The blockchain is basically a ledger (block) that sits on multiple computers. All these ledgers then update and validate transaction (paid for in bitcoin or other cryptocurrencies), so in theory there is no single repository (like a central bank) that can be corrupted.
Clearly, if blockchain and bitcoin sit outside financial and regulatory frameworks (as the cypherpunks envisioned) then governments and the banking world are not going to be happy. Since its launch, blockchain and bitcoin have spawned an ecosystem of ‘interesting’ financial services and trading businesses. The irony is that early business failures have helped to stress-test the robustness of the system and also the authorities‘ attitudes towards it.
Mt. Gox (an early bitcoin exchange) briefly handled 70% of bitcoin transactions before closing due to irregularities and in the process took 36% off the value of bitcoins.
The Silk Road was an online black market where users could buy and sell illegal goods anonymously. The FBI shut it down in 2014 and Ross Ulbricht, its founder was handed a life sentence without parole.
After these initial growing pains, cryptocurrencies are ironically being legitimized by the debates within government and financial services over their legitimacy. What government doesn’t want to get involved in the regulatory framework that controls cryptocurrencies and what financial institution wants to sit on the sidelines and watch the bitcoin train leave the station without them?
The fact is that in 2009 5,000 bitcoins cost US$27 and now the same bitcoins are worth US$886,000.
Blockchain and bitcoin are very attractive business models for early adopters and specific sectors (for the rest of us they might seem shady), but we all know that good ideas are difficult to kill, so in summary, watch out – the cryptocurrency cat is out of the proverbial bag!
• Why the Blockchain Needs More Failures to Succeed
• Banking On Bitcoin