that I’d like to quickly explore with you, and then your own imagination can take you from there.
Computer Science
There are many debates on the utility of bitcoin and blockchain technology, but no one will disagree with the fact that bitcoin is a complete breakthrough in the realm of computer science, specifically in the areas of cryptography and cryptographic sciences and currency.
To be even more exact, there’s been a long-standing conundrum within the realm of computational science called The Byzantine Generals Problem. The original paper shares the fundamental problem thusly:
We imagine that several divisions of the Byzantine army are camped outside an enemy city, each division commanded by its own general. The generals can communicate with one another only by messenger. After observing the enemy, they must decide upon a common plan of action. However, some of the generals may be traitors, trying to prevent the loyal generals from reaching agreement.
The question ultimately is one of trust between unrelated parties over a network that cannot be fully trusted. This problem exists in today’s economy and infrastructure. This problem has existed in everything we do online and on the internet.
Until now.
You see, bitcoin is the first pragmatic solution to this computer science problem that has been, up until this point, unsolvable. Just think about that for a moment, and let it sink in.
With bitcoin, we can transact with each other without having to necessarily trust the other party. Why? Because the underlying technology and protocol (i.e. the mathematical algorithm) is what we trust. In other words, every participant in the network (e.g. miners, purchasers, sellers of bitcoin) trust the mathematical principles instead of each other. This shared trust in the program logic is what makes bitcoin so groundbreaking.
Consequently, we can send information securely and with confidence, guaranteeing delivery with the ability to audit post-transmit with global accountability.
Financial Systems
This is self-evident in the fact that bitcoin itself is a unit and network of currency. But the principal characteristic that we must remember is that this is an entirely decentralized financial system where you, as an individual, can become your own bank, issuing yourself currency through mining while maintaining complete autonomy and agency unto yourself.
You can transact with people anywhere in the world without friction and without fear. Fraud and tamper-resistant, you could never be as confident with any other form of currency as you can with bitcoin because there are no intermediaries between one participant and another. Bitcoin is like a single firm handshake, while any other form of currency flow requires multiple “handshakes” (like through payment processors, banks, clearing houses) for the money to arrive, adding to the cost as well. When you send bitcoin, you know it’ll get to where you want it to go.
This Is Just the Start
We’re already starting to see local organizations, governments, and financial and technological systems transform as a result of the bitcoin and blockchain protocol. For instance, can you imagine a more safe, secure, and accurate way of voting in public elections? Blockchain can solve many of the issues around voter registration and identity verification necessary to have a fair and balanced vote of public officials. Startups like Democracy Earth and Follow My Vote are two companies building these tools.
And this is just a tip of the iceberg. So, let your imagination run wild with what all these innovations mean, for you, for us collectively, and for our world.
Tomorrow, we’ll talk a bit more about how one specific technological area has been born and what you should do about it.
Talk soon,
John
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