Some refer to Bitcoin as the internet of money. Why? Because they believe Bitcoin will revolutionize the way we transact with each other the same way the internet revolutionized the way we communicate with each other. Some critics argue otherwise. But, quite interestingly some of Bitcoin’s biggest critics are the same institutions and industries that stand to be disrupted by Bitcoin. To some, the idea of Bitcoin replacing our current mediums of exchange is too far-fetched. I would argue that our mediums of exchange throughout history have suffered arguably more drastic changes. As a human race we went from bartering, to exchanging precious metals, to paper money, and most recently to plastic cards with magnetic strips. How do you think people reacted when they were told they would not be buying and selling goods with precious metals, but instead they would be using paper? This was a substantial aberration in the manner people transacted with each other, and it took hundreds of years for there to be consensus on this transition.
On that note, what is Bitcoin? Most people will say that Bitcoin is a digital currency. While at its essence this is not a false statement, if Bitcoin is simply a digital currency it would be inconsequential. Most of our currencies today are already digital. Bank accounts today are digital databases, and we use those bank account to transfer money to and from each other, in electronic form. That is digital money. The reality is that only about 8% of total world currencies exist in physical form. It would seem that if Bitcoin is as revolutionary as some claim, it would need to offer something beyond the digitalization of money, and it does. Let’s discuss some of these characteristics and possibilities. Continue reading “Bitcoin and Money: An Advocate’s View”
Currency on a blockchain was the logical first step, and while it may well disrupt the way our financial systems operate, it was just that – the first step. Public and private industry adoption of blockchain and smart contracts is not dependent on the price or market capitalization of cryptocurrencies. Just this year blockchain popularity increased by 11% among large enterprises, while the cryptocurrency market capitalization, from early January to today, has decreased by an estimated $600 billion. Let’s talk emerging uses. Continue reading “Bitcoin, Blockchain, and Smart Contracts – Part 2”
Over the past year and a half Bitcoin and other cryptocurrencies have been taken a place under the mainstream spotlight, meaning the public at large has witnessed the speculative behavior in the cryptocurrency market. In December 2017 the price of one Bitcoin surpassed $20,000, only to encounter a bear market where the market price today is around $6,500. This volatility is not new to Bitcoin. For example, on December 4, 2013, Bitcoin was $1,175 and shortly after, on February 10, 2014, the price hit a low $100. I point out price volatility to show that the cryptocurrency market is a unique speculative market. With that being said, let’s put money to the side and focus on the technology on which the Bitcoin network runs – blockchain technology. As we will see, using blockchain to create and maintain a currency is only the beginning.
At its essence blockchain technology is linked data between computers. It is defined as a digital, decentralized, append-only, distributed ledger that allows unrelated individuals to transact with each other without the need for a third-party or controlling authority. Because no third-party transaction confirmation is needed, the network becomes trustless. I want to make a note on the ‘append-only’ characteristic because it is crucial to the high security value blockchain provides. Append only means that data can only be added to the blockchain, it cannot be removed. Blocks that are already on the chain cannot be altered in any way. You can only make a change by noting it on a future block that is not on the chain yet, and every participant of the blockchain can see this change. At very technical levels advanced cryptography is what allows blockchain to exist, but diving into a discussion of these technicalities requires a scientific discussion, which, while interesting, would not serve a legal purpose. However, something of high-relevance to the legal community is a discussion of smart contracts. Working closely with coders and blockchain experts, attorneys can draft smart contracts that provide a more efficient, secure, and cost-effective way of facilitating transactions between individuals. Continue reading “Bitcoin, Blockchain, and Smart Contracts – Part 1”