B I T C O I N
And Blockchain
What is
By Eugene Mutai | @kn9ts in @Andela
What is money!?!
What makes money, money?
Money is basically an accounting system that tracks:
-
who owns what
-
Who owes who what & has it been paid off
-
Who has what
How does money work?
Let's take a look at the history of the US Dollar
The money we use now is corrupted!
Eg. Banks lend more money than they have and call this: fractional reserve banking
It is new type of money currency!
It is DIGITAL money
global! borderless!
It is Decentralized
It is not owned or controlled by the government anyone
It isn't attached to state or government, thus it doesn't have a central issuing body or regulatory body, basically, there's no organization that can:
- Produce it (mint it)
- Keep track of it of its circulation, constantly checking where they all are
- Figuring when to make more money or just make more of it without cause
- Track fraudulent exchanges
- Block/stop any exchange of money
- Charge exuberant transaction fees to transfer it
Welcome to a world where we can now be our own bank. You and me.
We may need not banks anymore but we do need services that banks offer.
Cryptographically Secured
Cryptography: A special field of maths that can be used to hide any data in any public space.
Trust-less & Trustworthy
Out with the middle man (banks, remittance services, credit card issuers, accountants)
Nearly Instant
Right now, it is better to hop on a plane and deliver the money yourself than to send it through the bank to a loved one who really needs it on the other side of the planet
Nearly free to send
The cost of sending Bitcoin to a loved one anywhere in the world is almost negligible.
Accessible to Anyone
Anyone and everyone has access to Bitcoin/cryptocurrencies.
It is private money
Though traceable, one may not know who actually owns the bitcoins.
Tamper Proof
The blockchain powering bitcoin can not be mutated so easily to one's evil requirements
Stable Inflation
Bitcoin's system produces more Bitcoins at a constant rate controlled by the system's algorithm
It is also deflationary!
Has a specific supply and other people losing their bitcoins reduces the supply as it would not longer be in circulation
Limited Supply
Only 21 million coins will ever be in existence
The last BTC will be minted/produced in 2140
So how does it work?
What goes on behind the scene to get your money from point A to point B
Bitcoin Wallet/Account
You are your own bank. You hold the keys to your account.
Public & Private Key
The public key is your public address/account ID just like a bank account no.
Fact: An account can be created without any connection to the network
18tmrMjXB2mSg2SsQAatSpZEBUMpz2PnCe
Bob's Bitcoin Wallet (Yes! Bob is Me)
Bob sends 5 BTC to Mary
Bob's private key is used to sign to the request using a HASH function.
Broadcasted to the Network
The nearest bitcoin miner will receive the transaction request and verify it's authencity
18tmrMjXB2mSg2SsQAatSpZEBUMpz2PnCe
What is Bitcoin mining?
It is the verification of the authenticity of every bitcoin transaction broadcasted to the network and adding those transactions in groups known as blocks to the database.
Thus called blockchain
Blocks of grouped transactions chained together cryptographically
There is no Bitcoin
without Blockchain
Everything is possible because of the blockchain
What is a Blockchain?
a secure decentralized distributed tamper-proof public ledger/database
Our current systems allow Corruption
The ledgers/databases we use today, all of them are temperable. You can remove a record, or you can add a record.
Problem Solved: Double Spending
The internet uses duplication of data in order to share/transmit it. Money should/can not be duplicated. It is to be exchanged.
Problem Solved: Value Dublication
It solved the biggest internet problem where equities and assets can not be digitized. Items that only require to remain authentic
Allows Tokenization
assets & equities virtual or represented virtually, known as tokenization eg. bonds, shares, title deeds, home ownership, log books, pay slips
Advantages of Blockchain
- no double spending
- complete audit trail of all transactions maintained
- transparency (all the information is publicly accessible)
- no middleman/intermediaries (asking for your personal information, to only also lock us out of our own funds)
- incredibly tamper proof/hack-resistant (quantum computers to be a threat at this age)
- it is real time/nearly instant
- Can processing across jurisdictions/time zones
- Using a node network, it is fault tolerant
Blockchain adoption
Due to its characteristics, it can be adapted to store any digital information that would thrive due to those characteristics.
Recommended places to be used:
- Fraud prone systems
- Intermediaries/Middlemen
- Throughput
- Stable Data (permanent/unmodifiable)
- Speed required
Our money is shackled
Our money is shackled to 20th century deceptive financial innovation. Manipulated by the governments and banks
Imagine a world:
- Payments without intermediaries
- Investments without a broker
- Loan without a bank
- Insurance without an underwriter
- Record Keeping without an accountant
- Committees without a treasurer
- Escrow without an agent
- Charity without a Trustee
- Betting without a bookie