As the price of Bitcoin continues to soar, there are many more people asking questions about, including asking themselves the question of whether they wish to invest in it. Some people are investing in Bitcoin opportunistically in order to make money from it. However, for others, Bitcoin is more than just a digital currency, but also a way to change the world around them. To consider why some people think this, it’s first important to understand the structure that underpins Bitcoin, called the blockchain.
A blockchain is a shared network created by a complex set of algorithms based on certain rules that govern how the blockchain by be interacted with by its users. It records data in a permanent and encrypted form. The rules that govern the blockchain are up to the network, and therefore different rules can be applied to individual blockchains. For this reason, some commentators suggest that the word ‘blockchain’ is comparable to the word ‘vehicle’. Just like vehicle refers to many different forms of transport which we would normally refer to in their own form (such as car, train, plane etc) blockchain is also an umbrella term that should not necessarily be used to refer to all of the uses that it can be put to.
The blockchain ecosystem is most famous so far for its cryptocurrencies, especially Bitcoin, which was the first and is currently the biggest blockchain network. For many advocates of Bitcoin, its very existence is not only a feat in computing, but also a feat in social innovation, in the sense that it can change how individuals can interact with each other and how business and transactions occur online.
The reason for this is that Bitcoin has illustrated that a network of computers can be used to maintain a network of data that is immutable and almost immune to corruption or fraud without the need for a centralized authority to back it up. It allows a network of anonymous computers to create a trustworthy network, without there being necessarily any trust, or connection, between the users on the network. And as hacking the Bitcoin network would lead to also unbelievable riches, there is no doubt that there are no more valuable targets for hackers than the network. Despite this though, there is not enough computing power in the world at present that could hack the system.
It is for this reason that many people adhere to the qualities of blockchain and have considered how it could be adapted into other industries in order to improve efficiency.
Despite the merits of Bitcoin however, there are some negatives. For example, the popularity of Bitcoin has resulted in the network being overloaded by transactions and the lack of a centralized authority has meant that modifications to the software to improve efficiency have been slow. In addition, the system uses increasingly large amounts of energy to keep going. Furthermore, although the Bitcoin blockchain is encrypted, the transactions that are on it are public and can therefore be traced. The transparency of the Bitcoin blockchain raises issues in industries such as financial and healthcare, which are highly regulated when it comes to data privacy and security. For that reason, some suggest that private blockchains, which require permission to access, are the best way of utilising the technology.
However, for Blockchain enthusiasts, the concept of private blockchains misses the point. The very concept of permissionless public blockchains such as Bitcoin and Ethereum allow access to anyone who wishes to utilise them, and can therefore form a new form of decentralised transactional system where valuable data and value does not have to be entrusted to banks, large corporations or even governments. In other words, a decentralized network can allow society to escape the clutches of the behemoth companies that have effectively taken control of the internet (ie, Google, Amazon, Facebook and Apple).