The creation of Bitcoin is in itself a really big thing. The possibility of sending money, instant, cheap and directly between people on the internet brings with it a promise of a new world. So Bitcoin is exciting, but even so, the underlying technology that Bitcoin uses brings some even more exciting possibilities. The technology is called Blockchains and might change the internet and the world in general.
- A decentralised ledger spread all over the world
- An audit trail making it possible to track changes done in the Blockchain in an invertible way
- The first Blockchain was the Bitcoin. But the Blockchain may record all kind of transactions of value, not just financial transactions
- There is no centralised authority, the trust is built into the Blockchain itself
These Blockchains consist of blocks linked together. There are people responsible for relaying and validating transactions. These people are called miners and are awarded Cryptocurrency for their work. So instead of having the transactions stored on a single server at a bank the transactions are stored on thousands of computers spread all over the world. The promise of a truly decentralised network brings some associations to the internet itself and the original idea behind it, decentralised and free for all users. With recent years we have seen the internet moving against a more closed system with paywalls and systems for prioritising certain traffic. As a geek I have to say that this new way we are moving is much appreciated. In many ways we can say that the users are taking back control over the internet, removing the control from any central authority.
Why is the Blockchain called internet 3.0
There are some good definitions of the different milestones on the internet as we know it today. If we look at the really big picture I think it makes sense to divide the internet evolution up in bulks like this:
Internet of ideas
This was the beginning, the use was mainly educational and research. Many people think that this was the golden age, everything was new and exciting. At the time the commercial interest in the new technology was quite low, the internet was for the nerds and people with a special interest for this new and exciting medium.
Internet of e-commerce
When someone figured out that you could sell goods and services on the internet I would say that we moved over to a new era on internet. The companies selling on the internet have had more than 20 years of extreme growth.
Internet of agreements
This might not be the best name for the next era we are seeing, but Blockchains do fix some of the biggest problems the internet is facing today. The need for trust, safe and secure identity management and traceability on transactions are high in demand. When you also take away most of the control from the big centralised players, I do think this will change everything.
Everything started with Bitcoin
Bitcoin was the first Blockchain. The Bitcoin is actually many good ideas brought together to create a pure decentralised digital currency. Bitcoin does not have any central authority like a central bank. Instead everything is built around trust in a decentralised digital ledger. The ledger is maintained by users that we call miners. These people are the caretakers in the system keeping track of everything and making sure that transactions reaches a consensus. This makes cheating very hard.
Bitcoin is still the biggest digital currency with as much as 50% of the total market capitalisation. In second place we find the currency called Ether which builds on top of the Ethereum platform. There are however many other digital currencies out there that compete over user and media attention.
Ethereum VS Bitoin
While Bitcoin is a pure digital currency, the Ethereum platform is being called the world computer. By leveraging a technology called smart contracts it is possible to support many other things.
While talking about Ethereum we have to mention the ICOs. Initial Coin Offerings are the digital way of raising start capital like an IPO. ICOs are responsible for gathering around $2 billion in startup investment this year.