6 Things Bitcoiners Are Talking About That You've Never Heard Of
Not five minutes into the interview, and Ryan Findley -- the Principal of Neominds Labs in Philadelphia, Pa. -- had already bulldozed through what I deemed my most difficult question.
I had asked Ryan, "Does Bitcoin makes sense for businesses?" To which he simply replied, "Bitcoin works if you're interested in putting the time into it to learn about it."
It was the perfect answer. I could have ended the interview right there, but considering I had Ryan on the line -- and he's forgotten more about technology then I'll ever hope to understand -- I asked, "What do you find interesting about Bitcoin?"
Strap in, because Ryan took me down the Bitcoin rabbit hole. Here are six of the most interesting topics he touched on.
1. This is what gives Bitcoin value
In a counter-piece to Krugman's, "Bitcoin is Evil" -- in which Krugman suggested there isn't a clear value for Bitcoin -- Coindesk.com published an article that proposed Bitcoin holds value as a collectible, similar to gold or baseball cards.
The best answer seems to be a combination of everything. Bitcoin has value as a means of transferring currency, its peer-to-peer network, the technological innovation that it is, and Bitcoin, like gold, has buyers willing to use it and merchants will to accept it.
2. "Bitcoin is fractally interesting." -- Ryan Findley
A fractal is a mathematical phenomenon discovered by Benoit Mandelbrot in 1979. The basic idea is that patterns in nature repeat themselves. Think of, for example, a tree. The base of the tree will grow branches, and those branches will grow branches in a similar pattern -- and so on and so forth.
Mandelbrot theorized that financial systems exhibit fractal-like patterns. A theory that is much more eloquently explained in a blog post by Jonathan Wigley in "Of Bitcoin, Fractals and a New Economy."
The article suggests that while the current economic environment behaves like a river system flowing wealth into the pockets of "the one percenters" -- Bitcoin's peer-to-peer network could turn this system on its head.
There've also been advocates who suggest the Bitcoin market can be timed using fractal mathematics. While we don't believe in timing markets here at the Fool, nevertheless, the article "Bitcoins and Fractals" makes some interesting arguments.
3. Bitcoin solves the Byzantine General Problem
Imagine there are a number of generals who want to attack a powerful city. To be successful, a majority of the generals must attack simultaneously -- however, since none of the generals trust each other, several plans are written and sent out by horseback. The generals are to sign the plan they agree to follow.
Now, the problem is, there's nothing stopping the generals from signing off on more than one plan -- in the Bitcoin world, this is referred to as "double spending."
I won't pretend I fully understand the complexity of the issue. I will, however, suggest Bitcoin's block-chain is considered a significant breakthrough in solving a problem many thought was unsolvable. For those interested in learning more, enjoy the full example of the Byzantine General Problem on Bitcointalk.org.
4. "Bitcoin might be relegated as the Linux of currency."
An article published on ValueWalk.com suggested that "Linux is the plumbing of the Internet," and that perhaps the same will be the future of Bitcoin and payments.
What if we stopped thinking of Bitcoin as a currency, and starting thinking of it as a vehicle for moving currency?
The article would go on to explain that if you bought $50 worth of Bitcoin, then transferred it to a buyer who converted it immediately back into $50 -- excluding the possibility of extreme volatility -- the actual monetary value of Bitcoin is moot.
5. Transactions are slow, and zero confirmation transactions are dangerous
Bitcoin transactions can take up to 20 minutes to be fully confirmed. Which, as I'm sure you can imagine, would gum up the line at a coffee shop.
So, some merchants are approving purchases without receiving confirmation. These are referred to as zero confirmation transactions -- and while it speeds up the transaction, it opens the merchant up to significant risk.
It's been suggested that Bitcoin transactions can be revoked, but this doesn't help the coffee shop owner whose latte someone just walked out the door with.
6. Green addresses work in theory, but have some drawbacks
There have been several stabs at making zero confirmation transactions less risky for merchants. One of the more intriguing is green addresses.
The idea is that instead of person A sending his Bitcoin directly to person B, he uses a trusted intermediary. So far, mtgox.com and instawallet.org are two of the early adapters of the process.
However, it was suggested in Bitcoin magazine that these "greenlists" are potentially dangerous to the Bitcoin ecosystem. The article explained that anonymity is important to many Bitcoiners, and those who choose not to be greenlisted are likely to see a decrease in the value of their Bitcoin because merchants are more likely to accept Bitcoin from the trusted addresses.
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