Crypto Rails 101 – Why Bitcoin – Part 2
February 29, 2016
Longer term, bitcoin has the foundation to move any type of ownership, not only money. It is feasible to construct contracts, administer the ownership of properties, issue shares, setup loans and collaterals — all of this using the block chain foundation. Given the richness of the non-payment applications, these ideas deserve a separate document to keep this content focused on the payment applications.
Whenever a new technology surfaces, two basic communities result: the dreamers and the risk managers. On the outset of the internet, dreamers believed in the power of distributed information; that is, making content published in one country available to readers around the world instantly. Risk managers worried about how content is going to be administered, its authenticity, its reliability, its scalability, its privacy etc. On the outset of VOIP, the dreamers saw the potential for reduced long distance fees, video chatting, and groups of people coming together to communicate worldwide. The risk manager worried about reliability, quality, and laptop battery life during business or emergency calls.
The dreamers of the bitcoin community believe in moving money on the web like information and moves, without borders, real time and secure. Believers talk about new concepts in money where consumers are able to make very small (micropayments) or very large payments with an advanced escrow contract. Risk managers talk about the legality of bitcoin, security, the potential for the bad actors behind it, and the limitations of scaling this technology.
In all these industries, the objections of risk managers have become the set of issues that need to be addressed. Like any new technology, it takes time to work through the weaknesses and create a hardened infrastructure. Maturing new technologies go through a multi-year cycle and we are at the very early stages of a new, disruptive innovation.
Existing payment systems (the check, the wire, the card networks) were established pre-internet and adapted to the web. Even Paypal, the most modern global payment network is built on the same foundation as traditional payment systems. Bitcoin is natively digital, built like the internet; it has a distributed, decentralized infrastructure. Each user has a wallet and a public address that is used to send and receive money. Bitcoin is architected with crypto principles to ensure its security and refined over time by previous failed attempts that lacked the ability to solve the double spend problem, where users can spend the same money (coins) over and over. The block chain, the real invention of bitcoin, enables all transactions on the network to be recorded via a public ledger system where all transactions can be tracked. The block chain is an advancement in technology and will be the basis for a set of new applications that are going to be built on top of the bitcoin platform.