In 2017 Bitcoin finally permeated the collective consciousness of the world, as it and other top cryptocurrencies made gains of up to 10 times their value or more, from the beginning of the year. Still, I meet very few people who really understand what cryptocurrencies are and why the technology they are based on, blockchain, may revolutionize the way we live our lives.
To understand why the idea of Bitcoin came into being, is to also understand the inherent problems with a centralized bank controlling our money supply. In today's monetary institutions, such as the Federal Reserve in America, the central bank issues all of the countries currency, and therefore has ultimate control over the prosperity of those living within that monetary system. In simplified terms, the Federal Reserve, which is a private bank, prints money which is then borrowed by the government, with the promise to pay it back - plus interest. Yes, that's really how it works. Every penny in existence is owed back to the banks, plus an additional amount of interest which won't exist unless the debtors borrow more money to pay that interest off. There are two fundamental problems with this monetary model. The first is the fact that the central banks of the world are private institutions. We have a very small group of un-elected individuals with complete control of our monetary supply. The second is the fact that this is a debt based monetary system. Money equals debt, and that's an incredible problem. There will never be enough money to pay off all the outstanding debt, therefore more money must always be created, inflating the currency and forcing workers into a never ending rat race.
Blockchain, attempts to solve both of these problems. The first problem being essentially an issue of trust. In the centralized banking model we have to know we can trust the small number of people running the bank. History has shown that 'absolute power corrupts absolutely', as the saying goes. Sadly, the banks are no exception to this rule, as humanity has now been enslaved for hundreds of years by a monetary system which only produces debt. Blockchain, is simply a digital ledger, in which blocks of information are verified by the network, and kept in a chain as an unalterable record of transactions. Without getting too much more complicated, these blocks are shared across the network in such a way that the computers can always come to full consensus that the block has not been tampered with. In other words blockchain is fully secure way of keeping decentralized records between computers, it does not rely on a centralized party to keep track of the ledger. The ledger is secure because of the blockchain technology itself. Bitcoin then, is essentially a trust machine.
Second, cryptocurrencies are not created by debt. Most are 'mined' into existance by computers continually at work keeping the network running. In the case of Bitcoin there is a fixed amount, and once that amount is reached there will never be more available. The implications of this are profound, as our currency would switch from a model based on debt and scarcity, to one based on sustainability and abundance.
First came the computer, then the internet, and now blockchain. When humanity looks back on history 100 years from now, this will be seen as a single event where technology and computers revolutionized the way our world functioned. And it isn't just the monetary system that it will change. From voting, to storing medical and other records, the applications are limitless. Welcome to the Internet 2.0; Welcome to the future.
-Brian Johnson