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Bitcoin Basics: What does cryptocurrency enable?

Bitcoin Basics: What does cryptocurrency enable?

This weekend, Toronto will become a global Bitcoin capital, as more than 50 expert speakers and 500 participants will take part in the first international Bitcoin Expo at the Metro Toronto Convention Centre.

Some of the notable speakers include:

  • Andreas Antonopoulos, a pre-eminent global authority and prolific spokesperson on Bitcoin;
  • Jason King, who is known for promoting charity work with Bitcoin donations and helping the homeless via Sean’s Outpost;
  • Cody R. Wilson, a tech renegade, crypto-anarchist and Bitcoin activist best known as the maker of the first 3-D printed gun; and
  • Joseph David, CEO of VirtEx Canadian Virtual Exchange, Canada’s largest Bitcoin exchange.

The conference program will revolve around several topics, including the evolution of money and banking, safe Bitcoin storage techniques, the new cryptocurrency monetary era, Bitcoin and venture capital opportunities, and decentralized applications enabled by cryptocurrency platforms, among others.

This is a big deal. Bitcoin is not just a currency, nor is it a passing trend. Yet, for all of the frenzy that has surrounded the Bitcoin, few people really understand just what it is. The applications for Bitcoins are growing and the opportunities for new startups to harness the power of the Bitcoin are huge. Bitcoin is simultaneously a digital cryptocurrency, a peer-to-peer network, a distributed accounting ledger, open source software, a software development platform, computing infrastructure, a transaction platform and a financial services marketplace.

1. Digital cryptocurrency

The digital currency function is probably the most “visible” element of Bitcoin. Basically, Bitcoin enables users to pay for goods and services via a digital wallet that is encrypted for security purposes. As a currency, Bitcoin is gradually being accepted both online and offline.

2. Peer-to-peer network

There is nothing “central” about Bitcoin. A user reaches and transacts with other users instantly, no matter where they are located in the universe and regardless of banking hours. No intermediary can filter, block or delay a transaction between two users or two nodes that are consuming a transaction. Plus, any node on the network is allowed to offer services based on the knowledge of Bitcoin transactions anywhere.

3. Distributed accounting ledger

Bitcoin is also a distributed, public, time-stamped asset ledger that keeps track of every transaction ever processed on the Bitcoin network, allowing a user’s computer to verify the validity of each transaction so that there can never be any double-counting. This is a primordial feature of Bitcoin, also known as the “blockchain.”

4. Open source software

The core Bitcoin protocol is open source. The software was initially developed by Satoshi Nakamoto and was released in 2009. Since then, it has been maintained by a core group of developers and is continuously improved and enhanced by thousands of others who are innovating with products, services and applications that take advantage of the Bitcoin protocol’s robustness.

5. Software development platform

For developers, Bitcoin has several application programming interfaces (APIs), including a transaction scripting language, a peer-to-peer node communications API and a client API to check transactions on the network. Other APIs are sure to be developed. Developers are flocking to the Bitcoin platform to innovate at both the applications and services levels.

Bitcoin Basics

6. Computing infrastructure

Mining Bitcoin requires the deployment of a certain amount of computing infrastructure at a commensurate degree of difficulty. When you mine Bitcoins, you are rewarded with a “block” of Bitcoins that has value. Anyone with enough computing power (and money) can run the specialized software that “mines” for Bitcoins.

7. Transaction platform

The Bitcoin network enables a variety of money-related transactions, as well as meta-transactions based on the “proof-of-work” algorithm that is part of the Bitcoin protocol. This means that applications such as escrow services, contracts verification and other legally binding services can be implemented without expensive third-party intermediaries.

8. Financial services marketplace

Bitcoin also enables earning mechanisms beyond compute-intensive mining. The Bitcoin network is itself fuelled by money; however, it is also an incredible innovation environment for the next generation of financial services. It has been said that Bitcoin is the “Internet of money.” This is probably one of the most exciting phases of its commercialization.

The Toronto cryptocurrency ecosystem

Toronto has a vibrant cryptocurrency ecosystem, with its centre being Bitcoin Decentral, a vibrant 5,550-sqare-foot co-working space that houses several cryptocurrency-related ventures and activities, including Ethereum, KryptoKit, CoinTalk, the Bitcoin Alliance of Canada and Bitcoin Decentral Accelerate.

If you’re a Toronto tech startup looking to learn more about Bitcoin, register now for the Bitcoin Expo, which takes place April 12 and 13, 2014.

Feature photo credit: Bitcoin Wallpaper by Jason Benjamin, used under CC BY 2.0 / cropped