What is this Bitcoin hype? 💰

· Bitcoin could be worth $100,000…

· If you had invested $100 in Bitcoin in 2011, you would be a millionaire.

You’ve most likely read or heard about this whole Bitcoin hype. It’s been populating your news feed through channels such as Buzzfeed, VICE and Business Insider. The click bait articles seem to capture your attention and you might even be feeling a sense of FOMO. You start to question if you should put some money into this ‘cryptocurrency’ to save up for your next Euro trip.

Recently, the regular Joe seems to be investing in this space without doing any sort of due diligence/research or even understand the implications of the underlying technology called the Blockchain. Most of the investing is a pure pursuit for short term profit which isn’t necessarily bad however, there is a significant amount of information out there and a lot of it is either too technical or poorly explained by a Buzzfeed media journalist.

Of course, it’s ironic that I’m contributing to the hype factor with this post, but over the past few months I’ve been studying the Bitcoin / Blockchain. In no way do I regard myself as super knowledgeable about the field, but I wanted to write this to dispel poorly written articles about the space. Hopefully the summary below helps you understand and realise the direction that this technology is moving towards.😊

*Disclaimer: Please don’t take this as investment advice to go buy Bitcoin or other cryptocurrencies. Do your own due diligence and research. I am in no way responsible 😐

What is the Blockchain and Bitcoin?

Borrowing the analogy from Nik Custodio, let’s imagine we have an 🍎:

• We’re sitting on a park bench.
• It’s a great day.
• I have one 🍎 with me.
• I give it to you.
• You now have one 🍎 and I have zero.

So if we dissect this situation, we understand that:

• I transferred a good of value to you through an ‘agreement’
• No one really had to sit between us to check the 🍎 since we trusted each other
• I no longer have control over the 🍎 and you can do whatever you want with it. Eat it. Crush it. Or give it to someone else.

So let’s compare this to our modern day society. If you want to transfer money from Person A to Person B, it goes through the banking system. The banks acts as an intermediary to process your payment and then you can do whatever you want with it. However, during the GFC in 2007–2008, we saw that the banks couldn’t really be trusted and there was limited transparency in the system we believed so much in.

So this is where Blockchain and Bitcoin comes into the conversation represented by the 🍎. In 2009, a mysterious man by the name of Satoshi Nakamoto (a potential relative who shares the same samurai blood as me) proposed and created Bitcoin.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

This “electronic” cash would operate on a technology layer called the Blockchain, where computers collectively promote and enable transparency and trust in the system without having to depend on an intermediary.

When Bob sends a transaction to Jane through the Blockchain, several computers validate this transaction by solving a very difficult mathematical/cryptographic problem; hence the name ‘crypto’ currency. Then the computers confirm the validity of the transaction and Jane gets her money. The most important part of this transaction is that unless a majority rules/consensus is reached, the system will not allow the transaction to be validated. These super computers are rewarded for their work so there is a strong incentive for everyone to work together and be part of an honest network. Additionally, all of this is displayed on a public distributed ledger (i.e. a large record book) so everyone can see all the transactions, making it difficult to alter/fake a transaction.

Below is also a simple diagram that helps you understand why it’s hard to cheat the system…

I’ve simplified a lot of this and there are other technicalities such as mining, governance, Proof of Work/Stake and many more, but this system exists and the 🍎 represents Bitcoins. Currently there is a lot of money being put into the space and the cryptocurrency space is currently valued around $237 Billion US Dollars and it continues to garner interest.

Source: CoinMarketCap.com

So why has it risen so much?

There are multiple factors that contribute to the hype but overall, I think it’s just got to do with attention. There are many other notable blockchain enabled cryptocurrencies and ‘tokens’ such as Ethereum, Ripple and Litecoin and everyday there is a new cryptocurrency popping up.

The fact that my Uber driver ended up talking to me about Bitcoin is a good enough indication that people are starting to talk about this. We even have celebrities such as Jamie Foxx promoting cryptocurrencies. Who knows, tomorrow a Kardashian might promote Bitcoin and move the whole market…

Source: Twitter

Future of Bitcoin and Blockchain

No one can be sure what the price of Bitcoin will be in the 3 days, 3 months or 3 years. The market is undeniably volatile but overall it represents something larger than a currency… I think it represents a technological shift in the way we view privacy, transparency and trust.

Banks and governments around the world are doing their best to see how they can adopt this technology with their current system. There are also an endless amount of use cases being developed with the Blockchain technology such as crowdfunding, music sharing, cloud storage and many more.

One way or another, the ball has been rolled and I believe the future will incorporate blockchain in various sectors. And who knows, the leading currency we adopt might be Bitcoin or it might not be…but there is no denying that the wheels have been put in motion and that people are aware of the system. People seem to be judging Blockchain just on Bitcoin but I think it’s going to be something bigger than a currency… Only time will tell…

Thanks for reading 😊

Bonus: Here’s a picture of a smiling corgi after that long exhaustive read.

PS: If you are university student, feel free to check out Bit.fwd’s Blockathon / Hackathon. They are running an awesome event with great mentors to promote projects in the blockchain space. Link → Here.