Coop Digital newsletter: blockchain

The latest Coop Digital newsletter was a good challenge.

The EU referendum result had come in a couple of hours before we published, and it couldn’t be ignored. But Coop had no formal editorial position on the vote, and I’m representing Coop Digital rather than my own views. So I gritted my teeth and wrote something simple that looked forward. Then I went back to shouting hoarsely at the TV news for days.

It also had a piece on bitcoin, blockchains and the unfolding story of DAO (blockchain contracts, hackers etc). One of the things that makes bitcoin really interesting is that you have a sense that there’s probably something there a long time before you understand what it is. Perhaps like when you see something shiny flashing in a water fountain, and you don’t yet know if it’s a coin or something else, and then when you put your hand in to pick it up, it’s a lot deeper than you think due to the water’s refraction and… etc.

Here’s a bit, cut from the newsletter to keep it shorter, trying to neatly capture what they are:

What is Bitcoin? A decentralised digital currency, in which the transactions are between (anonymous) individuals rather than via an intermediary like a bank or VISA. It’s a decent medium of exchange (you can buy quite a lot of of things with it), but a volatile store of value (it goes up and down a lot in value against other currencies).

What is the blockchain? A public, distributed and continuously-growing ledger of between every bitcoin transaction historically, that’s cryptographically hardened” against tampering and revision. In money terms, it replaces the credit ledger functions of a central bank. Bitcoin was the first blockchain-based digital currency, but there are other blockchains, such as Ethereum.

Why are blockchain-based currencies interesting? Because there are no financial intermediaries, transaction costs can be much lower. They may fill a gap for countries with under-developed banking systems. The proof of work mechanism authenticates the user in a relatively tamper-proof way, but introduces weird inefficiencies: it’s energy inefficient and it takes time.

I still don’t understand bitcoin or blockchains, but am trying to get there.

The newsletter itself is magic to work on. Strong, decisive team of good people at Coop, great mission, and I’m learning lots.

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