Bitcoin from contraband to currency of daily use
The journey of bitcoin is amazing from being used in dark web, silk route to becoming a mainstream currency on par with the reserve currency of US dollar is amazing and the story that has some myths and legends
The first time I heard about Bitcoin was in 2009. I read about it and thought this was some hacker’s project and that they are trying to build a digital currency. Some of my coworkers were making fun of getting paid in bitcoins which I feel would have been fantastic retrospectively. Legend has it that a guy or a group of people under the pseudonymous name Satoshi Nakamoto published a white paper about virtual currency. This paper outlined the implementation ideas for this project using cryptography, peer-to-peer networking, economics, maths and other computer related topics. The original paper can be read here. In 2009 the bitcoin network was launched as a open-source project and it was installed by hackers and developed by other people.
Miners and Proof-of-work
One of the sections in the paper proof-of-work was very interesting to me. The following line got my attention.
Proof-of-work is essentially one-CPU-one-vote
This created a new type of business called mining and it went on to grow like a raging fire. This also led hackers to user other’s computers without their permission for mining. I know few people whose resources on public cloud was also used for mining. To me the early days of bitcoin looked like a hackers project rather than a useful project for the public. Looking back now I feel that proof-of-work algorithm was laying the foundation in transforming the internet from internet of information to internet of value. This is a big break through in the computer world. This transformation helped make money completely digital.
Bitcoin and Silk Road
The Silk Road was a digital darknet platform that was used to launder money and buy illegal drugs. Sadly bitcoin was the currency used for this transaction. It was launched in 2011 and did more than 100 million $ business in its lifetime. The FBI from US cracked down the network and finally shut it off after 2 years in 2013.
Today bitcoin is dubbed as gold 2.0. Bitcoin was fast becoming an investment tool. Bitcoin’s market cap crossed 1 billon USD in 2013 and current market cap is close to 1 trillion USD.
Bitcoin transformed itself from a project to a business or from a startup to an established business with the launch of new services associated with it from third party players. Satoshi himself released a wallet to store the keys for the transactions and then others like Electrum also released wallets for use. Bitcoin exchanges were launched to buy and sell crypto and most notable one is Mt.Gox which got hacked and the hackers started to attack and steal a good number of crypto exchanges. The crypto exchanges started to get more secure and today there are over 10,000 exchanges around the world that help people buy the crypto currencies. One of the exchanges Quadriga whose CEO Gerald Cotten had over 100 millon $ when he died and that could not be recovered. There are good amount of bitcoin which is either under federal custody or belongs to people who can’t claim it because either they lost the keys to access it or they are dead.
Bitcoin vs Gold
Whenever I have conversation with my friends comparison between gold and bitcoin comes up. Whenever there is a recession investors globally buy gold as hedge against the bad times. During the COVID-19 crisis I saw the buying of bitcoin and other crypto currencies go up along with gold and that indicated the shift in the mindset of investors. There are 8 noble metals in the periodic table and their year of discovery as listed below.
- Ruthenium (Ru) (1844)
- Rhodium (Rh) (1803)
- Palladium (Pd) (1803)
- Osmium (Os) (1803)
- Iridium (Ir) (1803)
- Platinum (Pt) (1735)
- Gold (Au) (????)
- Silver (Ag) (????)
You can guess outliers for Gold and Silver. Silver became lacklustre due to it industrial use in the modern era. Hence Gold became a unicorn due to the historical advantag of being discovered and used many millennia before other noble metals were discovered. In short Gold had first mover advantage. Gold became more valueable when it became rare, portable, divisible, tradeable and easy to check its quality (like 916).
Bitcoin on the other hand has similar values to gold. It is scarce due to the limited supply, it is transferrable from one person to another, it is tradeable via exchanges or defi and it can’t be counterfieted like fiat currencies and it is easy to verify the authenticity of the currency. The most attractive attribute of the bitcoin is the divisibility. You can buy 0.00000001 bitcoin which is called Satoshi. This is what attracts people to bitcoin and it will help build an inclusive economy of creating wealth for masses.
Just like iPhone revolutionized the smart phone industry, bitcoin revolutionized the cryptocurrency industry. Lot of cryptocurrencies were launched as alternative to bitcoin and some of them were even scams. The bitcoin started a fintech revolution that is growing exponentially every year and is pulling the people into its orbit. Recently El Salvador announced bitcoin as legal tender and this got worldwide attention.
Founder & CEO
He is an expert in emerging technologies like cloud, big data and analytics, blockchain and artificial intelligence. He is the author of the book Learning Google BigQuery. He recently completed his Masters in Blockchain from Zigurat Innovation & Technology Business School, Barcelona, Spain which is affliated to University of Barcelona, Spain. He lived in USA for 13 years and moved back to India in 2018 to start his own company. He lives in Chennai with his family.