If you're like me, then you started 2017 never ever knowing what Bitcoin, let alone Blockchain, was. But, because of the many stories about it in media, you became curious. Though, till to date, you still are struggling to get a basic understanding of what Bitcoin is. This is for you.
So what is Bitcoin?
Many know it as a cryptocurrency. While others mistake it for the definition of Blockchain. As simple as that. But, Bitcoin is a currency like Ugandan shillings, Dollar or Naira. Only that you cannot see or touch it. What we call a digital currency, and only exists in the digital world.
Unlike the normal currencies we already use, you cannot print a digital currency. There is no central bank like Bank of Uganda printing an controlling it, yet.
You could be wondering, how did Bitcoin come into existence?
Satoshi Nakamoto introduced Bitcoin to the world in 2009. So, it is important that we talk about him first.
First of all, nobody knows who he is. Is he even a he in the first place? Is it a secret society? A new government? Nobody knows. Till today the individual remains anonymous. At one point, people thought Tesla's Elon Musk was Satoshi Nakamoto. But he came out and denied it. Please, feel free to choose if this is scary or cool. I can’t decide.
Back to Bitcoin. Nakamoto, in 2009, created a domain name bitcoin.org. He then released a paper [PDF] breaking down his idea of an electronic cash system. decentralized and under no control of any government in the world. He started making it a reality by releasing the bitcoin software.
If the software is in place, how do we get these bitcoins?
One gets Bitcoins through a process called digital mining. And, the same way you don’t start digging up your backyard for gold, you need to search for where to get these Bitcoins. This search under is a complex mathematical equation which a miner has to solve.
Look at it like the equations in school requiring you to find X and Y. You have to look for Y’s sister-in law’s cousin and kill off his best friend’s cat. That kind of complex.
So, you the miner, after solving this equation get rewarded with bitcoins. Miners are also rewarded for verifying these bitcoin transactions. The recordings of these transactions get saved under a ledger called a ‘blockchain’. Hope I haven’t lost you there.
Also read: Africa and the Blockchain Revolution
But, think of a Blockchain as a public statement of transactions. Every bitcoin transaction gets verified and ‘cryptographed’. Which is a language of codes. To understand these codes, compare with secret codes of mobile money transactions. No two can be similar and duplication is not possible for forgery. That’s how it works.
Since its release, many miners joined in on bitcoin. With that came more complex math equations, and fewer bitcoin released each time.
Nakamoto made sure that for bitcoins to remain valuable, they need be scarce. And, as such only 21 million exist and approximately 13 million mined to date. Miners globally have merged to create mining pools to solve these ever-getting-complex equations.
Now, you may want to know where bitcoin owners keep their hard earned coins. More like;
Where is the bank for these coins?
Since they are digital coins, they enter ‘digital wallets’. Not your actual wallet, rather your digital wallet.
An owner of bitcoins opens an account by entering an address. Then, he/she is granted public and private keys. Those keys contain all your transactions in codes as well as proof of ownership of those Bitcoins. Again in codes, yes people. This is all digital and codes reign supreme here.
You can keep these ‘keys’ in a digital wallet. That is where you keep your ‘coins’ safe. Who knew there would be a point in life where you had to keep coins safe? Coins are winning, I tell you.
People are calling cryptocurrencies the future of transactions. But;
How does Bitcoin affect the ordinary Ugandans?
For now, cryptocurrencies will face a hard battle to win over the ordinary Ugandan. But, reflect on this; if you said years ago that people - even in remote areas - would transact on their phones, you'd get laughed at. So, indeed, it’s a hard battle but a winnable one.
An expert once said a currency is as strong as its people’s backing of it. So, cryptocurrency will only flourish in Uganda, if it gets backing from people. But, in order for people to back it, general sensitization needs to take place - to shut down the sceptics.
It didn’t help at all when Bank of Uganda warned the public to not invest in this digital revolution. Thus, before aiming at ordinary Ugandans, top financial institutions is the first step. Because masses love backed credibility. In other words, we need somebody to blame if things go wrong. So, support from top financial institutions - especially the central bank - is key.
Patience will also have to be a virtue for the tech community. It will take time. Especially for the minor crypto-community to engage financial policy makers, to make this a generally acceptable medium of exchange. A virtual currency stored in virtual space is a hard sale to the status quo loving nature of Africans in general.
It is also important to consider that the cryptocurrency revolution is an uncharted territory globally. It’s only starting to sort itself out. There are fears of hacking and a general meltdown of the entire system. All these make it volatile and risky. But, the question is;
Can one afford to ignore the cryptocurrencies completely?
The answer to that is NO. Knowledge is power. You may not get involved with cryptocurrency, but it doesn’t hurt to be in the loop of its ongoing revolution.
Once many fears are curbed, then as said before, this might be what the future of transactions looks like. And, who doesn’t like a glimpse of the future?