Blockchain is regarded as the most brilliant technology of our time, created in 2008 when Satoshi Nakamoto published his white paper on Bitcoin. Since then, numerous cryptocurrencies have been created, hundreds of startups and companies around the world have launched equivalent projects, and in the Ethereum ecosystem (Ethereum is the world’s second-largest cryptocurrency), programmers are obsessively working on applications for the future. All of this – the amounts of money invested, the companies involved, the fanatical supporters – indicates that these emerging technologies are about to transform the financial system in particular. The crypto world has long been far too significant to simply fade away…
A few years ago, belief in cryptocurrencies was much less evident: blockchain, yes, but nobody thought that cryptocurrencies had any potential. Back then, dozens of projects proposing commercial applications for blockchain technology were sketched out, with not a cryptocurrency in sight. But companies’ ambitious plans for blockchain – in finance, manufacturing, mobility, energy – were rarely put into practice. Over the same period, however, cryptocurrencies (Bitcoin and Ethereum in particular) gradually came to the fore, becoming a new asset class. Since then, projects that use blockchain without associated cryptocurrencies have collapsed beneath the pressures of real life. Banks and financial services providers in particular have realised that anybody hoping to use blockchain technology must first understand Bitcoin and Ethereum.
As new projects show, the number of cryptocurrencies is steadily growing. In 2019, Facebook launched the Libra project – now rechristened Diem. And Germany and France are both intensifying their efforts to build a blockchain-based euro. But even these major initiatives are unlikely to render Bitcoin or other cryptocurrencies obsolete – on the contrary, they tend to reinforce their validity.
Even though Bitcoin is intangible, in the sense that Bitcoins (unlike gold) can never be physically handled, it does share one key feature with commodities: there is only a limited amount. Gold cannot be extracted indefinitely, and there can only ever be 21 million Bitcoin “coins” – for technically guaranteed reasons. So unlike conventional fiat currencies, the quantity of gold and Bitcoin is limited. In a world where both the euro and the dollar are threatening to become “soft”, this scarcity means that gold and Bitcoin will always remain “hard”. To date, the only difference between them is that mankind has known about gold for thousands of years, whereas Bitcoin is still a long way from achieving the same level of recognition. Compared to gold, however, it is much easier to store, transport and transfer. Bitcoin values can be transferred from one person or entity to another in less than half an hour, even when the transferee is on the other side of the globe – and nobody can prevent it. Here in Germany, people may not fully appreciate this “unconditionality”. We live in a country with institutions that generally work very well. But what about the many millions of people who live in countries with high inflation and minimal legal protection? For many of them, Bitcoin represents the last opportunity for financial freedom and personal autonomy.
Bitcoin was the first blockchain-based application to prove the technology’s feasibility, by making it possible to trade in monetary values without a centralised authority. No Bitcoin has ever been issued twice, nor has the Bitcoin blockchain per se ever been hacked. Using blockchain technology, Bitcoin has ushered in the age of an “internet of values”: it will have a similarly transformative impact to that of the “internet of information” over the last 25 years.
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