Dominic Frisby, author of the forthcoming book Bitcoin: The Future of Money?, traces the origins of the virtual currency to a geek’s fantasy six years ago, and argues that Bitcoin will destroy old monopolies and pave the way for genuine revolution.
“Bitcoin is one of the most important innovations of our time – it will transform the way we do business. Dominic Frisby has written a great account. Read it and glimpse the future,” Sir Richard Branson
IN 2008, while the world was busy panicking about the global financial crisis, a computer programmer, who went by the name of Satoshi Nakamoto, posted a message on an out-of-the-way mailing list.
“I’ve been working on a new electronic cash system,” he said.
Nobody seemed to care.
“It might make sense to get some, just in case it catches on,” he suggested.
How right he was.
What he had programmed was the world’s most famous digital currency – Bitcoin. It turned its early adopters into multimillionaires and it caught the zeitgeist in a way only two people foresaw. A cult of devotees was inspired. Economists, anarchists, speculators, computer coders, libertarians, entrepreneurs and, of course, criminals – they all loved it.
Now the suggestion is that Bitcoin will do to banking and finance what email did to the postal service and what the internet did to publishing. Old monopolies will be destroyed and new opportunities will open up for the masses.
Some are even suggesting that the technology behind Bitcoin – a huge database known as the “blockchain” – will reform our Western systems of democracy, giving us the revolution so many are clamouring for.
How is such a thing possible?
The end of the middleman
If you’re standing next to me, I can hand you some cash. Nobody else has access to that transaction. It is between you and me. The cash is then yours to save, spend or invest, as you see fit.
For decades, coders had been trying to replicate this process digitally, but without success. It seems simple, but it isn’t. Nobody could make it work without a middleman of some kind – usually a bank. The breakthrough of the blockchain – and I haven’t the space here to explain how – was that it successfully eliminated the need for a middleman.
Satoshi was working on three things when he developed Bitcoin.
First, the blockchain. Second, a transaction system – he wanted to see if his money would attain any sort of market value without official backing. In both cases he was very successful, probably more successful than he could have imagined.
He had a third option. But, because he wanted to make sure Bitcoin worked, he deliberately neutered it.
But Bitcoin is up and running now and developers are enabling this third option. It extends blockchain tech beyond a money system into a replacement for the way the Internet works today.
Developers are saying: “We’ve cut out governments and banks from the creation and transfer of money. What else can we cut out?”
So we have Bitmessage – a system of sending and receiving emails with no need for Gmail or Hotmail or whoever the email service provider might be. So nobody can read your emails, except the person you sent it to. A bit like an old fashioned letter in an envelope – only to be read by the person it was sent to.
You have Twister – like Twitter, but peer-to-peer and with no company in charge. It’s a much safer way to organise an Arab Spring or to indulge in “excessive” free speech.
Financial assets can be traded, ownership registered and contracts verified on a blockchain. This has all sorts of implications for Wall Street, the City, for share registrars and brokers – indeed for the entire legal system. Already American company Overstock is developing ways to sell its stock through a Blockchain without going through Wall Street.
Services like YouTube, Facebook and Netflix can be provided via a blockchain – so nobody’ll be monitoring your viewing habits and selling you stuff based on them.
It is revolutionary stuff and it is happening now. Words like “blockchain” and “dis-intermediation” (the process by which a controlling body is cut out) are as alien to us now as “@” or “website” were twenty years ago. But in a few years they will be in everyday use.
It’s not just corporations that need to pay attention – there are huge implications for governments, too. If everything can be dis-intermediated, then what does that mean for healthcare, welfare and education, and the bureaucratic megalith of middlemen currently involved?
What indeed will be the purpose of representative democracy when a far more liquid form is possible, with any issue quickly and efficiently decided by the people and voted on via the blockchain? Politicians might once again become the administrators of the people’s will – as they are supposed to be.
The revolution will not be televised. It will be cryptographically time stamped on the blockchain.
Blockchain tech. It’s going to be huge.
Interested in Bitcoin? Follow my six step guide to finding out more.
1. Go to Blockchain.info and get yourself a wallet. All you need is an email address and password. Blockchain will email you your wallet address.
2. Copy your wallet address, then go to Bittylicious and paste it in, where it says “bitcoin address”. Then – still at Bittylicious – deposit £20.
3. Get a friend to do the same.
4. Practise sending each other small amounts of money.
5. Go to a café that accepts bitcoins and buy yourself a coffee.
6. Well done. You’re now part of the revolution.
Oh, yeah. The other thing you should do is come to my talk at The Idler on Tuesday November 4th. And, surely most important of all, read my book.
Dominic Frisby is the author of Bitcoin: The Future of Money?, to be published by Unbound on 1 November. You can come and see Dominic’s talk on Bitcoin at the Idler Academy on Tuesday 4th November and pick up a signed copy then. CLICK HERE. Or order your signed copy from us and we’ll post it out a day or two after the event. CLICK HERE