Have you ever wondered, what is the future of money? If we think a little, on how we do most of our transactions nowadays, we realize that we almost do not use coins, now we use credit cards with electronic chips and even our own cell phones. To glimpse something on the subject, it is necessary that we take a look at the origin of said social institution, called money.
At the time that someone wanted to exchange one good for another to obtain a benefit, which was called barter, the foundations were laid to give rise to the creation of money.
The purpose of barter was to access the desired through an indirect exchange, but over time there were certain limits, that is, not only had to meet someone who wanted what one offered, but in turn, had correspondence with what one was looking for, and in the right amounts, to, in effect, make the exchange: a “double coincidence of needs”. Thus, the prevailing need to control and measure the exchange of goods and services, using certain goods, either the most negotiable or the most desired, and therefore the most accepted by the majority or by all. Through the years, the goods that obtained the highest tradability in the market were gold and silver, which in turn were changing their quality, weight and shape, to facilitate transactions.
Far away, there seem to be those times of the first coin, which, most historians agree, was coined around the 7th century BC. by the Lydians, a town settled in the vicinity of today Turkey, where they were already coined with techniques of hammer, small ingots and coins of “electro”, a natural alloy of silver and gold, and where each coin, had already the mark of the issuing authority.
As we see, the money, coins and paper money, arose in an evolutionary way, not as someone’s invention or with the explicit intention of starting it up as such. But, until relatively recently, the history on this subject has begun to change due to the digital environment that surrounds us and that has ended up permeating everything or almost everything.
Our digital adventure begins in 2008, when Satoshi Nakamoto (pseudonym of its author or authors), published an article about computer security and cryptography that would change our ancient perception about money, and in that article, Nakamoto sowed the initial seed of what later would be known as “Cryptocurrency” or “Virtual Currency”. In the beginning, the dream was to have an intangible currency that was used to make purchases only through the Internet.
In the aforementioned article, Nakamoto laid the foundations for what would be the principles on the emergence of a new and revolutionary form of digital exchange of currency, which would later be called “Bitcoins”. Its origin, is still a mystery today, even some speculate about its “coincident” appearance shortly before the so-called “Real Estate Bubble” of 2009, as some assume, that Bitcoin itself will end perhaps in what many already call a “Bit-Bubble”.
The essential elements of the process proposed by Nakamoto are simply based on achieving certification, at least between two people, without the need for a third party to arbitrate this certification, that is, a principle that underlies Bitcoins, is that, for this type of new virtual currency, the certification is made by a network of servers or computers worldwide connected, and not by a centralized bank. In principle, the Bitcoin initiative seeks, among other goals, to free the world from an international banking system governed by a few.
There are numerous advantages that investors of all kinds see so far in Bitcoins, it is enough to know that, in 2009, the parity between a bitcoin and the US dollar was approximately 700 bitcoins for a dollar, but in 2017, a single bitcoin was the equivalent of $ 20,000, an increase in its value not insignificant to consider it.
This type of virtual money uses cryptography to control its creation, that is, the use of complex algorithms and mathematical programs in fast and very powerful computers, which use encryption or advanced coding techniques. The complete system is designed and programmed to “throw” or generate a fixed number of bitcoins per unit of time, through computers with very specific technical characteristics, or servers called “miners” (a nostalgic analogy with the gold rush in the Old West, back in the mid-nineteenth century).
For many, bitcoins are powerful by themselves, and at the same time, they are a masterpiece of programming and cryptography (or as Bill Gates has called it: “a technological feat”). But let’s go deeper, how the price is fixed, its value, and how has this virtual currency evolved, no matter how intangible some may consider it.
Paper money and coins that we have in our pockets, as we know them today, are nothing more than pieces of paper and alloys with a circular shape (coins) with no intrinsic value, and they do not even represent its value in gold. These value instruments created through history, are endorsed and certified only by issuing entities or centralized banks. And it is precisely such central banks which have the task of both regulating and controlling monetary policy in a particular country or region, and also have the task of creating and producing coins and paper money, according to particular demand and need, to have physical money, or its electronic version.
Now, to access and use this cryptocurrency, it is necessary to at least install a software on the computer or on our smartphone, which will work as a virtual “moneybox”, and which will be able to generate a bitcoin address, from which you can send or receive bitcoins from other users. It is important to remember that the sending of bitcoins is almost instantaneous, and any operation can be tracked or monitored in real time. The changes of owners with said currency result in a transfer between two bitcoin addresses, public, although anonymous. In this sense, to ensure the security of the entire network of Bitcoin users, transactions are secured using a series of complex “padlock” or “key” cryptographies, since each account has a public and a private padlock.
As our readers have noticed at this point, most of the whole bitcoin system, elements of production, storage, transfers and monitoring are governed by algorithms, computer programs, equations and computers with a high level of both processing and storage, which turns the process as a whole, into a digital and intangible entity, difficult perhaps to land in our physical and real world.
However, since its origin, bitcoins have found their way to our world. In fact, the first price of a bitcoin in history was determined by a transaction between individuals, and not between magnates or bankers of high lineage. This happened on May 22, 2010, in the BitcoinTalk website, where the user “Jercos” decided to buy two pizzas with his credit card from the user “Laszlo” in exchange for 10,000 bitcoins (BTC), possibly with an exchange rate of 1BTC = $ 0.003 USD.
And in this way, the simple transaction that only involved two pizzas, served as a trigger to start an accelerated process of economic revaluation. In those days, the then owners of bitcoins realized that they could access goods or services with their current cryptocurrency, until then without economic value, making it clear that Bitcoin definitely had the capacity to become what its ideologist and Creator, Satoshi Nakamoto, had proposed: an alternative and improved global financial system.
At the end, the price of bitcoin will reach as far as people are willing to pay for it since, as explained before, bitcoins are determined by the trust of their users, as well as by supply and demand in the exchange markets. Nowadays, many stores and service companies accept bitcoins in Mexico as a mean of payment, such as Dell, Shopify, Amazon Mexico, Gandhi Bookstores, Airbnb, Expedia, CheapAir, Pademobile, among others.
Turning now to the legal and protection sphere, let us understand that the open source that gave rise to bitcoins, is based on its roots in open programming codes, that is, in programs that are not the exclusive property of any particular company, nor are they restricted for “open” use, technically speaking. In general, most people might come to believe that the term “free” or “open source” refers to acquiring software for free, but more than that, freedom refers to being able to modify the source of the program without license restrictions, since sometimes many software companies “lock” their code, hiding it, and restricting the respective rights, but in the case of bitcoins, its source of creation is a public domain issue, and it is intimately related to the so-called “blockchains”.
In this sense, the word “Blockchain” today generates confusion since many people believe that it is only related to the technology that allows Bitcoin to work. To understand these concepts, remember that virtual currencies are a reality that today allows users, among many other things, to avoid banking entities to perform many types of financial operations. In other words, it is not necessary to use traditional means to make investments and / or economic movements in any virtual currency, it is only necessary to register in one of the platforms designed for it and thus be able to access the purchase of these virtual currencies and link it with a credit card or bank account.
In essence, the “Blockchain” technology is something similar to an accounting book through which every transaction is registered in the system, and where each transaction can be accessed by each of the users of a platform that uses said Blockchain technology. Remember that data access is performed in an anonymous way, where users are identified with addresses composed of 30 or more numbers that each user can choose and has the possibility to reveal or remain anonymous. In this way, each transaction is permanently recorded in the database as they are linked to other transactions (hence the name “chain”) and can be found on the platform for other users through algorithms that allow the search of said transactions (always anonymously). In the Bitcoins world, the “Blockchain” technology is used to securely view transactions in an encrypted database, for the security of the system itself and thus avoid “double spending” (that is, when a malicious user tries to spend their bitcoins with two recipients at the same time).
However, not everything that goes around “Blockchain” technology are virtual currencies, a sector in which the “Blockchain” has recently had particular success is in the music industry. In this entertainment sector, the “Blockchain” act as transaction registration systems in which information is distributed through a wide public network (something similar as in bitcoins). An article from Sarah Pérez published on TechCrunch website on April 26 of this year, tells how Spotify is trying to solve its problem of remuneration to artists through a platform that uses the “Blockchain” technology, where said platform has been called ” Mediachain Labs “. In her article, Sarah Perez tells us how last year the Swedish platform solved the conflict they had with the National Music Publishers’ Association (NMPA- an American collective management entity) in connection with “mechanical” licenses, essentially unpaid royalties. A “mechanical” license grants the rights of reproduction and distribution of musical compositions that are protected under a certain figure of Intellectual Property for private use (compensation for private copying). These rights allow the use of musical compositions on CDs, LPs (vinyl), cassettes and on certain digital platforms. In short, there was a lack of a database that allowed control over the number of musical reproductions made by users in a safe and transparent manner. At the end, the conflict was solved with a payment by Spotify of approximately 30 million dollars to the US entity.
On the other hand, the eighth largest Internet company in the world, Baidu, just launched on April of this year an application to protect the intellectual property of the photographs circulating on the network. Its app called “Totem”, which is nothing more than a photographic file developed with the technology of distributed accounting (Blockchain) that uses the chain of blocks to store on it, the personal data of the author of each work, as well as the date and time of capture. This information is contained on the project’s website. With this initiative, the team aims to support complaints of intellectual property infringement and also make the work of each artist traceable at all times, including that carried out before the launch of the platform. The platform will be addressed to photographers, calligraphers, painters, designers and any type of person who creates original images, who may request their admission provided they have not infringed the copyright and intellectual property at any time and meet certain standards of “Totem” quality.
And developments at different spheres of human activity do not stop. In January of this year, another important company, Kodak, announced the launch of a “blockchain” platform to also manage the intellectual property of photographs. This launching resulted in a 100% increase in the shares of the US company.
As we have seen through our small digital journey, the virtual currencies and the “Blockchain” technology arrived to stay among us at least enough time, thanks to their high levels of cryptography and computer security. In this sense, applications in the financial and intellectual property worlds are beginning to bear fruit. In the coming years, without a doubt, we will witness the revolution that is just beginning around us.