I first heard about cryptocurrency–well, specifically bitcoin–from my then 11-year old 2 years ago. He is a little hacker that enjoys breaking apart and reprogramming every device he can get his hands on. I was worried about his hacking before but he is honestly a good kid and has explained to me the difference between “white hats” and and “black hats” (the good guys vs. the bad guys) in the world of hacking, and assures me he is a white hat hacker. He is just a curious person…yes, kind of like his mom.
“Mom, you should buy bitcoin”, he said, after spending a day trying to “mine” the coin with his weak computer and only accumulating a few cents worth. (More on mining later…) The price of bitcoin was $200-$300 at the time (so it must have been around March 2015), and he was also spending his time playing a silly iPhone game sometime before that called Bitcoin Billionaire, so like any normal parent, I rolled my eyes & said “yeah, no”.
After that, I started hearing about “bitcoin”, “cryptocurrency”, and “altcoins” somewhat regularly. Here I am on Twitter in May 2015 discovering something called “dogecoin”:
Dogecoin has the adorable shiba inu meme (my son’s favorite dog) as their mascot so that didn’t really help me to take cryptocurrency very seriously. I mean, I admire the creativity of folks who come up with this stuff, but c’mon, are people actually using this thing as actual money and not just an arcade token??
Nevertheless, I love new ideas, and I had some Twitter followers talking about it, so naturally I started wondering about it and imagining things. Here I am last year wondering if we could tip people online with bitcoin someday, apparently clueless that people were already doing that:
And then here I am earlier last year wondering if patients could own their own medical records and get paid in bitcoin when third parties requested their medical data:
Still, I didn’t think of buying bitcoin until around June of this year when I noticed the price skyrocketed more than 10x from when my son said, “Mom, you should buy some bitcoin”. Here I am in July thinking out loud that maybe I should have taken advice from my little Gen Z’er earlier:
Well I finally thought it was time to actually take this seriously and educate myself. I didn’t want to do anything stupid and end up being a victim of a “black hatter” or a Ponzi scheme or “tulip mania” (as Jamie Dimon recently called it) or God knows what, so before putting my money into any of this, I decided to learn more and read anything I could get my hands on regarding bitcoin and cryptocurrency.
That’s when I learned about Satoshi Nakamoto, the mysterious creator of the first blockchain, the technology that underlies bitcoin. No one knows who he/she is–the name is a pseudonym–and that of course doesn’t help to make it seem any more trustworthy. But the technology is fascinating.
The simplest way to explain what blockchain technology does is to say that it takes care of the problem of trust. In the financial world, for example, in order to give someone money (when you are don’t have cash on hand or need to send it far away), we have to use trusted intermediaries in order to broker these transactions, such as credit card companies and central banks. What blockchain does is replace these third parties with technology.
Here is my explanation of how it works…
The blockchain is a network involving computers (called nodes) that are distributed throughout the world that conducts and records these transactions between people or other entities. Let’s say you are sending money to a someone. Both of you would have verified digital identities on this network and when you choose to send money to this person, a special puzzle is generated to verify the transaction. All the computers on the network try to solve this difficult energy-consuming puzzle. The first one to solve it becomes the winner and gets a small fee in the cryptocurrency used on that blockchain to reward them for the time & energy they used to solve the puzzle and for being first (much smaller than credit card or bank fees, in case you’re wondering). This is what “mining” is. Once someone claims to have solved the puzzle, the other nodes confirm, and if indeed it is correct, the transaction is carried out, added to an audit log. Other transactions are also carried out this way, added to the audit log, which is sealed off when it reaches a certain size or “block”, and it is permanently & securely sealed and a new block is started using a special code that is generated from the previous sealed block (or “hash” which makes all previous transactions harder and harder to hack). This creates a link, or “chain” of blocks that is stored among all computers on the network, not in one central server somewhere. Also, it is harder to hack than typical computer files because if you wanted to go back and change something that happened, say, last year, you’d have to undo all the other things after it on the chain in order to do so, and everything after has the stamp of the previous transactions on it, making it a uniquely permanent record.
So, in short, blockchain is a decentralized, distributed network of computer nodes, that conducts and keeps an immutable and secure log of transactions of all types. (Using all the buzzwords here that are commonly used to describe it…)
As we know, in many part of our lives, technology has replaced many intermediaries. Instead of going to a store and buying from a person, we can now buy online from a tech platform. Instead of going to the bank and asking a teller for money, we can just go to an ATM and withdraw cash. Instead of calling a cab company and asking for a ride, we can just call a car from an app.
So, once I learned about what blockchain is, I finally understood what the big deal was behind bitcoin and other cryptocurrencies. It’s not so much about the bitcoin or the altcoin, the big deal is really the blockchain. That is what can change the world. So, yes, I have bought some bitcoin and other cryptocurrencies, but I have no false assumptions about bitcoin:
What is more interesting & what has of late become a personal pre-occupation is blockchain:
Most blockchains have an underlying currency. The ones that will be valuable will be the ones that have the most useful, world-changing underlying blockchains.
What is fascinating to me is that it is not just going to change the financial industry, but IMHO, every industry. I mean, what industry doesn’t have a need for brokers of trust? I hope you’ll start imagining applications of this technology in your own respective industries as I have in healthcare. Maybe you’ll get as excited about blockchain as I have.
One of the things that drives me crazy about healthcare is just how many (possibly unnecessary) third parties (brokers of trust) we have between doctor and patient: insurers, employers, banks, & government. I’m not trying to say all of them should be innovated out, but certainly much can be streamlined, which could greatly help to reduce the excessive cost of healthcare we have in this country, which I see as money that could be better used for providing a safety net for people, taking care of basic needs which we don’t do enough of, and for innovation in preventing and curing disease.
I have so much to say on blockchain + healthcare…this may be a conversation I’m beginning that goes on for a lifetime, so I’m going to defer now to a future post. Stay tuned. 🙂