The Emergence of Bitcoin: The Birth of Blockchain – One solution that has been developed to address the complexities, vulnerabilities, inefficiencies, and costs of current transaction systems is bitcoin — a digital currency that was launched in 2009 by a mysterious person (or persons) known only by the pseudonym Satoshi Nakamoto.
Unlike traditional currencies, which are issued by central banks, bitcoin has no central monetary authority. No one controls it. Bitcoins aren’t printed like dollars or euros; they’re “mined” by people and increasingly by businesses, running computers all around the world, using software that solves mathematical puzzles.
Rather than rely on a central monetary authority to monitor, verify, and approve transactions and manage the money supply, bitcoin is enabled by a peer-to-peer computer network made up of its users’ machines, akin to the networks that underpin BitTorrent and Skype.
The Emergence of Bitcoin
Bitcoin has several advantages over other current transaction systems, including the following:
» Cost-effective: Bitcoin eliminates the need for intermediaries.
» Efficient: Transaction information is recorded once and is available to all parties through the distributed network.
» Safe and secure: The underlying ledger is tamper-evident. A transaction can’t be changed; it can only be reversed with another transaction, in which case both transactions are visible.
The Birth Of Blockchain
Bitcoin is actually built on the foundation of blockchain, which serves as bitcoin’s shared ledger. Think of blockchain as an operating system, such as Microsoft Windows or MacOS, and bitcoin as only one of the many applications that can be run on that operating system.
Blockchain provides the means for recording bitcoin transactions — the shared ledger — but this shared ledger can be used to record any transaction and track the movement of any asset whether tangible, intangible, or digital.
For example, blockchain enables securities to be settled in minutes instead of days. It can also be used to help companies manage the flow of goods and related payments, or enable manufacturers to share production logs with original equipment manufacturers (OEMs) and regulators to reduce product recalls.
The takeaway lesson: Bitcoin and blockchain are not the same. Blockchain provides the means to record and store bitcoin transactions, but blockchain has many uses beyond bitcoin. Bitcoin is only the first use case for blockchain.