Thousands of years ago, precious metals began being mined for use as currency. Silver and gold coins were introduced in Turkey and Persia as early as 600BC, before making their way into Europe via the Roman Empire in the centuries thereafter. Fast forward to 2008 – the year of USB 3.0, the iPhone 3G and Bitcoin – and the concept of virtual gold being ‘mined’ was introduced to the world.
Satoshi Nakamoto first revealed Bitcoin in a June 2008 whitepaper that was subtitled “a peer-to-peer electronic cash system,” before mining began the following January. Since then it has become a household term with its volatile values hitting the headlines. In 2010, Laszlo Hanyecz traded 10,000 bitcoins for two large pizzas, costing him roughly $30. In December 2017, those same coins would’ve been valued at $180 million.
But although most people know the name, do they actually know what it is and how it works?
The rise and fall
There is a plethora of reasons as to why there are such avid fans of Bitcoin. Created in reaction to the financial crisis of 2008, the cryptocurrency offers a decentralised finance option that was, and is, appealing to many – it took people’s money away from governments and financial heavyweights to essentially put you in control of your own wealth. While that may raise eyebrows regarding security, the safety of cryptocurrency is one of its main selling points; every bitcoin transaction is logged publicly, but anonymously, in a blockchain. Everything can be traced to its source.
Although your personal wealth is secure on the platform, Bitcoin and other cryptocurrencies have been at the heart of money laundering scandals of late. Cybercriminals made off with $1.2 billion in 2017-18 by using money tumblers, services which make the transaction history of the currency involved difficult to trace – but not impossible for determined investigators. As it stands, however, the lack of regulation surrounding cryptocurrency, and the fact that the platforms are not government-recognised, means that organisations that process it do not have to register as money transmitters, creating a Catch 22 scenario – cryptocurrencies either remain unregulated and maintain the host of benefits that come with that, or become subject to government crackdowns and are hit with strict usage guidelines.
The bitcoin boom made headlines in 2017, but its growth began much earlier than that. In the year following August 2010, it grew from a value of $0.07 per bitcoin to $11.15, a near 16,000 per cent increase. It would go on to top the $1,000 mark by the end of 2013, before a 2014 Mt. Gox system breach, the world’s largest bitcoin trading platform at the time, saw the rapid growth come to a halt. It subsequently picked back up, growing steadily until taking flight in 2017 when it reached an astronomical value of more than $17,000 per bitcoin.
The technology powering Bitcoin
Although the concept of blockchain dates back to the early 1990s, Nakamoto was the first to utilise the technology with the launch of Bitcoin. Since then, blockchains have really caught on in the commercial world and revolutionised the supply chain – just as with bitcoin, every transaction, movement of goods and data entry can be traced back to its source.
In an age where we have been forced to take more notice of our cybersecurity, both in personal and business contexts, the prominence of blockchain will only continue to grow. For example, devices that are deemed to be part of the Internet of Things (IoT) are often connected to a central information hub – if this is compromised then the whole system can be attacked, and as IoT makes its way into public facing infrastructure with smart buildings, smart parking and even smart bins, cybersecurity becomes a much bigger concern.
Bitcoin remains the poster child for blockchain for the time being, but the technology’s uses are certainly outgrowing the cryptocurrency space. After 10 years of development, blockchain has begun to seep into the wider world and it shows no signs of slowing down.
To say Bitcoin has endured a tumultuous time over the past few years would be quite the understatement. Cryptocurrencies as a whole suffered a drop in value of 36 per cent this time last year – a collapse so severe that it qualifies as a market crash – meaning that there remains widespread scepticism around its future.
For the cryptocurrency to truly take off, it needs widespread support from the business-to-consumer environment. As it stands, Microsoft are the biggest name to accept bitcoin as a form of payment; their name stands out on what is a very small list. Widespread adoption of new technologies doesn’t happen overnight – it’s taken electric cars a considerable time to get to the level of use they are at now, and people didn’t immediately ditch horses for motor vehicles at the turn of the 1900s.
Technology advanced and the benefits of motor vehicles began to clearly outweigh the benefits of horsepower, just as the strides forward being made in the electric car industry are making them genuine challengers to their petrol-powered counterparts. As of yet, bitcoin hasn’t found its use in our day-to-day lives, but perhaps as technology develops and evolves, we will all find reason to decentralise our dosh.
If you’re looking to make the most of innovative financial technologies for your business, OJO can help guide you through the process of implementing new and exciting solutions. Get in touch with one of the team today on 01225 220155 or email firstname.lastname@example.org.