Bitcoin, also known as digital gold, is a term you may have heard but never fully understood. As an emerging technology, it’s possible that Bitcoin’s blockchain technology could be the way of the future. So what is it all about, and why should you care?
Open Learning faculty John Prpić, a technology and innovation researcher recently published a research paper surrounding the phenomenon and looked deeper into Bitcoin’s blockchain software architecture and its origin.
“The Bitcoin software set-up is very innovative in how it operates, and the crux of this innovation lies in what has become known as the blockchain,” said Prpić .
Bitcoin 101 with John Prpić
What is bitcoin?
Bitcoin is a digital currency, the first of its kind to emerge on the scene since early 2009. Unlike all other currencies, Bitcoin is not issued by a central bank on behalf of a sovereign nation like the USD, CAD, Euro, etc. Since it’s a currency, you can basically use it like any other currency— to buy, sell and transact etc.
Why use bitcoin?
Bitcoin has proven to be more secure than traditional currency in a number of ways. The software operates through cryptography, hence why it’s known as “cryptocurrency” in many circles. Cryptography is basically complicated math that scrambles digital data to make it inaccessible to outsiders and thus, very secure.
Since Bitcoin isn’t tied to any nation, it changes the nature of currency-value risk and some have suggested that it can be used in similar ways as gold to hedge fluctuating currency values.
Why is this important?
Bitcoin is a currency, and it can be used to transact and to store value. The Bitcoin software set-up is very innovative in how it operates, which has become known as a blockchain.
If Bitcoin is currency, what is a blockchain?
Essentially, blockchain is the technology-logic behind Bitcoin. Like Bitcoin, blockchains are often open source software technologies, meaning that you can build upon the core-system as desired, though you can also build private blockchains too which many large firms are, often in the form of software development consortia. Functionally, blockchains usually provide a method to undertake encrypted transactions, the details of which become part of a permanent ledger of all transactions ever, and which cannot be changed.
In a blockchain, every transaction is time-stamped, verified, added in sequence, and made public from the very first transaction, until the current moment—so the digital record keeping aspect becomes very important.
Thus, you can build blockchains that have nothing to do with Bitcoin, and there need not be any currency or monetary aspects to a blockchain. The use of blockchains promises to be able to bring significant efficiencies to global supply chains, financial transactions, bureaucracies, markets etc., and perhaps many things yet unimagined.
What’s next for blockchains?
Some highly respected innovators believe that blockchains may be a new foundational technology akin to what the internet is, and so in that respect it may have far-reaching repercussions for society, like the internet has. In this sense, it may emerge as a transaction and record-keeping “layer” on top of the internet, that is at the same time, also outside of any centralized control.
I’d say that it seems that Bitcoins and blockchain are here to stay in some respect, it’ll be interesting to see where this all goes.
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Open Learning faculty member