What exactly are Bitcoin, Blockchain and cryptocurrencies? Is it safe to invest in them or are we facing a bubble of enormous proportions? On all these issues and the future of money on the Internet we spoke during the past Xataka Awards, in one of the talks that took place during the event.
The speaker of the talk was Carlos Domingo, co-founder of the company SPiCE VC specialized in investments in Blockchain with a long career in innovation in the field of telecommunications. He has lived in the United States and Japan, has been responsible for everything that carries the word R & D in Telefonica in different positions, and now is involved in a project related to the world of cryptocurrencies.
The talk is focused on teaching the basic concepts of Bitcoin and Blockchain, recent technologies but that the Nobel Prize in economics Milton Friedman already imagined in 1996, when he assured that a virtual currency would be created in the Internet in which to make payments without a know the others.
With this premise, Domingo places Bitcoin at the same level as the rest of the protocols that make the Internet work, such as TCP, IP, FTP or HTTP. A protocol that allows transmitting value as others allow to transmit voice, mail or files. And no, it has nothing to do with Paypal or Apple Pay, since these do not represent digital native money but a way to transmit the money of the current banking structure. Bitcoin is "a hundred percent digital native coin".
And where does Bitcoin come from? The first of the cryptocurrencies was created "Satoshi Nakamoto", a pseudonym that corresponds to a person that no one knows exactly who he is. This man published an article in 2009 describing a P2P payment system he called Bitcoin. After a few months he himself published the first version of the software that allows managing the currency network, and begins to interact in forums with the first interested parties.
To understand the Bitcoin you have to understand several basic concepts. The first is that it is based on a decentralized computer network, which means nodes scattered around the world with copies of all transactions that have been made. The second concept is that of the miners, people who are part of the nodes, and who have the incentive that every time new Bitcoins are generated they are shared among those who are part of the nodes.
Another important concept is that of exchanges, which allow you to change currencies such as euros or dollars for Bitcoins and get into the world more easily. When you get them, they are stored in what are called 'Wallets' or portfolios, which are applications that allow you to save or exchange them.
"The bigger the Bitcoin network, the more secure your transactions"
From there, from purse to purse you can change money, and when someone gives you their purse address you can send them Bitcoins. Once the transaction is made, it is replicated throughout the computer network so that you can no longer modify it, since to do so you would have to modify the transaction on all computers. This means that the larger the Bitcoin network, the more secure your transactions.
In addition, the amount of cryptocurrencies that are issued each year is configured in their algorithm. It is mounted in such a way that every four years the number produced is reduced by two, and only a total of 21 million Bitcoins will be issued. This is a fundamental difference with conventional currencies, since banks modify their value at their own free will. This gives it more capacity to generate value against currencies that can be devalued when banks say.
Is Bitcoin a type of currency?
Tal y como nos cuenta Carlos Domingo, la palabra criptomoneda está formada por dos conceptos diferentes. El primero es cripto, porque para que la red de Bitcoin sea segura se utilizan algoritmos criptográficos. Estos permiten que cuando se realiza una acción los ordenadores no pueden revertirla, y no se puede saber de dónde viene y quién la ha realizado.
La segunda parte del concepto es la definición de lo que es una moneda. Las monedas tienen que cumplir tres funciones, la de permitir almacenar valor, realizar intercambios y transacciones, y referenciar objetos. Referenciar quiere decir que se puede utilizar de referencia de valor, como cuando dices el precio de tu teléfono para que el resto podamos hacernos una idea de su valor.
As Carlos Domingo tells us, the word cryptocurrency is made up of two different concepts. The first one is crypto, because cryptographic algorithms are used to make the Bitcoin network safe. These allow that when an action is taken the computers can not reverse it, and you can not know where it comes from and who has made it.
The second part of the concept is the definition of what a currency is. The currencies have to fulfill three functions, that of allowing to store value, make exchanges and transactions, and referencing objects. Reference means that you can use a reference value, as when you say the price of your phone so that the rest of us can get an idea of its value.
According to these criteria, as Domingo explains, we can not say that cryptocurrencies are real coins because they do not fulfill these three properties. The one that is fulfilled the most is the storage of value, as if it were a virtual gold. But as a means of exchange is not accepted in too many places, and as its value is constantly changing does not serve as a reference. Cryptocurrencies will not be real coins until these three properties are met.