Jerry Mooney Cryptocurrency Will Disrupt Finance Like Email Disrupted Mail

The digital age has been disrupting human structures for decades. The internet transformed the way we communicate, share, transport and organize. 25 years ago, corresponding with someone in another country through mail was a slow and limited process. A letter often took a week to arrive and a response would take at least that long.

Today you can send someone just about anything at the touch of a finger. Interestingly, though, this is not true for money. You can send an email to China that simply says ‘hi,’ but if you want to send a dollar, you’re out of luck. If you send larger amounts, there is expense and delay. But there is new technology that is revolutionizing money in our global digital economy: Bitcoin.

I call it technology instead of money because the technology is what makes it revolutionary. However, it is true that Bitcoin is a digital currency that can be spent similarly to an email being sent and is the next step in monetary evolution. Money has been many things since humans have been trying to trade their goods and services, from beets, to seashells, to broken sticks, paper and the most recent advancement of EMV card technology.

But Bitcoin takes all of these currencies and their advantages and brings them to a new level. It is frictionless in that it crosses international borders, bypasses bank charges and delays, and is verified by a network of computers instead of a central banking system. And just like email disrupted the postal system, Bitcoin is disrupting the financial world.

Because of its disruptive quality, much of the discussion around Bitcoin surrounds its legitimacy as a currency or questions as to what it even is. The most important are its implications. Northeastern University outlined some of the pros and cons of this currency innovation. Most of the cons stem from its relative newness and a lack of trust. This is coupled with the fact that it is digital cash and thus creates a platform for illicit purchase. But the pros are significant and far reaching, including international money transfer without fees or delays. This might seem like a small thing, but when we examine the globalization of our economy, speeding up the rate of a transaction has a major impact.

Additionally, because Bitcoin is not created by a treasury and then controlled by a central bank it threatens the current financial infrastructure. This has created concerns from those who currently benefit disproportionately from the status quo. But when we look at the real implications of Bitcoin it appears to be a benefit for most people because it is a decentralized and distributed currency. The network validates and facilitates transactions instead of a bank so it doesn’t cost money to make transactions with Bitcoin, saving users those persistent transaction and banking fees.

The security system is a massive network run by total strangers. This sounds dubious at first, but it is completely secure. The network uses computers that are solving math computations to support a transaction’s protocol. Those on the network must reach a consensus as to the validity of a transaction before it can go through.

Those transacting use an encrypted public key to hide their actual identity, while using a public key to make transactions possible. Because personal data is not used and there are public key changes for each transaction, there is no way to steal identities.

This is significant considering half of all cybercrime is financial and costs us trillions of dollars. Protecting identities becomes unnecessary with Bitcoin because transactions occur over a block chain that is an open digital distributed ledger of transactions but the identities of those transacting is completely anonymous. This is the opposite of how things currently work. With conventional currency and banking, the ledger is private but personal information is required for access.

By having a decentralized and distributed currency based on an open ledger with anonymous users commerce can be conducted without the risk of hacking. This includes privacy issues as well and theft. This model also reduces the cost of verification, because the banks don’t take a part of the money. The money supply can’t be manipulated by central banks and governments, because it is not centrally created. All of these things make Bitcoin an attractive and disruptive new technology and currency. It will be interesting to see where it takes us as we are in the infancy of its applications.