Bitcoin: Evolution or Revolution?
· To investigate the perceptions of Bitcoin and Blockchain Technology.
· To investigate Bitcoin alongside previous technological advances to gauge a measure of realisation.
· To investigate the potential success or failure that may lie ahead for Bitcoin.
The year of 2008 is marked as a significant point in the man’s financial history, the collapse of the global economy caused many leading economists to deem this event the most serious since the Great Depression of the 1930s.
Lehman Brothers Holdings Inc was a global financial services firm, founded in 1850, and had a prosperous and successful history. Lehman Brothers Holdings Inc subsequently collapsed on 15th September 2008.
Shortly after on 18th August 2008, the domain name bitcoin.org was registered. This was closely followed by the release of a whitepaper named “Bitcoin: A Peer-to-Peer Electronic Cash System” on 31st October 2008 to a cryptography mailing list. The creator was an anonymous person (or group of people), referred to as Satoshi Nakamoto.
Source: Bitcoin News
The timing on the release of the whitepaper is significant in that it appears to be a reaction offering an alternative remedy, if such a financial crisis could happen again. This new concept looked to offer people another option instead of relying on the large institutional and capitalism systems, that people are often raised on trusting with question.
Despite this, many people both outside and inside the world of cryptocurrency have major doubts on its creditability. It is understandable that people who are unfamiliar with cryptocurrency and Bitcoin, could doubt a subject that they do not understand. Resistance to any sort of change is a common trait of human behaviour. It way come as a surprise that some participants embedded deep in the world of cryptocurrency, also do not fully believe in Bitcoin. The main narrative on this is that the believe in the blockchain technology and not cryptocurrency and Bitcoin itself.
This article will investigate how Bitcoin and blockchain technology are currently perceived and possible future paths of more mainstream adoption. The article will also focus on Bitcoin (and not cryptocurrency in general) due to it being the most established cryptocurrency, and the fact that many cryptocurrency tokens have little, if no case use, and will eventually become obsolete.
To be able to imagine the true potential of Bitcoin is typically what discourages many people from the idea, that it can be one day be truly adopted into everyday life. To be able to imagine this is not fathomable to fractions of wider society, hence when there are ground-breaking advances that disrupt, adjust and finally better mankind, it is down to the visionary intellects to drive adoption against the colossal resistance to change.
For ordinary folk such as you and me, how do we get our minds engaged with this unthinkable concept? Well, a good way to determine its potential, is to draw parallels from something similar in terms of scale with comparable characteristics. What better place to start than the Internet and the World Wide Web?
The Internet and the World Wide Web
The World Wide Web became recognised in 1990 due to the work of inventor and computer scientist Tim Berners-Lee. The World Wide Web and the Internet are often mistaken.
Source: Bitcoin Exchange Guide
The World Wide Web is actually just the utilised method of accessing data online in the form of websites and hyperlinks. The web helped expand and familiarise the wider world with the Internet, and serve as a crucial step in developing the vast trove of information that most of us now access on a daily basis.
The Internet was in fact the collective work of many pioneering scientists, programmers and engineers, who each developed new technologies, that eventually merged to become the “information superhighway” we know today.
The truth is that the Internet has been in the thoughts of visionaries for over 100 years. The far-sighted Nikola Tesla (pictured below) toyed with the idea of a “world wireless system” in the early 1900s. This notion was later developed Paul Otlet and Vannevar Bush in the 1930s and 1940s in mechanism used for searching for storage systems of books and media.
The first practical schematics for the Internet were delivered in the early 1960s. Joseph Licklider (pictured below), an associate professor at the MIT Massachusetts Institute of Technology (MIT), promoted the idea of an “Intergalactic Network” of computers. This was then developed by a team of computer scientists into a concept known as “packet switching”. This allowed the effective transmission of electronic data that would subsequently become one of the central building blocks of the Internet.
Source: History Computer
In the late 1960s, the Advanced Research Projects Agency Network (ARPANET), along with original funding the U.S. Department of Defence, created the first workable prototype of the Internet. Packet switching was used to allow multiple computers, with no centralised headquarters, to communicate on a single network. This was at the height of the Cold War.
Further developments in the 1970s by Robert Kahn and Vinton Cerf (Transmission Control Protocol and Internet Protocol) and ARPANET in the 1980s, allowed the adoption the TCP/IP on 1st January 1983. This assembled “network of networks” that became the modern Internet.
This story of the development in the Internet would be extremely difficult for the majority of people to comprehend, so in applying this way of thinking to Bitcoin, what does this mean for its future development? Well let’s find out.
To the current day, Bitcoin is a little over 10 years old. Although many feel Bitcoin has significantly developed over this period, in comparison to the Internet, Bitcoin remains in its infancy and is still trying to find its place in the world. Cryptocurrency and Bitcoin as an asset class is also miniscule when compared even to the market cap of many leading blue-chip stocks. These things take time to develop, or they dissolve and disappear.
In the whitepaper by Satoshi Nakamoto, Bitcoin was referenced as being “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” This remains a valid use, thought there are also other cryptocurrencies that do this both cheaper and quicker.
The amount of Bitcoin currently being traded in Venezuela is at an all-time high, and this is likely due to the unimageable financial crisis that the country is going through. The annual inflation rate of Venezuela in February 2019 was 2.30 million percent.
Source: Trading Economics
This case of hyperinflation is to the extreme, and although Bitcoin remains to be classed as a volatile, high risk asset class itself, it seems to be providing people with a very small glimmer of hope in this region.
Moving on from the above, for Bitcoin to become a more stable asset class and one day potentially becoming a store of value (to the wider social demographic outside of the cryptocurrency industry), this requires considerable amount of growth in its market cap. The current market cap of cryptocurrency in total is $137 billion, in comparison to gold (a widely used store of value) which is over $8 trillion. This notion appeals to many people as the decentralised nature of Bitcoin allows anyone to invest from anywhere in the world. This would be a short-term solution for people to survive in a financial crisis, such as that currently ongoing in Venezuela.
Source: Steemit (2018)
The most talked about concept (in the cryptocurrency community) and yet probably the most difficult to comprehend of the factors analysed in this article, is that one day Bitcoin could replace fiat, and become a national, or even a global currency. The resistance to this notion is colossal and large financial institutions and governments are not likely to adopt something that they cannot fully control. Most economists are against the idea of Bitcoin even running alongside fiat as another form of digital currency. Though Bitcoin has yet to become recognised as being fully adopted, there are small and early signs that it is edging into the traditional business space. Again, referring back to the long and unforeseen development and adoption of the Internet, this will take time if true, global adoption and everyday use is to embrace Bitcoin in its entirety.
There is a possibility that the Internet itself could have its own digital currency. The significant development of modern technology has seen people transacting in a variety of ways that continues to grow. It could be possible that Bitcoin could become “the money of the Internet” and adopted as a payment system to go hand in hand with an alternative modern method of transacting. This would still see a significant growth in Bitcoin from its market cap today.
The future possibilities for Bitcoin are vast, but so too are the risks. Time will tell if this can develop into one of life’s “can’t do without” go to tools.
Simply put, a blockchain is chain of blocks, with a public ledger being the chain and digital information stored as blocks. The information contains transactional data (date, times etc), the sender and receipted details (in the form of usernames) and a unique “hash” code which makes each individual block distinctive.
Blockchain technology was first recognised in 1991 by Stuart Haber and W. Scott Stornetta, but it wasn’t until 2009 and the launch of Bitcoin, that it was applied with such magnitude.
The application of blockchain technology has been quickly recognised for its potential in real life case uses. Basic advantages such as being decentralised, immutable, secure, and transparent are attractive to large business for obvious reasons. Aside from cryptocurrency industries such as banking, voting, food, entertainment, trading, real estate, healthcare, supply chain management, insurance, sport, government and many others, are all beginning to investigate how this technology could improve their operatiional practices.
For example, I can think of a perfect example were blockchain technology would have alleviated a large scale EU food scandal in 2013. The horse meat scandal uncovered that food advertised as being beef actually contained horse or pork. Investigators had to work back through an incredibly complicated and diverse supply chain. An example of how this could have been improved by using blockchain technology is it could have created transparency in the supply chain process.
There are many routes for further adoption available to Bitcoin. This article has briefly touched on a small number of these, however over the course of time there are many other options that could become available that have yet to be considered. Technology is growing at a faster pace now more than ever, and with this, Bitcoin could grow to something incomprehensible. There is also a significant possibility that Bitcoin will disappear, many cryptocurrencies are forecasted to do so. Blockchain technology on the other hand remains clearer cut in being adopted and this is currently being reviewed by a number of industries.
Bitcoin should continue to expect resistance, it should continue to expect criticism, it should continue to expect to be written off. This is completely normal human behaviour. For an idea today to develop into something meaningful, it requires people to become familiar with characteristics of the new system and how it will improve their lives. The user will otherwise not adopt to the change and will revert back to their original habits.
The market for Bitcoin remains immature, and future forecast growth will likely bring advances in a wider understanding and usability, a reduction in volatility and perhaps even regulation. These factors conclude that the adoption of Bitcoin will likely come under an evolutional development rather than a revolution.
“The science of today is the technology of tomorrow.” (Edward Teller)
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