The True Value of Bitcoin: The Internet of Money

The value of Bitcoin is far more than the currency itself, because it is the Internet of currency.

When future generations look back at Bitcoin, they will understand that it is actually a platform for building new financial services.

Most people only know Bitcoin as a virtual currency, but what is truly meaningful is Bitcoin as a hidden protocol, which has the function of encapsulating and distributing contract law.

Bitcoin encapsulates four basic technologies:

1. Electronic signatures: cannot be forged and allow one party to securely verify a transaction with another party.

2. Peer-to-peer networks: Like BitTorrent and TCP/IP, they are virtually indestructible and do not require maintenance by a powerful central authority.

3. Proof-of-Work prevents users from spending a penny twice, and there is no need for a central authority to verify whether the transaction is valid. Bitcoin has set up a reward mechanism for miners, who use powerful computers to complete the work of verifying whether the transaction is valid. Miners can get new Bitcoins as rewards from this activity. Anyone with enough computing power can participate in mining and get rewards.

4. Distributed ledger: In every Bitcoin wallet, you can check every transaction record of the entire Bitcoin system. Block chain means that anyone can verify whether a transaction has occurred.

Thanks to these four basic technologies, Bitcoin is scarce (central banks cannot issue currency indiscriminately), durable (does not degrade like gold), portable (can be stored or transmitted electronically or just in the form of numbers in your brain), divisible (one Bitcoin can be divided into 100 million parts), verifiable (can be found in everyone's block chain), easy to store (can be recorded on paper or electronic media), fungible (every Bitcoin is the same), difficult to counterfeit (almost impossible to crack), and can be widely used. Many Internet technology talents are spending their time to continuously improve Bitcoin.

People who support the government will say that a limited supply of money will not last long. They believe that inflation is the only way to make people willing to spend money, but they ignore the fact that the world did not start to operate on a limited supply of money until 40 years ago. There are also people who worry that a central power will take over the entire Bitcoin computing network, but the current Bitcoin network computing power has reached 2250 PetaFLOPS (quadrillion floating point operations per second), 90 times the fastest supercomputer (this figure has risen to 48,000 PetaFLOPS in October!)

There are also various concerns, such as the security of encryption algorithms, transaction speed, size of Block chain, irreversibility of transactions, possibility of theft or hacking. All of these can be solved by third-party services and protocol upgrades. You might as well think of the current Bitcoin protocol as Bitcoin 1.0, just like HTTP 1.0 in the past. It will evolve from a browser with only simple text and pictures to the current Internet, and there will be a richer Bitcoin world in the future.

Compared to the current British pound or US dollar, Bitcoin has many obvious advantages, many of which have been mentioned above. But more importantly, the Bitcoin protocol can support financial transaction services that are currently impossible or expensive and require a strong third party.

Bitcoin comes with a scripting language that not only supports transactions like "send money from X to Y", but also requires M of N parties to agree to complete the transaction. For example, a will will only take effect when most of the heirs agree that their parents have passed away, without any lawyers at all; or only two of the three parties agree to approve a certain expenditure; or a crowdfunding plan on Kickstarter will only be paid to the initiator when the majority of supporters agree to reach a certain target. In all these cases, the arbitrators themselves cannot take the money, they can only approve or reject a transaction.

Of course, scripting languages ​​can also support transactions based on other parameters. For example, time-based transactions can lead to automatic mortgages, trusts, and allowance payments. Transactions based on random numbers are lotteries that can be audited by a third party. You can also design smart property, such as an electronic car key. Only when the buyer pays the seller a sum of money, the seller's car key will fail, and the buyer's key will start working and can be used to drive. The use case is as follows: your driverless car is stuck somewhere else, and you can give your neighbor some Bitcoins to pick up his car and use it.

Everyone has a backup of the entire Bitcoin blockchain, and can verify your transactions. You can encrypt any document, timestamp it, and put it in the blockchain, and anyone can verify it at any time. If you sign the document with your private key, and the other parties sign with their private keys, the document becomes an undeniable co-signed contract, completely ignoring the existence of a notary, as shown by sites like www.proofofexistence.com. There are also Namecoin projects, which solve the domain name problem, or P2P stock and bond exchanges (Satoshi Dice), which allow stocks and dividends to be bought and sold without a traditional stock exchange.

Most importantly, Bitcoin provides an open API interface that can be used to create secure, scriptable electronic cash transactions. Just as the Web democratized publishing, Bitcoin can make building new financial services more accessible. You can use any third party or the code itself to make, modify, or execute electronic contracts, completely free and fast, without worrying about forgery or withdrawal. Traditional banks or credit card companies will only open their payment infrastructure to a few companies, while Bitcoin is open to everyone.