Bitcoins and Blockchains: Time to Take Note, Ireland | Ireland EU

Bitcoins and Blockchains: Time to Take Note, Ireland | Ireland EU
Bitcoins and Blockchains: Time to Take Note, Ireland

Bitcoins and Blockchains: Time to Take Note, Ireland

Background

Invented by an anonymous person or a group of programmers using the pseudonym Satoshi Nakamoto back in 2008, Bitcoin has the advantage of low transaction fees and few other features which protect the rights of businesses, the most appealing one probably the option of eliminating fraudulent chargebacks. Members of the cryptocurrency community have also created several derivatives of bitcoin known as alternative coins, or altcoins for short, some of which have introduced new features which may make them even more attractive to businesses. In addition, developers constantly use the associated ledger, called the blockchain, in attempts to find new ways to use its secure by design quality, meaning its ability to process records in a way which discourages attempts at tampering with the ledger.

Bitcoin’s major breakthrough was providing a solution to what programmers call “the Double Spend Problem”. The solution uses a scheme by which a cryptographic hash logs each transaction on the blockchain ledger in a way which makes it impossible for the owner of a bitcoin address to issue a chargeback after making a bitcoin payment and then send the same bitcoin to somebody else, thus double spending it. This practically eliminates the risk of fraudulent chargebacks which come with using payment systems like credit cards or PayPal.

Bitcoin for Businesses

Bitcoin may have been a success mostly because it was the first true cryptocurrency. Its blockchain ledger doesn’t care about anything else other than whether the sender has enough bitcoins to cover the transaction and whether the receiver has a valid bitcoin address to receive it. For this reason, as far as businesses are concerned, accepting cryptocurrencies works much in the same manner as cash payment. You can’t pay for something if you don’t have the money to; just the same, you can’t make a bitcoin transaction if you don’t have enough bitcoins. It’s impossible to have a negative bitcoin balance.

Businesses are protected even more by the low transaction fees. Credit card companies usually charge 2-3% of every transaction. In the case of cryptocurrencies, the transaction fees never amount to much more than a few pence per transaction, regardless of the amount being sent; also, the fees are paid by the sender. Since there’s no need of currency conversion, the fee is same even if the transaction crosses international borders, which means that businesses which routinely engage in international transactions will save tons of money by using bitcoins. If the volatility of the market becomes a concern, some options for accepting bitcoin payments offer a way to liquidate the bitcoin almost instantly. All of this makes bitcoin very attractive to almost any business concerned with keeping overhead costs under control.

What Is the Blockchain?

Developers are interested in different things than business owners. As far as they are concerned, the most interesting innovation introduced by the bitcoin has to be its verification ledger, the blockchain.

Ethereum’s developers, for example, are using blockchain technology to create what they refer to as “smart contracts” – these can reverse themselves if certain conditions are not met. Say, you buy a car, but you have no intention of paying it off. If the company which manufactures the car or its previous owner has been smart enough to add a “smart contract” to the car’s computer system, the car would drive itself back to the dealership once the new owner misses a loan payment. No matter where he or she is.

Bitnation, the blockchain governance service, recently made a deal with Estonia to create a blockchain-based notary service for “e-residents” who can use it to register legal documents like land deeds, titles and business contracts on the blockchain ledger. Overstock CEO Patrick Byrnes is currently working on a blockchain-based security exchange. Provenance tries to integrate blockchains within our supply chains. It’s quite possible that blockchain technology may help better even modern business communication. These are only few of the projects currently capturing the attention of decision-makers in the world of business and finance. In layman terms: they are also some of the projects which may make an impact on your business in the near future. So, be careful.

Some altcoins are nothing more but worthless vanity coins and simple clones of bitcoin. Others have active development teams who have successfully introduced further innovations. Altcoins such as DASH and NXT, in fact, may play a major part in the future of cryptocurrencies. DASH’s developers have improved anonymity, while NXT’s have introduced built-in marketplace.

Not a decade has passed since the introduction of bitcoins, and business owners are already in a position to choose which altcoin paying method would they want to offer as a payment option alongside bitcoins. Altcoin currencies such as Dogecoin may nicely integrate with branding strategies by pet supply stores. Some other industries may want to attract customers, by showing interest for a particular cause, such as SolarCoin’s support of renewable solar energy. The best thing is that, if necessary, all of these cryptocurrencies can be easily exchanged for bitcoins at almost any cryptocurrency exchange website.

What Does the Future Hold for Bitcoin?

Mike Hearn, a bitcoin expert and prominent developer, recently left the bitcoin development team after a dispute regarding few modifications he had made to its protocol. In an article published on his blog, he wrote:

“Bitcoin is an experiment and, like all experiments, it can fail. … [T]he now inescapable conclusion that it has failed still saddens me greatly. The fundamentals are broken and whatever happens to the price in the short term, the long-term trend should probably be downwards.”

Should we believe Hearn? After all, people have predicted bitcoin’s death for many years now, but it never died, did it? But, Hearn is an important bitcoin developer and he has just said that he has sold all of his bitcoins. Could this be one of those cases when we have heard too many people crying “wolf” to actually believe the one who has seen the wolf nearing our village?

As always, only time will tell.

Conclusion

Bitcoin’s tumble from its November 2013 peak at $1,200 per bitcoin to almost a half of the rate after the Chinese Government banned financial institutions from using bitcoin and major exchanges were hit with DDoS attacks proves that bitcoin is not invulnerable. The recent disagreements between prominent members of its community may be a warning sign of future trouble.

But, then again, history has shown numerous times that it’s quite difficult to get the genie back into the bottle once it has been left out. And bitcoin seems just too widespread to die, without causing too many deaths. In fact, not only is the bitcoin still very much alive, it has the potential to become even bigger. Much bigger.[1]

And even if bitcoin’s death does happen, this may only mean that it will be promptly replaced by another cryptocurrency. Satoshi Nakamoto’s system is unique enough to be researched and developed for many years to come. Prominent businessmen such as Patrick Byrnes take bitcoin’s blockchain technology pretty seriously and nations like Estonia have already recognized the value of its secure by design concept.

If nothing more, this should be a cue for “ordinary” business owners to avoid missing the boat. Even if they are not ready to ditch credit and debit cards just yet.

 


[1] As opposed to Hearns’ prediction, future has been kind enough so far to vindicate ours: even though the bitcoin split into two derivative digital currencies in August 2017 (the classic bitcoin and the bitcoin cash), its price has surpassed the value of an ounce of gold and it has started to look even more stable than it. As of August 2017, a bitcoin can be sold at the price of $4,700, and it could go as high as $100,000 per bitcoin according to the analyst who predicted its current rise. (August 2017)

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