In October 2008
a document was published online by a guy calling himself Satoshi Nakamoto.
The document, also called a whitepaper, suggested a way of creating a system for a decentralised currency called Bitcoin.
This system claimed to create digital money that solves the double spend problem without the need for a central authority.
At its core Bitcoin is a transparent ledger without a central authority, but what does this confusing phrase even really mean?
Well, let’s compare Bitcoin to the bank.
Since most money today is already digital, the bank basically manages its own ledger of balances and transactions.
However the bank’s ledger is not transparent and it is stored on the bank’s main computer.
You can’t sneak a peek into the bank’s ledger, and only the bank has complete control over it.
Bitcoin on the other hand is a transparent ledger.
At any point in time I can sneak a peek into the ledger and see all of the transactions and balances that are taking place.
The only thing you can’t figure out is who owns these balances and who is behind each transaction.
This means Bitcoin is pseudo-anonymous;
everything is open, transparent and trackable but you still can’t tell who is sending what to whom.
Bitcoin is also decentralized;
there’s no one computer that holds the ledger.
With Bitcoin, every computer that participates in the system is also keeping a copy of the ledger, also known as the Block-chain.
So if you want to take down the system or hack the ledger you’ll have to take down thousands of computers which are keeping a copy and constantly updating it.
Like most money today, Bitcoin is also digital.
This means there’s nothing physical that you can touch in Bitcoin.
There are no actual coins, there are only rows of transactions and balances.
When you “own” Bitcoin it means that you own the right to access a specific Bitcoin address record in the ledger and send funds from it to a different address.
So what does all of this mean?
Why is Bitcoin such big news?
Well for the first time since digital money came into existence we now have an alternative to the current system.
Bitcoin is a form of money that no government or bank can control.
Think about the time before the Internet, how centralized the flow of information was.
Basically if you wanted information you could get it from a few major players like the New York Times, The Washington Post and others like them.
Today, thanks to the Internet, information is decentralized and you can communicate and consume knowledge from around the world with the click of a button.
Bitcoin is the Internet of money and it’s offering a decentralized solution to money.
Bitcoin has several advantages over the current system.
First, it gives you complete control over your money.
With Bitcoin, you and you alone can access your funds.
No government or bank can decide to freeze your account or confiscate your holdings.
Bitcoin also cuts a lot of the middlemen from the process of transferring money.
This means that in many cases Bitcoin is cheaper to use than traditional wire transfers or money orders.
Also, unlike fiat currencies, Bitcoin was designed to be digital by nature, this means you can add additional layers of programming on top of it and turn it into “smart money”,
Finally, Bitcoin opens up digital commerce to 2.5 billion people around the world who don’t have access to the current banking system.
These people are un-banked or under banked because of where they leave and the reality that they have been born into.
However, today, with a mobile phone and a click of a button they can start trading using Bitcoin, no permission needed.
Today there are several merchants online and offline that accept Bitcoin.
You can order a flight or book a hotel with Bitcoin if you like.
There are even Bitcoin debit cards that allow you to pay at almost any store with your Bitcoin balance.
However the road toward acceptance by the majority of the public is still a long one.
The revolution of money began in 2009 and these days we are seeing it change money as we know it.