Bitcoin and Blockchain: Internet for Money
Bitcoin is an innovative payment network and a new kind of money. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. But the prospect here is not Bitcoins, but technology (blockchain) and solutions based on them.
Many technological visionaries, for example, believe that Bitcoins and blockchain - are the Next Big Thing, meaning that it can change people's lives in the same way as Internet did. Most reputable venture capitalists are investing big money to the development of these technologies. And if a year ago Bitcoin was widely perceived as a toy for geeks, but now we can say with confidence: in ten years, most people in developed countries will use the solutions based on blockchain.
Bitcoin network is a large number of interconnected computers (through the Internet) with special software. A list of all performed transactions are stored (and constantly updated) on each of these computers. When "A" wants to send one Bitcoin to “B”, a message of such intention is sent to the entire Bitcoin network with special computer program (e-wallet). Computers included in this network, cross-check the transaction with the list of transactions to confirm that "A" has a sufficient amount of money at the disposal and it has not yet been used, as well as make sure that the e-wallet at "B" exists. Once the majority of computers on the network confirm compliance with these conditions, the transaction is considered to be done - and recording about it spread over time for all of them. Such transactions are approved by the blocks, each of which contains a reference to the previous block; blocks form a chain, hence the name of technology - blockchain.
This approach opens up completely new possibilities for solving problems for whose solutions did not exist, or it was “crooked”. It is good when you make a deal with a friend - or a person with whom you have mutual friends. But if not? For example, you buy something from an unknown company on the Internet. Such transactions is becoming larger and larger, and this is a clear trend.
What are the advantages of blockchain?
Transaction information is distributed among a plurality of computers, so breakdown or failure of individual nodes in the network does not lead to loss of information, and therefore assets.
All transactions are in the public domain. It increases transparency, and considerably reduces the possibility of abuse. It reduces the costs of defense against fraud. In connection with the above, the total transactions cost is reduced.
And, most importantly: there is no need for a single certification center. That is, users are not burdened with concern (voluntary or imposed) to trust somebody one.
The advantages of using blockchain for payment systems are big, and the "shortcomings" in terms of the regulators are removable. So that the "reconciliation" of officials with this technology is only a matter of time.
Why is it the Next Big Thing?
Blockchain technology is called "the Internet for money". If this technology has become the base for the payments, it would be great. But its capabilities are far beyond monetary settlements - it allows us to exchange a variety of assets and do any transactions, including operations with stocks, bonds, ownership of real estate, insurance policies, and so on. These transactions have called "smart contracts" - and it is not only about transactions, but also about identity of any events, such as voting.
The volume of each of these markets is grandiose, and the amount of money that can be saved with the simplification and automation of procedures, is amazing. For example, investors will applaud standing, if there will be the normal issues of shares in private companies, in which they are invested: there will always be clear how much, when, and what kind of shares were issued, who are holders, for whom and when shares were transferred.
Probably, we will see a lot of interesting solutions in these areas in the next few years.