BITCOIN - A PROTOCOL FOR THE 21st CENTURY

Bitcoin is a revolutionary new invention that will have a profound effect on peoples' lives in the 21st century. The word Bitcoin can refer to three related but separate things: It is a protocol, a network and a currency. This article will concentrate on the Bitcoin protocol and network. The Bitcoin protocol can be used to maintain a permanent record of practically any kind of transaction, such as stock trades, bond trades, land title transfers, mortgage records, voting, wills, contracts and many other things in addition to currency. A longer list of possible uses can be seen at Ledra Captial online . Currency will be used here to illustrate the capabilities of the protocol, because, after all, currency is the first thing for which the protocol has been used, and it has been successful for over four years so far. But, we will try not to get lost in the weeds over discussing the many misunderstandings and confusing issues surrounding Bitcoin as a currency found in recent media accounts. We will jump into those weeds and try to clarify some of the confusion in a subsequent article.

From Kalamazoo to Timbuktu
The Bitcoin protocol can be used to provide a permanent record of a transaction between two people anywhere in the world, without any third party intervention, at the speed of the Internet across a distributed peer-to-peer network for free, or for the cost just a few pennies. This has never been possible before. Suppose you are a young man from Timbuktu who sojourned to the United States to seek your fortune. Suppose you found your way to Kalamazoo, Michigan where you found an entry level job that paid you much more than you could ever hope to earn back home in Timbuktu. After getting your first paycheck, you want to send some money back home. You could send money home with a wire transfer through a well known company, but you would have to pay a fee for that transfer that could cost you as much as 20% of the funds you want to transfer, or possibly more. With Bitcoin, you could transfer funds from Kalamazoo to Timbuktu at the speed of the Internet, and for a fee of a few pennies you could have that transfer confirmed in about ten minutes. Not only that, but you would not have to deal with any third party like a telegraph company or bank. The transaction would be strictly between you and your family back home. No middleman would stand in your way to slow the transaction.

To accomplish such a transaction, all you would need is a public address of the recipient that looks like this:

1BRNx8SNPx7naEG9t4NEYS11FT4CL5SuAR 

The recipient could send you their address in a simple SMS text message with a simple "dumb" cell phone. Or they could display their address in an e-mail or a web page in the form show above, or in a QR code like this that you could read with your smart phone:

With "wallet" software on your smart phone (or personal computer), and some "currency" in that wallet, all you would have to do is put that address into a window on your smart phone (or read it in directly from the QR code), type in how much you want to send, and click a button to send it. Within seconds, that recipient's address would show the money received, and within ten minutes the network would lock-in that transaction as confirmed. The public address shown above is real. If you were to send a small fraction of a Bitcoin to that address, I would receive it virtually instantly, and the transaction would be irreversible.

Take Me To Your Leader

 Bitcoin is not owned by anyone. It is not controlled by anyone. It is a protocol and a network of the community, by the community and for the community. It's core is a public ledger that contains every transaction that has ever taken place in the Bitcoin system. Thousands of computers around the world have a complete copy of this public ledger, known as the "Blockchain".  The only way to destroy Bitcoin would be to shut down the entire worldwide Internet and all the thousands of participating computer "nodes." One of the most difficult tasks that many people have when learning about Bitcoin is fully accepting the fact that no one is in charge of Bitcoin. It is a fully decentalized, peer-to-peer network that is controlled by the entire community that participates in Bitcoin.

One of the most revolutionary aspects about the Bitcoin protocol is that it takes a totally opposite approach to trust and security as that taken by current banking and financial systems. According to the original Bitcoin Paper: "Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments." Problems with relying on a trusted third party in a transaction between two people include increased cost, slower transaction speed and the danger that some bad actor could penetrate the trusted third party or its systems and steal your money! The Bitcoin protocol trusts no one, but relies instead on trusting mathematics. Quoting again from the original Satoshi Nakamoto paper: Bitcoin "...is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party." Since Bitcoin relies on mathematics and cryptography to secure all transactions, the entire core system is completely open and can be fully examined at any time by anyone.

A great wealth of information about Bitcoin and how it works is available online. One of the best sources of information is the Bitcoin Wiki where you can read the full Bitcoin Protocol Specification,  clarification of many myths and misconceptions, and much much more. There are also numerous videos online that provide in-depth information about Bitcoin. Two of the best videos are How Bitcoin Works Under The Hood and Bitcoin Cryptocurrency Crash Course With Andreas Antonopoulos. For those who would prefer to read a book about bitcoin The Bitcoin Primer is an excellent short kindle book avalable at Amazon.com.

Bitcoin has been operating for almost five years as of this writing, and it has never been broken or hacked. You may have read or heard through the media about several incidents that claimed that Bitcoin had been hacked or that people have had their money stolen or lost through Bitcoin. All these incidents relate to problems in software systems or services that are peripheral to Bitcoin. A lot of work still needs to be done to solve problems in these outside peripheral services provided by independent suppliers, and this will be discussed in the next article which will discuss the Bitcoin currency. The Bitcoin network and its core, the "Blockchain", remain standing solid as a rock. Whether Bitcoin the currency survives into the future or not, the Bitcoin protocol is here to stay, and willl have a profound effect on the world of the 21st century.

The Future of Technology

Replica of Sputnik 1

The first artificial earth sattelite

Launched by the Soviet Union on Oct. 4, 1957

 In 1902, Charles Holland Duell, the former United States Commissioner of Patents (from 1897 to 1901) stated: "In my opinion, all previous advances in the various lines of invention will appear totally insignificant when compared with those which the present century will witness. I almost wish that I might live my life over again to see the wonders which are at the threshold." 

More than 100 years later, I believe those same sentiments apply to the 21st century. However, given all the advances in technology that took place in the past century, it is difficult to foresee just how the coming century can surpass the pace of the last century technologically. When Charles Holland Duell wrote those words more than a century ago, the Wright Brothers had not yet made their first successful flight, but their invention of the airplane was being used by the military by the time of World War I just 15 years later. Horses were still the principal means of local transportation in the United States in 1902. In 1901, Henry Ford designed and built a racing car, and won his first race. At that time there were numerous companies making automobiles, but they were primarily toys for the rich. It wasn't until 1908 that Henry Ford introduced the Model T, the automobile that revolutionized transportation. For several years following 1908, Ford continually improved the mass production techniques to build them such that the price kept coming down every year until 1920. By 1920, almost every family in the United States could afford to own a Model T. Thus Ford not only revolutionized transportation, but he also revolutionized manufacturing.

Commercial radio would not appear until 1920. Airline travel became fairly common in the 1930's. Television became available to consumers in the late 1940's. Jet airline travel became commercially available in the 1950's. Computers the size of a room became available in the 1940's and software that was useful for business was developed during the 1950's. Credit cards became available in the 1950's and became more ubiquitous in the 1960's. Sputnik, the first artificial satellite to orbit the earth was launched in 1957. By 1969, the first human beings traveled to the moon and returned safely to the earth.

 In 1904, John Ambrose Fleming developed the "Fleming valve", or diode vacuum tube, with which he was able to detect radio waves. In 1907 Lee De Forest invented the triode vacuum tube which was the first electronic amplifier. This marked the beginning of the electronic revolution of the 20th century.  These vacuum tubes dominated electronics during the first half of the century, but they had some drawbacks. They were fairly fragile devices that consumed a lot of power and generated quite a bit of heat.

In 1947, the transistor was invented at AT&T's Bell Laboratories by John Bardeen, Walter Brattain, and William Shockley. By 1960, small devices like transistor radios became widely available. This semi-conductor technology expanded into integrated circuits, and by the mid-1970's integrated circuit technology had developed to the point where chips with a component density high enough to put a computer central processing unit onto a single chip. This made the small desktop computer possible.

During the 1960's the Unix operating system, developed by AT&T's Bell Laboratories, became widely used by science, manufacturing and academia, along with the C programming language, invented by Dennis Ritchie at Bell. IBM's proprietary mainframe operating system was used primarily for business applications. During the 1960's and beyond, the IBM mainframes were programmed primarily with the COBOL programming language, developed by a committee of researchers inspired by the work of "Amazing Grace" Hopper, an early pioneer in computer science. (Grace Hopper was also a Rear Admiral in the U.S. Navy.)

By the mid 1970's, computers small enough to sit on a desk and inexpensive enough to be purchased by the average consumer became available thanks to the Apple I for hobbyists and the Apple II for the ordinary consumer. Very quickly thereafter,VisiCalc, the first spreadsheet program, became available, putting a powerful financial analysis tool in the hands of any Apple computer owner for a very reasonable price. IBM followed with the IBM PC to compete with Apple. The early 1980's saw the introduction of the first portable computer about the size of a sewing machine, the Osborne 1. By this time, some powerful software had been developed for small computers for word processing, spreadsheets, and procedural programming languages. Unlike any other computer in its time, the Osborne I came bundled with some fairly expensive software (WordStar word processor, SuperCalc spreadsheet, and Basic programming interpreter.) Software for other computers up to that time cost extra.

The 1980's saw spirited competition between Apple (founded by Steve Jobs and Steve Wozniak), Microsoft (founded by Bill Gates and Paul Allen), IBM, and numerous companies making IBM clones. Apple made the greatest inroads with creative artists and educational institutions, while the IBM and its clones, along with the Microsoft operating system made greater inroads in the business community. By the end of the decade, the internet became available and the use and development of internet applications grew substantially throughout the 1990's.

In 1983, Richard Stallman started the Gnu project to develop a free Unix-like operating system. This marked the beginning of the free software movement which has been developing some of the best software available to this day, created by programmers all over the world, all of it free. It wasn't until 1991, when Linus Torvald created the Linux kernel, that a very robust, free Unix-like operating system could be created from the kernel combined with other software from the free software movement. Since then Linux operating systems, in a variety of flavors, have been developing and improving every year.

The 1990's saw rapid growth and development of the laptop computer, allowing people to carry a computer around as easily as carrying a book. In software, the internet, and both free and commercial software developed at an accelerating pace. By the end of the 1990's, commercial uses for the internet were developing rapidly. One of the best examples of this early use is Amazon.com which revolutionized the book market and largely made local book stores obsolete.

Given that whirlwind tour of the twentieth century, one could be tempted to recall a couple of lines that appeared in "Punch" magazine in 1899: 

       genius: "Isn't there a clerk who can examine patents?"

       boy: "Quite unnecessary sir. Everything that can be invented has been invented."

However, I believe the words of Charles Holland Duell quoted above will apply to the 21st century just as much as they applied to the 20th.

This blog will be devoted to speculation and discussion of what technological changes will happen in the next 100 years, and what effect they will have on the people on planet earth. In order to make some intelligent speculation and prognostication on what the future holds, we will sometimes have to discuss history, economics, philosophy and perhaps politics in addition to technology. After all, you can't understand where you are going unless you first understand where you have been and what trends are currently in motion. Fasten your seat-belts and come on along for the ride!