As you all know, I think BitCoin is a horribly stupid idea. It is thriving in the community of male libertarian internet nerds. I have been very vocally against it, as I consider the rise in its price to be nothing short of the kind of scams that were the dot-com bubble in the late 90s and the mortgage security bubble of the late aughts that destroyed the world economy. I feel it will collapse, the early adopter hedge fund type people will walk away with all the money, and normal people will be hurt.
However, that doesn’t mean that the technology behind BitCoin is bad. In fact, the technology behind it has absolutely nothing to do with trying to create an alternative currency. And I had a perfect example on how the core technology behind BitCoin – the “decentralized ledger” – is great even though BitCoin is stupid. This decentralized ledger is the amazing technology behind BitCoin – a problem that computer science has been trying to solve for years. Banks, Paypal, eBay, etc. have a “centralized” ledger. The ledger is like a spreadsheet – it says who owns what.
This morning, my company attorney sends out a power of attorney document for 3 inventors (I was one of them) to sign. Even though it is 2014, and we all want “paperless office”, the document has to be printed out, signed by all of us, scanned in, and e-mailed. We actually did this by one person signing it, and walking down the aisle to the next guy with a yellow sticky on it saying to sign it and give to the next person, etc. (We could all have printed our own copies and signed them and then scanned them all in separately and e-mailed back – but you get the idea on how “ancient” this is).
With the decentralized ledger, a document like this can be tagged in the ledger as belonging to the attorney. She sends it to inventor #1 so the ledger indicates inventor #1 has it. (In BitCoin, this is how BitCoins are transferred – the ledger indicates user #1 had one, and now user #2 has it). They send to inventor #2, again, with an update to the ledger, they send to inventor #3, and then finally back to the attorney.
The ledger knows who has it, and the “block chain” shows how it transferred through the 4 people. Thus, a full record of a transfer of ownership, with a clear intent to send to the next person (thus power of attorney granted). This all happens electronically – no printing, signing with pen, scanning, e-mailing. (Obviously, I’m skipping a step here, which is that from a legal standpoint, something like this ledger/transfer mechanism is recognized as legally binding).
That is the future. That is the technology that BitCoin uses that should be celebrated. That is the technology that *needs* to live on long after all these stupid crypto-currencies die the death that needs to happen. My fear is that this technology will get stunted, much like peer-to-peer file sharing technology is somewhat stunted because of the first (and still prevailing) usage model – media piracy. Peer-to-peer networking and file sharing has nothing to do with trading Beyonce songs, but since that is all people really think of when they think of peer-to-peer, it keeps the technology from being more widely distributed.