Anyone who has spoken to me in the last two years about technology has inevitably heard my thoughts on Bitcoin. For those that don’t know, Bitcoin is a globally distributed ledger that allows for the secure, instantaneous, and nearly free transfer of value between any two parties in the world. It has been likened to digital gold, praised by libertarians as the panacea for government-issued fiat currencies, hailed as a remarkable invention for the 3 billion unbanked of the world. It has also been pandered as a colossal waste of computing resources, a pipe dream of out-of-touch technophiles, and a ponzi scheme.
While I could fill many posts going into depth on Bitcoin the currency and explaining why it really is a remarkable financial invention, for now I’d like to draw attention to the technology that underpins it. Computer scientists have been seeking ways to securely transact value across the internet for many years, but until now some big problems have stood in their way. Double-spending and compulsory trust in a central party have prevented many solutions from taking off. The reason email has become so woven into the fabric of our society isn’t Gmail, it’s the protocols that underpin the standard so that anyone who plugs into the network, be they an individual or a multinational corporation, can run their own servers and manage their own data. There isn’t any central “email office” of the internet – it’s a standard protocol that anyone can access. The same holds true for the Blockchain, the protocol that powers Bitcoin. Blockchains are just that – a chain of “blocks” (just a fancy word for ledger entries) that are mathematically based in cryptography.
Bitcoin was the very first permutation of a blockchain that made waves when it was proposed by its anonymous inventor “Satoshi Nakamoto” in 2009. Recognizing its legitimate innovations, computer science enthusiasts around the world began participating in the network, and since it has grown into the amazing ecosystem that we have today. In 1994, there was a small but very loud minority clamoring about a new thing that operated over telephone lines called the “inter-net”. While most people were unaware of the impact that the internet was going to have, a few smart engineers and investors saw its potential. Today, venture capital investment in the bitcoin ecosystem is exceeding that of the internet through 1994, currently around $500M.
One project that seeks to build on the same blockchain technology that powers Bitcoin is Ethereum. Vitalik Buterin, Ethereum’s creator, is working hard to mold blockchain technology beyond its financial applications into a fully-fledged (Turing complete) computer network. The possibilities this kind of technology presents are virtually endless – anyone could start their own currency with a few lines of code, issue stock, marriage certificates, run distributed websites, forge and sign impervious contracts, even establish a fully autonomous and decentralized corporation that can never be shuttered. To be clear, blockchain technology isn’t a new clever addition to the internet. It’s a paradigmatic shift for computing, and it’s very exciting to witness.