At close to midnight on 14 April 1912, an alarm was activated from the crow’s nest of the RMS Titanic. Fredrick Fleet had spotted an iceberg dead ahead, and they were motoring towards it at 22.5 knots. First Officer Murdoch was quick to act. He ordered the engines to stop, go full steam astern and secure all watertight doors. His efforts slowed Titanic down and set her on a course to avert the floating ice mountain, and for a moment it looked as though she would safely clear it. But it was not to be. Titanic’s hull collided with the massive underbelly of the iceberg, tearing into her metal, buckling the plates and opening five of her watertight compartments to the sea.
That’s how it is with icebergs!
What we see at sea level is a minuscule representation of what lies beneath. While 10% of their mass and shape is visible, their bulk remains submerged, only to be seen or experienced by those looking beyond the surface.
The same can be said for Bitcoin.
Taking bitcoin at face value, and branding it as 'just another currency', belies the enormity of Bitcoin.
The bitcoin currency is just one component of Bitcoin. It’s the part we can ‘see’; the element that we ‘interact’ with. But look deeper, and you reveal the powerful weight of Bitcoin.
Bitcoin is a network. An intricately designed one, which allows for the transfer of bitcoin (the value tokens of the network) from one individual to another: securely, instantly and at a fraction of the cost of traditional payment systems. This cryptographic protocol is the technology that drives the Bitcoin network.
Within the protocol lives the blockchain, a distributed ledger consistently updated independently from any central authority. by utilising independent nodes on the network using computational power to recognise, accept and confirm the transfer. It facilitates and accurately logs the secure, instantaneous, pseudonymous movement of data, any data, and not just bitcoin.
The blockchain serves as an all-purpose global database. A secure, transparent record. Blocks can’t be added to the chain without the agreement of a majority of nodes. And once they are placed on record, they’re immovable. This allows for clear audit paths of transfer, traceable at every point since inception. This quality lends itself to use in industries that rely on time-sensitive, verified information. Some considerations include:
In these instances, the use of the blockchain to record information guarantees the data is permanently recorded in the ledger, and available to anyone requiring it.
The programmable nature of the protocol adds further opportunity in the way of smart contracts. Smart contracts are essentially agreements loaded into the blockchain that have self-executing functionality if or when a certain condition is met.
Let’s take a (hypothetical) scenario of my mate, Nathan, and I having a ‘friendly discussion’ about which football teams will take the FA Cup in the next season. For the sake of our friendship, I’ll omit the team preferences here, but suffice to say – our teams are rivals.
We decide to put our money where our faith lies and place a bet on the winners. But here's the thing. I’d trust Nathan to look after my wife and children if I died, but to honour his word when it comes to this bet? Not a chance! How can I ensure he sticks to his side of the deal when my team wins?
Enter smart contracts.
Using a smart contract, we can solidify our wager on the blockchain, including the terms and conditions of payment. This means that when - yes, when - my team win the final, the built in programme will automatically effect the pre-determined action of transferring the total bet pool to me. I don’t have to trust Nathan, he doesn’t have to trust me. Heck, we could be perfect strangers and the commitment would stand. As our bet was placed within the public record of the blockchain, with the payment terms setup as an automated process and determined by the bet's if/when statements, we only need trust the protocol to execute the transfer, not an individual.
Our bet is a highly simplified version of the potential of these smart contracts. As technology evolves and further applications or programmes are developed on the Bitcoin framework we can expect to see blocks on the chain with pre-programmed instructions executing more complex contract terms. This will be a natural progression as more and more of our physical items and assets become connected, and the Internet of Things continues to infiltrate our daily lives.
It’s for these reasons that the true power of Bitcoin doesn’t rest in the convenient currency of bitcoin, for that my friend is merely the tip of the iceberg. The seismic, dormant potential is found beneath the surface, in the underlying protocol of the blockchain. And unlike an iceberg, that has the potential to sink the ‘unsinkable’, the blockchain – and by association, Bitcoin – can only serve us well, not only now, but well into a wondrous future too!