bitcoin or Bitcoin ?

This weird question is hiding a huge trend : the blockchain revolution. To be a little less cryptic, bitcoin comes in two flavours: a crypto currency (bitcoin) and the technology supporting it (Bitcoin). This is not only a little detail : the technology created for the bitcoin currency can be used for many other purposes and this is waht has been called blockchain v2 (and v3).


Under the hood, bitcoin is made of 3 elements :

The currency itself is only one of those components and the two others are the technology building the bitcoin system. The secured and open transaction database which is the heart of the bitcoin system is called blockchain. Because it stores transactions which appear to be on bitcoin but could be on any other asset, this technology is very attractive and reused in a number of projects under the banner blockchain v2.

The protocol is a peer to peer protocol used to connect all the bitcoin nodes together (remember that bicoin is a distributed system to be resistant to attacks).

What is all this technology bringing ?

Double spending

The Blockchain technology is solving the double spending issue which a very common issue even in the real world : how to avoid that a person is selling twice the same good ? We also face this problem through counterfeit money which is another type of double spending.

This issue is aggravated in an electronic world where everything can be copied infinitely.

Bitcoin infrastructure addresses this issue with the blockchain which validates the transactions in the mining process. All the valid transactions are confirmed by the bitcoin infrastructure and sends back unspent transactions output which are reflecting the new position.

Ensure trust

Trust is also a key issue over an insecure media such as internet. Messages exchange has to be reliable and secure. This is achieved through a peer 2 peer network which is less sensitive to attacks than any centralized architecture. The distribution is a key feature to ensure trust as all nodes run independently. Cryptography is also extensively used to protect content and ensure trust, making sure that sensitive content is not disclosed and that participants have clearly the rights they pretend.

Bring resilience

The distributed architecture not only makes the network more resilient it also avoids to centralize all the information in one location which could be more vulnerable to attacks, releasing sensitive personal data : no more honeypots so attractive to hackers! This is also making the system invulnerable to governments censorship.

The distributed architecture has been built not only to be more resilient to any kind of attack but also to avoid the man in the middle. In traditional processes, trust is ensured by a trusted body (state, central bank, exchange, …) and transactions are flowing through this body which ensures trusts between counterparts. The blockchain technology brings this level of trust without any man in the middle which will have a huge impact on costs. Ripple which is, among other things, a money transfer agent is often viewed as the “Napster of payment”. It will have the same impact on Financial Services as Napster had on the majors of the music industry .

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s