Sunday Longreads


Bitcoin, the Blockchain and You

“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments”.
 
It is likely that this opening line used by Satoshi Nakamoto in his 2008 paper “Bitcoin: A Peer-to-Peer Electronic Cash System” will become as well known as “All happy families are alike, each unhappy family is unhappy in its own way”, or “It was the best of times, it was the worst of times.” After all, no matter what happens in the next few years with Bitcoin, we can be certain that people will be talking about Nakamoto’s work one century from now, as we do today about Tolstoy’s, or Dickens’. Less than a decade from its publication and despite heavy opposition, Bitcoin is the first challenger that has a real shot at the almighty Dollar’s throne, becoming the new gold standard and turning the global financial system upside down. Moreover, its base technology, the blockchain, is widely seen as the next game changer across many industries. 
 
Surprisingly, nobody knows who Satoshi Nakamoto is: a man, a woman… it could even be a group of people, for all we know. The name is an alias that has yet to be successfully connected to a real person, and there is only written record of his work. After writing the code and publishing his paper in 2008, he spent another couple of years on the project, exchanging emails with the early group of coders and miners who helped to put everything in motion. Until April 2011, when in an email to a collaborator he wrote “I’ve moved on to other things and probably won’t be around in the future,” and disappeared. Since then, WiredNewsweekThe New York Times and many others have tried and failed to uncover his identity, making him the new Holy Grail of investigative journalism.
 
But let’s take a step back. It has been said over and over that Satoshi Nakamoto conceived Bitcoin as a response to the earthquake that shook Wall Street just one year before, and to a financial system that was doing a great job in proving itself to be rotten to the bone. In fact, Bitcoin arrived at the beginning of what has been called the Second Great Depression, when a lot of people had every reason to disrupt that system.
 
This 2011 piece by Joshua Davis for The New Yorker is a joyful long read about those first years in which this new cryptocurrency emerged and slowly started to gain momentum while journalists started their hunt for Satoshi Nakamoto. Even today, nobody can be sure of his identity or inner motivations, but it is fair to say that the legend of the unknown crypto-coder outsmarting the bad guys and fading back into the shadows after his job was done and made irreversible has certainly helped to the success of the whole project.
 
Ok, but enough already with the detective stories. So, what is Bitcoin? How does it work? That’s probably what you wanted to know but were too shy to ask about in that coffee machine conversation and too lazy to google afterwards. It’s ok, that’s what we’re here for. If you’re still too lazy to follow links,
here’s a quick explanation from Wikipedia: Bitcoin (₿) is a cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator and can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries. Transactions are verified by computers connected to the network through cryptography and recorded in a public distributed ledger called the blockchain. If you prefer an explanation designed for 5-year-olds, here are the Coindesk folks to explain it to you with apples. If you prefer a pro, investment-tycoon briefing to display your deep and interesting other side in the next couples dinner with your boss, check out JP Morgan’s “Bitcoin Bible” to get all savvy. And if you have time enough to kill and want to take a deeper dive, you can get into The Bad Crypto Research Repository or wander into the abysmal depths of the Bitcoin subreddit
 
In the big picture, probably the most relevant matter here is, will Bitcoin eventually replace the Dollar as the world’s reserve currency? There have been a lot of strong opinions on both sides of the question. On one side they say that it’s not a matter of if but of when. On the other side they say that it is indeed a matter of when... of when will the Bitcoin bubble burst. This piece by María Bustillos for Medium is of the most interesting ones you will read on this matter. In it she says that, philosophically speaking, both Bitcoin and the Dollar are illusions. Mass hallucinations. Or (as the author of Sapiens, Yuval Noah Harari would put it), intersubjectives, shared myths that exist for as long as people say they do. Bitcoin would be the myth for those who want to change the system; Dollar and all fiat currencies would be the myth for those who believe that the system is good enough as it is, and that any disruption of this size would inevitably lead to a dystopian world. You can take sides or just sit back and enjoy the match.
 
Let’s take a look now at the blockchain, Bitcoin’s core technology. Quoting again Coindesk’s apples explanation, “it's basically a book where you track all transactions – an accounting book.” Blockchain is exactly that, a ledger of which every computer connected to the bitcoin network has a copy. No one can change it without every other computer of the network knowing. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system. That's the strength of blockchain. As Sam Andoni tells us in this piece for Forbes, “the distributed ledger technology used in blockchain offers multiple benefits to businesses that make a difference when implementing a solution that requires a high degree of trust for business transactions.” Sam uses the examples of Real Estate and Digital Identity, but there’s many more businesses and administrations experimenting with the technology. What will you be doing with this technology in the near future, if not already? Seemingly almost anything, short of being born and dying (for now): votingusing social mediaasking for a credit, paying or wiring money, trading with stocks or any other assetlistening to musicshipping anythingmaking planes and travelling in thembuying a car or sharing onegetting an insurance, or even cannabis... we could go on and on.
 
Ok, so you have clicked on all those links and read a lot. Now you know what a Bitcoin is. You understand the blockchain technology and its impact on the future and are in fact already mentally redacting the really nasty email you will send to your insurance company since you’ll never need them anymore. All you want to know is... Do I buy a Bitcoin now or what? Well, depending on who you ask, you may expect either a hundred-million-dollar price by 2030 or a bubble burst within a year.
 
As for us in Goonder, we are not into the oracle business, but into the democratizing access to investment business. Most users of the Goonder app have no financial skills or no time to follow the markets, especially those with highest volatility. They just want to make their money work to get some extra cash by the end of the month. Initially, Goonder offered opportunities only in the main stock exchanges. But we needed to address the fact that a high percentage of our users, mainly the youngest, are more interested in crypto than in stocks. And so, a few months back we launched the Crypto Alerts, signals of short-term trends of several cryptocurrencies that help users make an investment decision both when the price rises and falls. Our approach with the Crypto Alerts is using a strategy that calls for buying and selling different cryptos all the time, limiting the exposure and hence the risk. The idea is to take advantage of all the fluctuations of the price to obtain multiple short-term returns; it’s a complementary strategy to the classic buy and hold Bitcoin hoping you will be rich before your retirement. And of course, we make it as easy and fun as it gets.



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