IMF: Blockchain may build an Internet of Trust

The International Monetary Fund (IMF) has published an article explaining bitcoin’s blockchain technology and suggested that it could be beneficial to the banking and trading sectors.

The article, “The Internet of Trust,” co-authored by Andreas Adriano, Senior Communications Officer at the IMF’s Communications Department, and Hunter Monroe, Senior Economist at the IMF’s Monetary and Capital Markets Department, provides an overview of the history of Bitcoin, its underlying blockchain technology, and its potential uses.

The article explores whether blockchain technology can make payments and trade settlements cheaper and simpler.

In response to some people's view that Bitcoin is a Ponzi scheme, the author said: "Bitcoin, or more accurately, its underlying technology called distributed ledger or blockchain, may allow for a fundamental transformation of the financial industry."

Interestingly, there is also a section in the article about Bitcoin FAQ:

Q: Is Bitcoin the only digital currency?

A: No, there are more than 700 cryptocurrencies on the market. Bitcoin is the most famous one. It has the highest market capitalization, liquidity and acceptance. Ethereum ranks second.

Q: Is cryptocurrency safe?

A: Hacking incidents, Bitcoin thefts, and even exchange and wallet provider bankruptcies happen from time to time, but they have become less and less common over time.

Q: What is the volatility?

A: Cryptocurrencies can be very volatile. Bitcoin hovered around $400 in 2016 (it’s now over $700), was below $300 in May 2015, and even reached $1,200 in 2013.

Q: It is so volatile, so is it a good investment?

A: This is a very speculative investment and it has no central bank or government support, so investors are completely on their own.

Q: How can I buy Bitcoin or other cryptocurrencies?

A: There are many exchanges that can trade Bitcoin, such as Coinbase, Localbitcoins and CoinDesk. There are also many physical Bitcoin ATMs that can be used to trade, which can convert physical currency into Bitcoin.

Q: How do I store my Bitcoin?

A: The most practical way is to download a digital wallet using a smartphone. Storing large amounts of Bitcoin is more complicated, and some users have a dedicated offline computer (i.e. cold storage) and use encryption and very strong passwords to protect their funds.

Q: Where can I use them?

A: Bitcoin acceptance is still limited, but it is increasing, with some online retailers accepting Bitcoin and some brick-and-mortar stores accepting it.

When asked whether blockchain can truly deliver on its promise to speed up the financial world, the author said: “Current technology does not prevent instant settlement, the problem lies in the structure of the market.”

In conclusion, the article is neutral, with the author arguing that “it may be too early to say whether blockchain will become the next Internet or just a gradual evolution,” but at the end of the article, the author writes positively:

“The blockchain game has just begun.”