Digital currency is fast changing and disrupting many industries, including the financial industry. In fact, the technology behind digital currency has the potential to be a much greater disruptive force than the crypto currency itself. Strong evidence suggests that this technology could replace huge aspects of both the financial and online industries, and even how the corporate management model works. Crypto currency refers to digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
This disruptive technology is not really new; the first decentralized digital crypto currency can be traced as far as late 1990s, with emergence of “Bit Gold”, created by Nick Szabo. Bit gold is considered the ancestor of Bitcoin. This article aims to provide a comprehensive overview about Crypto currency with a specific focus on Bitcoin, peer-to-peer technology that operate with no central authority, the network carries out activities usually done by banks; managing transactions and issuing of Bitcoins collectively.
Bitcoin is an open source; nobody owns or controls Bitcoin, enabling everyone to participate. Using a cryptographic protocol, Bitcoin allows exciting uses that could not be covered by any traditional payment system. Although Bitcoin is the most common Crypto currency used to today, Litecoin is another alternative to BitCoin. Litecoin is a digital currency, which is created and transferred electronically using encryption. Like Bitcoin, Litecoin’s transactions are recorded on a public ledger and new coins are created through a process known as “mining”. Litecoin is the second most popular crypto currency; today one Litecoin is worth about US$4.7. Despite the similarities between Litecoin and Bitcoin, differences exist in how transactions are handled. The biggest differences however is the value, despite it being the second highest valued crypto currency, Bitcoin is 200 times more valuable than Litecoin.
In 2008, an individual and or a group of people by the name Satoshi Nakamura released a paper titled “A peer-peer electronic cash system”; this paper outlined how Bitcoin works, furthermore the paper outlined conceptual and technical details of how Bitcoin would allow individuals to send and receive payments without involving any intermediary financial institutions. No one knows who Satoshi is; this mystery is the many reasons why Bitcoin cannot be trusted claim some opponents. Bitcoin goes against the norms of today’ financial systems and could potential remove the need to go to a bank in order to borrow money. I believe this is the main reason why major players in the financial system led by reserve or central banks are fighting crypto currency such as Bitcoin. Thus protect their own interests and continue insanely charge exorbitant fees.
According to Satoshi, because Bitcoion is based on cryptographic proof instead of trust, it allows any two willing parties to transact directly with each other without the need for a trusted third party. Thus, transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. Furthermore, he claims Bitcoin is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes. Users send Bitcoins, by broadcasting digitally signed messages to the network using Bitcoin wallet software. Transactions are recorded into a distributed, replicated public database known as the block chain, with consensus achieved by a proof-of-work system called “mining”.
According to Crypto currency facts, Bitcoin is believed to offer the following benefits to its users:
Privacy — Although not entirely anonymous, users can transact without being traced by third party entities such as banks etc. This because Bitcoin uses a public-private key cryptography, individuals can send and receive transactions without attachment to their real-world identities.
Accessible to Everyone — Anyone with Internet access can use bitcoin. No background check is required nor fees. Bitcoin is an equalizing system. Also, modern bitcoin client software makes the technical aspects of Bitcoin transparent to the user; contrary to popular belief, you don’t need any tech skills to use bitcoin.
Low-Cost — Credit cards and third-party transaction companies like Paypal both have hefty transaction fees. Banks often charge exorbitant percentage fees on money transfers. Bitcoin transaction fees are set by you and are generally a fraction of what you’d pay for the same transfer through a different medium.
In it early days, Bitcoin was seen as a threat to monitory order by many central banks. Because it can be used as a cheaper, faster alternative to traditional electronic payment systems like PayPal, credit cards, and online banking money transfers. It can also be collected and traded as a commodity or investment. In order to combat the success of Bitcoin, thus protect their banks; Russia for example is developing new laws to regulate national digital currency. Enabling companies and individuals to exchange Rubles or other currencies for digital cash on special electronic platforms. Moreover, Some banks for example Swiss USB are investing a lot of money in research and development to explore new technologies such as crypto currencies and block chain. Furthermore understand the impact that it could potential have on the banking industry.
Yes, the Bitcoin revolution has not taken off in Africa yet, but it is just a matter of time before we see crypto currencies become the preferred trading currency in Namibia and though out the African continent. Therefore, our banks need to be vigilant and not ignore the Bitcoins of today, as they do not only pose a growing threat to the financial sector but also revolutionise how payment is done.
Lameck Mbangula Amugongo is country Ambassador of 1 Billion Africa in Namibia. He holds B.IT: Software Engineering, B.Hons: Software Development (Cum Laude) and currently pursuing MSc. Computer Science