Ten years ago today, the pseudonymous Satoshi Nakamoto presented bitcoin to the world in a famous White Paper. In the intervening decade, bitcoin has seen boom and bust cycles, spectacular heists and fraud, has spawned thousands of imitators, a new way of financing start-ups and helped create an industry that Switzerland has wholeheartedly embraced.
Many of the 600+ blockchain start-ups and support service currently operating in ‘Crypto Nation’ Switzerland owe their existence to bitcoinexternal link, which initially kickstarted the industry and set in motion a chain of innovation.
Bitcoin itself remains an enigma. Its place in society is as hard to pin down as its dollar conversion value. The first bitcoin appeared in January 2009. The first transaction in 2010 saw two pizzas being purchased for 10,000 bitcoin. Last December 10,000 bitcoin were worth $200 million and they now fetch around $65 million.
Volatility makes bitcoin an unreliable method of buying pizzas. As an investment, the original cryptocurrency has created multi-millionaire winners and shirtless losers. It therefore has plenty of enemies who would like to shoot it down.
And yet, seemingly against the odds, bitcoin has survived. This might be explained by enthusiasm for the basic concept behind bitcoin: to allow people to transfer digital assets directly between each other without the need for trusted third parties.
Big business adoption
Bitcoin employs blockchain - a form of Distributed Ledger Technology (DLT) - to carry out the accountancy and auditing work currently performed by banks. Balancing the books is decentralised among all participants, allowing everyone to view and approve the transaction ledger.
Big business has cottoned on to the idea. Removing middle-men removes friction and increases profits. Groups of companies can view real-time transactions in their entirety, increasing transparency and impeding fraud.
Much to the consternation of bitcoin purists, firms such as Nestlé, UBS and Mercuria are stripping out the more rebellious parts of blockchain and creating their own custom-made, private DLT systems.
If the technology can be employed without bitcoin then why does the cryptocurrency persist? The notions of independence, self-determination and choice are also powerful drivers.
Authors selling tokens over blockchain that grant access to their book not only increase profits, but also gain more control over their masterpiece. A growing number of entrepreneurs would rather raise capital from the public by issuing tokens than give up control of their firm to venture capitalists.
Initial Coin Offerings (ICOs) have been criticised for producing more failures than successes, burning public investments along the way. There have also been cases of outright fraud. But the so-called ‘token economy’ is becoming more mainstream and respectable, to the point that companies with no connection to blockchain are raising capital via ICOs.
The genesis of the token economy is bitcoin. Even bitcoin purists would concede that it must solve some fundamental technical problems before it can be fully adopted. One website of bitcoin obituariesexternal link tracks the number of times the cryptocurrency has been declared dead in the media (315 times). But bitcoin isn’t dead because the spirit behind it refuses to die.