Co-op Digital newsletter: blockchain
The latest Co-op 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 Co-op 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.