Bitcoin and Blockchain 101

Most of us are familiar with our country's currency (insert your countries form of currency: USD CAD, JPY, GBP, CNY) wether it is physical or digital we are willing to exchange goods and services for it. For centuries, people of earth have relied, and trusted a third party to hold, and transfer, their currency. From the ancient templars escorting precious metals across the globe on behalf of others, or exchanging them for ancient bank notes; to bankers as we know them today holding our money. As society has advanced, so has the banking system.

In the digital world, we have become use to instant access. Instant access to whatever news organization happened to get their hands on a story first followed by a flood of other sources, even if the original is incorrect. Instant access to photos, and status updates. Technology is wild. Hell, last year I was watching kids enter the augmented reality of Pokemon Go on their phone as my girlfriend and I walked the streets of Burlingame, CA.

With all these technological advances, comes something else: Blockchain. A term that is almost impossible to dodge in this digital revolution, and the next steps Fintech is taking as a way to eliminate the trusted third party.

Blockchain is built on three technologies; Private Key Cryptography, p2p Network, Program (blockchains protocol). These three technologies are a way of removing a trusted third party so no one person/group controls the information. With this, we have a master ledger, where all transactions are recorded.

In a simple form, we have a network of computers constantly listening, and keeping a record of transactions on a ledger.

Example: Person 1 says they are sending .05 Bitcoin to Person 2; the network of computers verifies that person 1 has .05 Bitcoin, sends it to person 2, then verifies person 2 receives .05 Bitcoin, and records the transaction to the ledger.

Transactions continue to be added to the ledger until the block is full, in which it is added to the chain and a new block is started.

That is a simple form of the Bitcoin Blockchain.

*This ledger cannot be tampered with, if we have a rogue computer that is trying to fool the network of invalid transaction, other computers with receive the rogue computers request, compare it with their ledger, and realize it is invalid.

follow me on twitter @postmattern and @bitfuturist

Comments

Bubbles: Cryptocurrencies, Dotcom, Tulips, USD

There are a few things that we need to look at when comparing cryptocurrencies to bubbles. First, supply and demand. Second, the market. Third, value of money. The cryptocurrency bubble and the tulip bubble have some similarities, as well as some differences. When farmers see the price of crop A increasing dramatically, they have some choices. Ignore the price rise and continue to grow crop B, losing out on the potential gain in income, which some will do. This has no affect on crop A. If they are already growing crop A, then they will be able reinvest excess profits and grow more of their cash crop, crop A. This increases supply of crop A. If they are growing any other crop, and see a price rise in crop A, they will have an incentive to shift from their current crop at the end of the season, and grow a crop that will bring in more revenue (crop A). Increasing supply of crop A. However, increasing the supply of crop A won't happen over night, as crops take months to grow. As c...

Crypto, Monetary Policy, and Global Trade

Apologies for being reclusive over the last couple months. I've been a little busy relocating. Lets discuss some of my favorite topics: monetary policy, global trade, and (you guessed it) cryptocurrencies. First: Hyper inflation, bad... very bad. very very very bad. controlled inflation, ok. Inflation has taken a beating throughout the blockchain community. Mainly from Bitcoin Maximalists. Scarcity, along with supply and demand, creates value. However, scarcity also leads to a decrease in the velocity of money, and lead to hoarding. Why? When resources are scarce, humans conserve. Think of the price of oil. When the price of oil is high, the price of gas is high. When the price of oil is low, the price of gas is low. You can see the correlation by comparing the next two graphs. The price (USD) of oil per barrel. Chart by MacroTrends The price (USD) of a gallon of gas. Chart by Gas Buddy When oil is abundant: supply goes beyond demand (most recent 2014), and p...

Numismatics: Fiats & Cryptos

The philosophical thought process behind currency has been around for centuries, and has continually evolved. Aristotle gave three functions of money: a means of exchange, measure of value, and a store of value for future transactions. Cryptocurrencies meet Aristotle's three functions of money, but there is still a link missing from this cryptocurrency chain. Averroes added a fourth: a reserve of purchasing power. Not only does money serve as a store of value, but money could be spent at any time without having the need to be sold. This is where cryptocurrencies fall short, and it seems that this could be one of the reasons that we see such sell offs in the cryptoverse. Cryptocurrencies have come a long way since their conception, and have done well (so far) under the 2017 lime light. In order for cryptocurrencies to reach the end goal of a being a true form of money, we will need to see adoption for payments receivable (such as retail) sector. Until then we will continue to ...

cryptonomics

Search This Blog