English | EN Bitcoin 2.0 Enables the Birth of the “Internet of Money”
Feb 20, 2015
Bitcoin is the end of “dumb money”. Thanks to Bitcoin, money is now programmable, “it’s a money platform with many API’s”, which allows countless financial innovations to be created. The possibilities are virtually endless and often quite unexpected. Examples include fraud-free voting systems, digital rights management systems, new types of air miles or freebies, and festival coins for buying drinks. Imagine a car rental company issuing bitcoins linked to their fleet of rental vehicles. Each vehicle can be unlocked and started by using a corresponding bitcoin. People can book the car online and use this digital currency (which can be encrypted on their smartphone in a special app) to drive the car when they are entitled to do so. And, if they are in a hurry, the driver can issue micro-payments to other road users to get out of the way.
Or what about a NSA-proof version of Twitter? Recently a fully decentralized P2P microblogging platform, named Twister, was created by leveraging from the open software implementations of both the Bitcoin and Bittorrent technology. Bitcoin could ultimately give rise to a completely new generation, economy even, of distributed and decentralized companies and services. Combined with decentralized production technology such as social collaboration they can even be virtually leaderless, self-organising corporations.
Bitcoin also makes it possible to automate all kinds of processes related to a transaction. The protocol contains several features that allow for payment conditions to be set, transactions to be voted on, and illegal use to be prevented, among other things. The Bitcoin protocol lowers the threshold for engaging in transactions. Not only because the transaction itself will be cheaper, but also because it will be simpler to manage any risk involved in the transaction. Before Bitcoin was discovered, similar networks had been experimented with for decades. That is, Bitcoin didn’t just appear out of thin air. It’s the story of the “Long Nose of Innovation”16 all over again. Bitcoin is “simply” the first network to have solved all the associated technological problems.
Since Bitcoin has come into existence, many comparable cryptocurrencies have arisen. One of the more promising ones is Mastercoin, it’s built on top of Bitcoin and makes it possible for anyone to create their own cryptocurrency. The Mastercoin protocol is an open source project that will add many new futures to the Bitcoin block chain. In the near future Mastercoins will facilitate the creation of new asset classes, such as stocks or other ownership certificates, and create a variety of automated “smart contracts” (as already was explored in a 1997 paper by computer scientist Nick Szabo).
The Ripple network is a another promising example of such a network. Although this platform has its own currency (currency code “XRP”; Bitcoin’s currency code will probably be “XBT” instead of the currently used “BTC”), it is basically currency agnostic, so it is just as easy to use euros or dollars. The Ripple network makes exchanges and other automated facilities possible, allowing frictionless currency conversion. International payments are possible at the speed of the Internet, from wallet to wallet, also without the need for a bank or bank account. This could provide the billions of unbanked people around the world with easy access to the international money market (assuming that they have internet access).
Ripple’s so-called “chains of trust” speak to the imagination. Everyone has encountered the situation where debts are settled within a group of friends. Some time ago, Pete borrowed 3 dollars from Elsa, and Elsa is now asking Pete to settle her debt of 2 dollars to John, after which Pete would only owe 1 dollar to Elsa and Elsa would be debt-free. Ripple allows this debt-exchange game to be carried out on a global scale. Paying smaller amounts becomes mostly a zero sum game, with existing debts (IOUs) being redistributed between people who trust each other. What Ripple essentially is suggesting, is a “Next Level” economy.
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