30 July 2014 / The Globe and Mail: By Geoff Gordon – The media’s insatiable desire to sensationalize stories has resulted in a lot of misinformation around bitcoin. For business owners who aren’t properly educated, this misinformation – understandably – leaves them with inaccurate opinions, and the reality of bitcoin is left somewhere behind.
Those who understand bitcoin view the technology as highly innovative and one that holds a tremendous amount of potential. I personally share this opinion, but as a payment professional, came to this conclusion from a very cautious position. It was important that our company educate ourselves on this new type of currency in order to determine how to best deal with it.
So, what is bitcoin and what does it mean to businesses? Bitcoin is comprised of the following four things:
First, it is software. In 2009, Satoshi Nakamoto released the first version of the bitcoin software as an open-source project. The software essentially defines the protocol in which the bitcoin network operates. As an open-source project, the software can be freely used (and modified) for other projects. As a result, many other coins – informally known as altcoins – have been launched using modified versions of the original bitcoin software. Some examples of altcoins are Litecoin, Dogecoin and Peercoin.
Second, bitcoin is an open peer-to-peer network. The use of and participation in the bitcoin software by users across the globe creates the bitcoin network. Anyone can participate and it’s the collective computing power of all the users (specifically a type of user known as a Miner) across the globe that supports and operates the bitcoin network. The peer-to-peer design of the network does not support any central authority that controls the network – in other words, it’s decentralized. I like to describe it as “a network by the people, for the people.
Third, bitcoin is a secure transaction verification mechanism. It combines a general accounting ledger, known as the Blockchain, with encryption technology to provide a secure transaction verification engine. This removes the need for a trusted third party and allows bitcoin to operate independently. The bitcoin Blockchain is shared to the public and everyone can view it in real time.
Fourth, it is a brand. It’s the name of the encrypted digital tokens that represent a unit of value within the bitcoin payment network; much like the greenback or loonie represent a unit of value within their respective fiat currency systems…… Read more
