Last year, Bitcoin reached over $2,000 and long-term investors were ecstatic. Those that had heard of Bitcoin were kicking themselves for not listening to their libertarian friend preach about a new “blockchain” technology that could decentralize banks. This is no longer the case.
Considering that only two years prior Bitcoin was at a little over $400; the return on Bitcoin was starting to get noticed by mainstream media outlets and cryptocurrency optimists were given more reasons to say “I told you so”. But wary eyes have known better.
Come August 2017 Bitcoin almost doubled in price in only a few months. Those that had not heard of Bitcoin or cryptocurrencies were bombarded with news about how this new technology was seemingly taking over. Headlines eerily reminiscent of the epitaphs of the Dotcom era seemed to reappear without much reproach. As exposure grew, prices continued to soar and again early investors confirmed their assertions about the potential of Bitcoin. Though, where does the value in Bitcoin come from? Many claim, including Warren Buffet, Bitcoin is not backed by anything.
The answer is that the underlying blockchain on which Bitcoin is built. That is what people are truly investing in. Blockchain technology is able to create a public or private ledger by using many computers in the network to verify and confirm the ledger. This technology requires very little human interaction. The lack of human input in data storage and gathering reduces the amount of error and potential for fraud drastically. Blockchains brought the archaic ledger protocol of the past into the 21st century by relying on basically infallible machines to verify and keep track of things without the need for filing papers.
The blockchain is the reason why other cryptocurrencies are also gaining attention. Unlike Bitcoin, Ethereum, another cryptocurrencies, allows for private ledgers and programmable smart contracts. With smart contract capabilities, Ethereum has the potential to be used in a real-world business setting with minimal transaction fees as well, built in as state of the art security. Other cryptocurrencies like VEChain are trying to implement blockchain ledger technology for storage of inventory data which could save trillions of dollars in the shipping industry. Blockchains will continue to target currently inefficient marketplaces; similar to other internet technologies in the early 2000’s. Bitcoin itself, however, is not synonymous with these technologies. It is merely the prime practitioner of their first iteration.
Almost 40% of the world does not have a bank account. For American’s, this might seem like a high number but many countries do not have the capital necessary to build a banking system comparable to the one here in the US. Many of these people without bank accounts must carry all their valuables with them or store them in insecure places. Blockchains offers a solution for these people without banks accounts to have a storage of value that cannot be taken from them. In war-torn or tyrannical countries, that security is priceless if and when your family is forced to move overnight or when a fascist government freezes your bank account. E-currencies also facilitate international trade by setting a true exchange rate that isn’t tied to any national interest. Bitcoin is just the start of ledger decentralization. In a world where data seems to be increasingly valuable, it seems blockchains are here to stay… even if Bitcoin is not.