In the run-up to Christmas, It felt like the world was in an uproar about Bitcoin. Suddenly, this sleeping giant was the hot topic of conversation. Bitcoin broke into the mainstream media seemingly overnight, having everyone from the BBC and CNN to the postman in furious discussion over it. “Bitcoin is going to change everything,” they said. “The technology is the biggest thing since sliced bread,” was the general gist. Others concluded that it is simply a bubble, technically the biggest bubble in human history – bigger than the Dot-Com bubble or the Dutch Tulip Bubble of the 1630s.
The big problem with all of this is that nobody really has any answers. Some speculators think that Bitcoin will go much, much higher. Kim Dotcom – the German tech entrepreneur currently fighting extradition to the US – has announced his own plans for a cryptocurrency, and thinks that Bitcoin could easily pass $40,000. Meanwhile, billionaire investor Warren Buffett believes “… almost with certainty that cryptocurrencies will come to a bad end.” We’ll only know who is right with the benefit of hindsight.
Bitcoin and Blockchain have come to light together, they are as important to each other as the chicken and the egg, but they are not the same thing.
But if the sudden deluge of media coverage about Bitcoin has done anything useful, it’s that it has raised the profile and understanding of the Blockchain as a technology that may well influence many existing industries, and underpin emerging ones. So whether the ‘Bitcoin bubble’ bursts or not, the big takeaway is that it’s time to stop confusing the two. Bitcoin and Blockchain have come to light together, they are as important to each other as the chicken and the egg, but they are not the same thing.
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Bitcoin was the first decentralised cryptocurrency and as such is the most valuable right now. All Bitcoin is is a tradable measure of value on a Blockchain, no different to any of the estimated 1400+ other cryptocurrencies which have been created to date. Some of these share the same Blockchain (mostly Bitcoin or Ethereum) and some are based on their own. There are only a finite number of ‘coins’ in circulation, which preserves their scarcity and therefore a value that can rise or fall based on demand.
Like the chicken and egg analogy, nobody can conclusively tell us which came first as Blockchain was created alongside Bitcoin. Bitcoin would not be here without Blockchain, they were created in unison by the mysterious Satoshi Nakamoto.
From startups to multinational corporations, people are betting heavily on Blockchain being the future. Somewhat annoyingly, many are of the mindset that Bitcoin directly represents how important Blockchain is, it is but a mere hint of the potential here. Bitcoin barely scratches the surface of how Blockchain can change the world.
Originally known as ‘block chain’, now universally referred to as Blockchain, is a list of blocks, or records, that is ever growing. These ‘blocks’ are secured and linked together using clever cryptography. The individual blocks would normally contain a hash pointer as a link to the previous block in the chain they are linked to, a timestamp for when the block was created and the transaction data that it was created for.
In other words, a Blockchain (it is worth noting that there are several) is a digital, decentralised, public ledger of all cryptocurrency transactions. A Blockchain is constantly growing as ‘completed’ blocks get added to the chain. These are added in chronological order once they are completed, and a number of computers on the network – known as nodes – hold identical copies of the complete blockchain. The decentralised nature of Blockchains means that assuming you have a big enough hard drive, anyone can download the entire blockchain. Everyone has access, but no single entity has total control.
There is no one central server that can be hacked to change the data, hundreds of thousands of computers hold a copy. It is part of a peer to peer network upon which, once recorded, the data in any given block cannot be altered retroactively without having to alter all subsequent blocks, on all of the machines storing the information. It is the best example of distributed computing with what is known as high Byzantine fault tolerance.
DLTs (Distributed Ledger Technologies) are cropping up everywhere now, it is fast becoming a trusted resource for everything from the obvious, such as transferring of funds around the world (using currencies like, but not only, Bitcoin) to signing of legal paperwork, seen as documents can be coded into Blockchain and are therefore as near as makes no difference, fraud-proof. Once signed, a record is there for all to see.
An obvious place to use Blockchain is an area where accurate audit trails are required. For example, global shipping company Maersk estimates that it takes some 200 communications between 30 different parties to ship one of its containers from Kenya to the Netherlands. It sees Blockchain as a way to hugely simplify this process and remove the risk of errors. In the case of land-based supply chains, Walmart, Kroger, Nestle and Unilever are working with IBM to integrate Blockchain into their own processes.
From our own perspective as a games company, Blockchain allows something that exists purely in a digital sense to be given its own unique identity and value. What this means is that this technology will open the doors to a new form of creativity that is digital-first. People will be able to share and monetize their creations directly, bypassing the gatekeepers who make far more revenue than the creators they profess to support. And the security provided by the fact that each and very blockchained item is unique means that value that is created can be protected and retained.
The real value of Blockchain is not in the raft of get-rich-quick cryptocurrencies, or people willing to bet their houses on the rise of Bitcoin. Yes, we may well be in the middle of a speculation bubble for all things Bitcoin-related. But it’s actual success has been to open a door to a Blockchain-driven future. Blockchain is in its infancy, but it could well become the technology that becomes the bridge between the digital and physical worlds. It’s altogether bigger and more exciting than Bitcoin will ever be.