BlockChain and BitCoin: scams or new trends to follow?

BlockChain and BitCoin?

BlockChain and BitCoin are almost unknown terms with regard to a technology that can be defined as “disruptive” (volatile, radical, that explodes on the market, overturning the life of consumers from one day to the next, while sending its predecessors into oblivion). Let’s try to clarify things.

Today, many people associate the term BitCoin with BlockChain, as if it were something unique and inseparable. Theory teaches us that this is not so, yet can we also confirm this in practice?

BitCoin is a Cryptocurrency, or rather a digital currency that is assigned a true value (USD/EUR) based on market demand/supply.

BlockChain is the decentralized technology at the base of cryptocurrencies that enables to create a currency, transfer it and certify each transaction in an unmodifiable manner, ultimately eliminating the need for “trusted” third parties such as banks.

Two complex concepts, let’s start with BitCoin.

What was just written is the synthesis of two extremely complex concepts that require both technological and financial skills, propensity towards risk and a futuristic vision similar to faith. Somewhat excessive?

In this first article we’ll be focusing on the first of the two, but we’ll also be publishing an explanation on Blockchain soon.

BitCoin is a cryptocurrency, therefore something intangible, unlike a banknote, but potentially with the same value. It’s a shame that presently almost nothing can be purchased with it: there is no way to use it in an easy and “user-friendly” way to make purchases, there are no bank accounts where to deposit it and above all there is no one to give advice or explain how to use a cryptocurrency…

History teaches us.

All of this is sufficiently out of the ordinary, making 99% of those who are considered mentally sound cry out that it’s a scam and the remaining 1% (those who are not sane) that it’s a miracle.

I’ll try to explain what I’ve just said from the mental hospital where I’m writing from. Let’s think of currencies as we know them today, that is, the paper bill with which I purchase my anti-depressant drugs (yes, I admit it, I’m among those insane few who believe in cryptocurrencies). Actually, let’s take a further step backwards, when the exchange of services and goods was based on gold (coins, ingots, nuggets, etc.): a good was traded for a value in precious metal, also known as heavy currency. And it certainly was heavy… Imagine shopping at the supermarket with gold coins, instead of cash registers we’d have strongboxes and instead of cashiers we’d have goldsmiths weighing the amount owing: definitely not very feasible.

In my opinion, however, gold was the ancestor of cryptocurrencies: even gold, in fact, did not require a third party (bank) involved in every transaction and what took place was simply an exchange of a good for a real counter value.

I realize this affirmation may seem somewhat strong, but let’s continue with the story and I’ll try to help you understand this distant link.

The exchange mechanism through gold had several problems that went along with it: transportation, managing fractions of its value, where to safeguard it and deposit it. It is precisely for this reason that someone thought of creating a deposit where people could open an account and deposit gold to avoid theft. But the real stroke of genius was to create a paper certificate with a value (the value of the gold deposited): the ancestor of banknotes; simple to manage, divide and transport.

At this point in history (around the fourteenth century) something unexpected happened: some illuminated people created banknotes (at the time known as running cash notes) and the transition from a single currency (gold) to banknotes (which maintain a counter value) took place.

It is said that “appetite comes with eating” and in 1971 the United States decided that it was no longer necessary to have a value in gold equivalent to the printed currency and that every state could print an unlimited number of banknotes. Hence, the question arises spontaneously… If there is no counter value in heavy currency, what guarantees the value of my banknotes? The answer is quite simple: NOTHING! This means that if, hypothetically, a state “collapses”, the local currency would be worth 0, although I’m sure that someone could say that it is virtually impossible for a state to declare bankruptcy. I quote Beppe Grillo, the comedian, during one of his shows: “The same thing was also said by the designers of the twin towers ‘It’s practically impossible for the towers to fall’, or the captain of the submarine Greenwille who decided to resurface quickly in the middle of the Indian Ocean, whereby a deckhand asked him if there could be someone on top and his reply was’ Who could there possibly bet, we’re in the middle of the Indian Ocean, it’s practically impossible to find a nine meter Japanese fishing boat right above us'”. Perhaps we should give a different meaning to the word practically.

This is where banks come into play; private entities that “help” the state (which can print unlimited currency) to manage and distribute the currency to people, using deposit accounts, where the end users can keep their money, while certifying all the transactions carried out by the account holders. As private companies, banks do not work for charity, rather to generate profits using the capital of individuals and, as history teaches, they too practically can’t go bankrupt.

In summary.

We’ve reached the end of the first point.

In summary: today’s paper currency is managed by a few enlightened people who have the power to print currency at will to increase or decrease its value compared to other currencies. Currency has no real counter value and is managed and distributed by private companies that certify the transactions and work for their own interests.

At this point I’d like to understand why it is so detestable to talk about cryptocurrencies… They do not have a real counter value (but we’re already used to this) and the transactions are certified by the network and included in the famous Blockchain, which is unchangeable. This means that the cryptocurrencies present in a wallet (wallets or checking accounts of individual users) are not subject to errors such as shortages or possible internal manipulation (so basically there’s no private company that manages my virtual money), the amount of currency that is created is finite and no one can decide to modify it unless the majority of the network is unanimous (at this point a cryptocurrency fork would be created, a concept that we’ll look at in the future). Cryptocurrencies have no jurisdiction limits because they are on a par with a global currency that does not exist today; payments are unlimited and the management costs are next to nothing.

However, could it not be that cryptocurrencies are the evolution of current payment systems, establishing the end of banks as we know them today, while leading to a progressive loss of control by banks and states? Perhaps this is what is really considered annoying and has people up in arms stating it’s a scandal and scam.

Moreover, all great inventions go through the phase of non-acceptance, rejection, scam, bubble, but those that have solid foundations and resist the “bad weather” stage create an evolutionary drive that leads to a technological, cultural and social revolution.

Internet
is an example. A system that was initially contrasted, fought, considered useless; a system that has evolved over time to become what it is today: an integral and fundamental part in the life of each and everyone of us.

Can you imagine today’s world without internet? The world would stop!

BitCoin and Cryptocurrencies: a final thought.

This long digression on BitCoins was needed to describe them under a different aspect as opposed to the one presented to date by the media or institutions. I don’t know if I managed to get you into that 1% group which I spoke of earlier, but I hope at least I got you thinking.

But the real revolution, which is the foundation of cryptocurrencies, is Blockchain. Would you too like to know what it’s about? Keep in touch with us!

Paolo Ferrari
paolo@mon-k.com

Graduated in Information Technology, he has a twenty-year experience in data protection, information technology and cyber security. He worked at various Italian companies in the field of Networking & Security, covering both technical and managerial roles. His whole professional activity has been driven by the passion for innovation, technology and entrepreneurship, and this resulted in the participation and contribution to start-up projects and entrepreneurial activities. LumIT SpA and Mon-K Data Protection are the most relevant examples.

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