Bitcoin has the potential to revolutionize the world. It will upend the entire financial industry by giving rise to the utopian idea of a single fabric of exchange not regulated by a central bank or government. It has the ability to do for finance what the Internet has done for communications and trade; through the introduction of the revolutionary technology that make up Bitcoin’s programming, Bitcoin will herald the dawn of a new age in currency.
Although the current state of Bitcoin has inherent flaws in regards to management and security, real money is beginning to flow into Bitcoin, and real businesses all across the world are starting to accept it as a means of payment, such as Dell, Dish Network, Expedia, and Overstock.
Bitcoin is a peer-to-peer digital currency that trades on public exchanges and can be instantly transferred between any two people anywhere in the world with nanosecond-speed and at a cost far lower than usual transactions processed through the traditional financial system.
Satoshi Nakamoto, the programmer who created Bitcoin, set out to solve the problem of “double spending,” meaning that all financial transactions should be made directly between two participants absent of middlemen, in a method that is wholly verifiable and absolutely impossible to counterfeit.
Although Bitcoin is absent of any intrinsic value, its core tangibility stems from its mathematical basis. The Bitcoin protocol operates on a concept called a “Blockchain.” The blockchain is a giant, globally shared ledger of every Bitcoin and every transaction in the history of the network.
The programmers (known as “miners”) who run these complex validation and confirmation processes are rewarded with new Bitcoins. The genius behind the reward system of mining is that it provides the incentive for the Bitcoin network to continue running in a completely decentralized manner, free of government regulations. In order to acquire new bitcoins, a miner needs to maintain the public Bitcoin ledger by running a set of specific mathematical algorithms.
During the Cyprus Banking Crisis of 2013, venture capital firms began pouring vast amounts of money into Bitcoin. Investment increased from $36 million in 2012 to $88 million in 2013. Current predictions show that by the end of 2015, over $1 billion will flow into Bitcoin and related enterprises.
Bitcoin’s value was bid up in a time of desperate uncertainty, as the currency was able to circumvent the traditional banking system and government-imposed restrictions. Bitcoin proved that it could be the world’s safety net, independent of fluctuations in the global market, and act as an independent currency that relies on its own innovative system to function.
As of today, 13.5 million bitcoins of the 21-million upper limit have been mined.
Because Bitcoin has a finite supply and its increase is highly predictable over time, Bitcoin will become the perfect currency. For the first time in history, we have a currency and a payment system that runs not just on faith or trust in a system but on a mechanical foundation and predictable growth of money supply.
As students, we can begin taking advantage of Bitcoin’s low transaction costs immediately, especially in regards to student loans. An online company named Brawker is providing students a simple and secure way to reduce their student loan debt by at least 20 percent. A student can go online, purchase a Bitcoin from a public exchange, post the Bitcoin on Brawker for a 20 percent markup, and trade that Bitcoin in for essentially a “tuition gift card.” A tuition gift card worth $500 will cost you $400, which is the equivalent of roughly two Bitcoins at the current exchange price.
As Bitcoin continues to evolve and its exchange price continues to stabilize, its future is undeniably optimistic. I do not believe the current version of Bitcoin will become the global medium of exchange, but an evolved version will certainly be. The potential is enormous, and the technology is here to stay.
