What happened to the old fashioned way of doing things? Paper money isn't even a valid currency anymore here in the UK. Our pockets are lined with plastic and businesses deal in Cryptocurrencies. It really is beginning to feel like the year 3000. Although we don't live underwater - yet.
But seriously how important, to us as individuals and to our jobs in tech, is this virtual currency malarky?
What is a Cryptocurrency?
"A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank." - Dictionary definition.
So let's take Bitcoin for example, the first and now most valued cryptocurrency around, created in 2008 by Satoshi Nakamoto. What are the similarities between Bitcoin and physical currencies?
- It's constantly changing value, this week Bitcoin has valued at around £6,000-£8,000
- It can be traded for goods/services
- You can withdraw your Bitcoins into real hard cash a bit like going to an ATM
So how is it different?
- It's a virtual online currency
- The verification of transactions is decentralised
- All transactions are filed on the Blockchain
- You can earn Bitcoins by becoming a Bitcoin Miner
Don't worry if you don't understand any of these terms - we will cover these later.
So what can I trade my bitcoins for?
- Travel sites like Expedia accept bitcoins as a form of payment
- A branch of Burger King in the Netherlands also accepts Bitcoin in return for a greasy chip or two.
- Gun shops in Texas also accept Bitcoins in return for a weapon - we don't advise this.
- Even a bed retailer Ghostbed will give you a good night's sleep for virtual money.
- One of Japan's biggest electronic retailers Bic camera also accepts cryptocurrency.
- A number of Las Vegas casinos allow you to gamble with Bitcoins - we also don't advise this.
Granted most of these places are in the US only, but here you can search all the places you can spend Bitcoin in the UK. Find out more about the dramatic decline in cash purchases in recent years, with some stats revealing cash payments in Weatherspoons have fallen 20% in 4 years.
SO What is Blockchain?
Blockchain is a software platform that shows all transactions in cryptocurrencies ever listed. It is a distributed ledger accessible to anyone.
Each block is a transaction, and instead of Government centralised verification methods used by physical currencies, it is decentralised. This means anybody can verify it. Well not everybody - only Miners, but anybody can be a Miner.
A Miner is somebody that uses a graphics card in their computer to run programs to solve mathematical equations that equal the verification of a transaction.
When a transaction is requested it is sent to all of the Miners to verify. Once more than 50% of the Miners agree the transaction is legit, it gets approved and added to the chain.
This process takes 10 minutes to best avoid being tampered with, making them extremely secure and therefore so popular.
Inside a block
A block contains data which in Bitcoin's case is the sender information, receiver information and the amount of currency.
It then has a a 'Hash' this is like it's digital fingerprint if you like? A series of letters and numbers individual to each block. It also includes the Hash of the previous block.
If you tamper with the data, the data changes and so does the hash, thus changing the 'previous hash' on the block after and so on. This breaks the chain and makes all further blocks invalid. However computers are so fast they can recalculate up to 50,000 hashes per second, meaning you can rewrite and revalidate the chain in lightning speed.
To stop this from happening Blockchain have added something called 'proof of work' which slows down the creation of new blocks to 10 minutes. Meaning if you were to tamper with a block in the chain it would take 10 minutes to revalidate one block, bare in mind there are hundreds of thousands of blocks - you're getting nowhere.
Not quite following? Did you just read that more than 3 times? Don't worry we've got some analogies for you:
Blockchain Is Like Google Docs
Here's a clever metaphor for blockchain from William Mougayar, the author of The Business Blockchain:
"Blockchain is like Google Docs. Before Google Docs, if you wanted to collaborate on a piece of writing with someone online you had to create a Microsoft Word document, send it to them, and then ask them to edit it. Then you had to wait until they made those changes, saved the document, and sent it back to you.
Google Docs fixed that by making it possible for multiple people to view and edit a document at the same time. However, most databases today still work like Microsoft Word: only one person can make changes at a time, locking everyone else out until their done. Blockchain fixes that by instantly updating any changes for everyone to see. For banking, that means that any money transfers are simultaneously verified on both ends. Blockchain could also be used in the legal business or architecture planning— really any business where people need to collaborate on documents."
Here's another useful explanation from online forum Bitcoin Talk. This one does a really good job of explaining how public and private keys work:
"Imagine there are a bunch of safes lined up in a giant room somewhere. Each safe has a number on it identifying it, and each safe has a slot that allows people to drop money into it. The safes are all made of bulletproof glass, so anybody can see how much is in any given safe, and anybody can put money in any safe. When you open a bitcoin account, you are given an empty safe and the key to that safe. You take note of which number is on your safe, and when somebody wants to send you money, you tell them which safe is yours, and they can go drop money in the slot."
Now you know the basics of Blockchain and Bitcoin, how will it affect you?
Back in 2008 when Bitcoin started it was worth £0.01 now 10 years later it has fluctuated from this number to £20,000 and then what people believed to have been a 'crash' sent it plummeting after reaching its peak. It's had about 5 of these so called 'crashes' much like an economic crash. At the moment Bitcoin has levelled out at around £6,000-£8,000.
The biggest change to our everyday lives will predominantly be where we can use Bitcoin. Will it become more mainstream? Some say the crashes where fueled by media coverage and mainstream availability hypes. So as the currency grows, this becomes more of a possibility.
Education on Cryptocurrencies. Future curriculums could introduce classes on cryptocurrencies in Business GCSE and A levels. Think about it; this would actually be very handy if we used cryptocurrencies in everyday life. Educating the next generation of how to safely and securely store currencies and information on Blockchain would prevent Black Hatters. Hopefully. As well as creating more jobs in teaching.
Although mining is a hobby for most that brings in money on the side, job roles of the future are more likely to involve coding/development using blockchain technologies. Used for creating secure records, like medical records, financial records, smart contracts, voting etc. Just like the gaming industry that has boomed over the last 10 years. Job roles for game designers/developers weren't around in the 90's, now everyone wants to be one; and there are some great online courses you can take to get your foot in the door, or develop existing skills.
As mentioned Hospitals can withhold private data of patients securely on Blockchain, opening up thousands of roles for skilled coders. Even the Governments have been using Blockchain to record election votes to eliminate fraud. The possibilities are endless.