On Halloween 2008, just over a month after global financial crisis began on September 29, a person, or group of persons published a research paper called “Bitcoin: A Peer-to-Peer Electronic Cash System”, using the name Satoshi Nakamoto. The research paper demonstrated how a digital payment system without any form of central control could be mounted on an uncrackable publicly distributed ledger system known as blockchain. Less than three months later, it was released as open source software and Nakamoto’s invention became a reality.
Called a “cryptocurrency”, Bitcoin operates without administrators or a central repository of funds. It can be exchanged for goods and services or converted to other forms of money such as a national currency. It functions as real money in both legal and black markets around the world. According to a 2017 study conducted by Cambridge University, upwards of 5.8million people use cryptocurrencies, the vast majority of which are bitcoin users.
Bitcoin was not the first electronic currency. At one time, the Internet was littered with the busted shells of broken alternative currencies such as Flooz and Beenz. The difference between bitcoin and its many failed predecessors was the complex yet elegant simplicity of the blockchain. At the end of 2010, one bitcoin was worth about $0.18 US. Six months later, on the fourth of July 2011, that same bitcoin was trading at $13.86USD. Six years later, the value of that same bitcoin has skyrocketed to $2664.88USD, surpassing gold as a means of storing wealth in a commodity that accrues in value. That value is found, stored, and easily confirmed in its blockchain.
A blockchain is a mathematical formula that facilitates online transactions by recording the values of those transactions in blocks in a decentralized ledger. That ledger cannot be altered or changed retroactively without first altering all other blocks in a chain. This function lets all participants in that transaction verify and audit the process instantly with very little expense. The chain of blocks (or recorded transactions) can be audited and verified by anyone examining the chain, leaving virtually no room for uncertainty regarding the honesty of data. Because each block contains the value of the previous block, a chain that conforms to itself is known to be unbroken and thus an accurate record of X number of transactions. While larger or more complicated transactions might involve a larger number of blocks, the basic structure is elegantly simple. Blockchains are now used in virtually every complex measurement of transactional value from banking to insurance to military and industrial procurement.
Blockchains are also used to store and verify all other forms of data, including the personally identifiable information we all share freely on social media that frightens contemporary privacy advocates with its abuse and availability. Again, because they are encrypted and virtually impossible to break, blockchains are more trustworthy than a database of user information would otherwise be. Several blockchain experts, including Canada’s visionary Don Tapscott, believe blockchains will soon flatten government and corporate bureaucracies and allow individuals far greater control determining how much of their personal information is used by third parties.
To suggest bitcoin will change small to larger scale businesses is stretching the evidence to fit a supposition however to suggest blockchain will fundamentally alter the way we keep record of transactions and value is a kin to suggesting a fish swims better in water. While your business might want to establish a bitcoin wallet in order to allow your clients to use this highly popular currency, there is always the chance that bitcoin will fail as a long term currency. In terms of business, what we count is constantly changing but how we count those items rarely changes. Bitcoin represents what we count but the blockchain revolution represents the most fundamental change in how we count since the invention of zero. Canadian businesses and entrepreneurs are urged to learn more about blockchain as it will have a far greater affect on business than virtually any other common factor in the coming future.