A lot of people talk about Bitcoin as a new kind of currency, but ignore that talk. The real revolution of Bitcoin is a new kind of payment network, something like Visa or PayPal. Those conventional payment systems are owned and operated by for-profit companies.
But Bitcoin isn’t – there’s no Bitcoin the company, instead, Bitcoin is run as a peer-to-peer network. Computers on the Bitcoin network process Bitcoin transactions by adding them to a shared public register. They call that the blockchain. All the computers keep it together. It’s as if we were all keeping Visa’s records up to date together as some kind of volunteer project. You’re probably wondering, well what’s the point? Why not just pay for things with PayPal or Mastercard like a normal person? And it’s a good question.
But Bitcoin has one big advantage over conventional payment networks. It’s an open platform. To become a Mastercard merchant, you have to apply for permission, pay a lot of fees to Mastercard, comply with hundreds of pages of regulation, Bitcoin is different.
Anyone can use it, it’s free and there are no rules limiting what Bitcoin-based services can do. An open technology platform like this can become a hotbed of innovation. Think about the internet. People were as baffled by the internet in the 1980s as they are about Bitcoin today.
The internet was unusable then. It seemed ridiculous that anybody would ever find anything useful to do on it. Eventually, that freedom allowed people to build great companies like Amazon, Google and Facebook.
The buzzword here is “permission-less innovation,” you can do cool things without any central authority being able to tell no. In the same way, Bitcoin can become a platform for building a new generation of financial services, like international money transfers that are faster and cheaper than Western Union, better security for everyday purchases, and perhaps new services that aren’t even possible with conventional payment networks. We don’t know what this stuff will be, but now that Bitcoin is here, we’re going to find out.
September 19, 2018
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