What is Bitcoin?

What is Bitcoin? It is the world’s first cryptocurrency, and it works because of the world’s first public blockchain network. What does Bitcoin do? It’s simple. It lets you send and receive value to and from anyone in the world, using nothing more than a computer and an Internet connection. Now, why is it revolutionary? Because unlike every other tool for sending money over the Internet, it works without the need to trust a middle-man. The lack of any corporation in between means that Bitcoin is the world’s first public, digital payments infrastructure. And by public, I simply mean, available to all, and not owned by any single entity.

Now, we have public infrastructure for information, for websites, for email. It’s called the Internet. But the only public payments infrastructure that we have is cash, as in, paper money. And it only works in face-to-face transactions. Before Bitcoin, if you wanted to pay someone remotely, over the phone or over the Internet, then you could not use public infrastructure, you would rely on a public bank to open their books and add a ledger entry that debits you, and credits the person you’re paying. And if you both don’t use the same bank, well then, there will be multiple banks, and multiple ledger entries in between. With Bitcoin, the ledger is the public blockchain, and anyone can add an entry to that ledger, transferring that Bitcoin to someone else. And anyone, regardless of their nationality, race, religion, gender, sex, or creditworthiness, can, for absolutely no cost, create a Bitcoin address in order to receive payments digitally. Bitcoin is the world’s first globally accessible public money.

Is it perfect? No. Neither was email when it was invented in 1972. Bitcoin’s not the best money on every margin. It’s not yet accepted everywhere. It’s not used often to quote prices. And it’s not always a stable store of value. But it is working, and the mere fact that it works without trusted intermediaries is amazing. It’s a computer science breakthrough. And it will be as significant for freedom, prosperity, and human flourishing as the birth of the Internet.

And Bitcoin is just the beginning. If we can replace private payments infrastructure, then we can replace other private chokepoints to human interaction as well. Now, why should we want to build more public infrastructure? Why should we embrace blockchains over corporate intermediaries? Why should we tolerate their inefficiencies and work to make them better? Why should we want the pioneers of this technology here, in the United States, and not fleeing overseas? A simple reason. Because the corporate intermediaries providing today’s critical but privately-owned infrastructure are becoming fewer, larger, and more powerful. And their failures are increasingly grave.

So, roughly half of all Americans, 143 million people, had their social security numbers exposed to hackers because of a breach at Equifax. The SWIFT network has relayed hundreds of millions of dollars in fraudulent transactions because of hacked member banks in Bangladesh, Vietnam, Ecuador, and Russia. The FBI suspects now that the largest of these hacks was perpetrated by North Korea. Corrupt, low-level employees at an Indian bank, Punjab National, were able to fraudulently certify SWIFT messages stealing $1.8 billion dollars. It’s the largest electronic bank robbery in history. In fact, it’s the largest bank robbery in history. In October, 2016, an estimated 1.2 million Internet-connected devices were hacked and turned into a bot net that, for several hours, made prominent websites unavailable across Europe and North America, including CNN and Fox News, the New York Times, and the Wall Street Journal. Increasingly, physical machines are being connected to the Internet to augment their capabilities. They’re wired through servers that are owned and maintained by private and trusted intermediaries, the so-called Internet of Things. Pacemakers from St. Judes Hospital have been hacked. Baby monitors from TrendNet have been hacked, and Jeeps from Jeep have been hacked, to the point that they can be remotely commandeered and driven off the road. Now, those vulnerabilities are inescapable in systems that have single points of failure. It doesn’t matter if the point of failure is a corporation, or if it’s a government. There shouldn’t be a single point of failure.

Similar choke points existed before the Internet. If you wanted to deliver a message you’d have to go through one of three television broadcasters or a handful of newspapers. Private corporations, but no critical infrastructure should rely on one or two. The Internet removed single points of failure in communication infrastructure and ushered in a wave of competition among new media corporations building on top of its public rails. Blockchains can similarly disintermediate critical payments and IoT infrastructure. The technology is not yet ready to answer all of those questions today, but it is our best hope. And, as with the Internet in the 1990s, we need a light touch, pro-innovation policy, to ensure that these innovations flourish in America for the benefit and security of all Americans.