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Bitcoin and Blockchain: A Digital Revolution that Goes Beyond the Global Economy

Since the beginning of 2009, following the emergence of the virtual currency called bitcoin, we have also heard about Blockchain.

This technology, which consists of a set of Internet protocols, is a decentralized database used to carry out transactions between several computers, whose records can only be modified retroactively, with the agreement of those who make up the network.

The blockchain is a flexible technology behind bitcoin, but can be separated from it for other purposes.

For example, it can be used to create cryptocurrencies (virtual currencies that can be exchanged and traded like any other traditional currency) based on the same principles, but with different properties because the algorithm or monetary policy has been changed.

This transformation has begun to be felt in various countries around the world. It is an announced shift that marks the beginning of a very likely transition of banking operations in the financial scenarios, based on a distributed and secure database that can be applied to all types of transactions.

For example, digital money transactions are carried out from the so-called «wallets» or electronic purses, which are encrypted files that work in a similar way to a bank account but have two keys: one public and one private.

Basically, this system eliminates intermediaries, because it decentralizes all management. In fact, the control of the process is not in charge of the traditional bank, but of the users themselves.

Although digital currencies are still far from becoming massive and becoming a common means of payment, most investors turn to them in search of quick returns.

The bitcoin, which is the largest of the digital currencies together with ether, is increasingly compared to gold, with which, its supporters say , they are looking forward to compete as a safe haven against future crises and inflationary peaks, amid the speed with which central banks print banknotes to stimulate recovery.

Twelve years after the enigmatic birth of bitcoin, created by a so called Satoshi Nakamoto, the pseudonym of someone completely unknown to the general public, there is no consensus on its role and that of the rest of the cryptocurrencies in the future world. 

Have bitcoin and blockchain come to decentralize the issuance of money and strip the central banks of their absolute power? Are they just the latest money-making toy of capitalism that will end up exploding in the hands of speculators?

 One of those pioneering goods that could be bought with bitcoins were Tesla’s electric cars. But its founder, Elon Musk, backtracked in record time, claiming that cryptocurrencies are excessively polluting because of the enormous energy expenditure they entail, much of which is carried out in China using coal. The change of opinion of one of the richest men on the planet has been criticized as suspicious.

 Did you know that the electricity used to produce bitcoins is equivalent to that consumed by countries like Argentina or Greece? The fact is true, but it is one of many things that make no sense and serve to describe the aura of irrationality that surrounds this cryptocurrency.

Bitcoins are lines of computer code created by digital laborers called miners. They use special software that produces blocks from which bitcoins are made. The miners’ job is to produce the coins, confirm transactions and enforce the security of the system. They are paid in exchange for their work in satoshis, a virtual unit that is convertible into bitcoins. The miners are unremarkable, but the companies involved in this type of mining are increasingly visible. They have names like Riot Blockchain; Bitmain; Blockcap; and Argo Blockchain.

Although blockchain is closely related to new cryptocurrencies or cryptocurrencies, it is logical to ask whether this system would be valid for other types of transactions, and the answer is a resounding yes. That is what the Ethereum platform, which has its own blockchain and its own currency, called Ether, has been trying to achieve since its inception. Unlike bitcoin, the transactions here are smart contracts -programmers love this concept-, which can be more or less complex and allow all kinds of transactions to be defined. As with bitcoin, the beauty of those transactions is that they will remain on the blockchain, unalterable and accessible for the lifetime of that blockchain.

 If we go to the extreme, Ethereum could basically replace any middleman, replacing products and services that rely on third parties to be fully decentralized. This is just one of the alternatives that have been generated with the blockchain as the protagonist, and in fact there are many ideas that seek to exploit the benefits of a technology that has a virtually unlimited scope.  

Among these, the following stand out:

The above are just a few examples of the application of blockchain to all kinds of areas, but there are many, many more.

Likewise, bitcoin experts reveal that one of its greatest potentials will be Smart Contracts. That is, with blockchain technology, agreements and transactions can be made with confidence, without revealing confidential information between the two parties. For example: sale of products, house rentals, cars, etc.; all online.

On the other hand, the blockchain will be essential for the Internet of things. Many projects are currently being researched to implement the blockchain as a structure to support them. In conclusion, it will be in a matter of years when we will be able to see if it will really become the technology of the future and its expansion in the world will displace traditional banking.

Let’s take note from now on: the presence of Blockchain technology could generate a great impact in the economic and financial world by accelerating the processes of disintermediation, decentralization and disinstallation in favor of individuals and their access to products and/or services.

This digital revolution will go beyond our imagination.