The Bitcoin – the world’s newest crypto currency that is making strides in the digital world. Today the exchange rate for one Bitcoin is equal to 637 US Dollars. This high priced virtual currency is making headlines due to its untraceable and transparent abilities of being sent anywhere in the world. Recently, large retailers, goods and services suppliers have begun to accept Bitcoins as a form of payment. In latest news one of the largest online retailers, Overstock.com introduced its Bitcoin payment option.
Q: Give us your best attempt at explaining Bitcoin to a layman.
I’ve been told this recently: imagine 5 kids who invent a special kind of apple that they can instantly send anywhere. They have exactly 5 apples and there will never be more than 5. They are planning to use those five apples to send their grandmother money; each apple is worth exactly one dollar.
After a while five of their friends notice how easy it was for these kids to send money to their grandmother, and they want in on the action. They approach the first group, and ask them to give them some magical apples, but there are only five, so the initial group turns them down on the claim that there isn’t enough.
The new guys then suggest “What if we split each apple in two, and we give each one of you a dollar, so now we have 10 pieces worth 10 dollars instead of 5 pieces worth 5 dollars.”
Bitcoins are like those apples – they are a quick and easy way to send money to anyone on the planet, but they’re limited in units, in turn the units can be split indefinitely, so as more and more people desire to use these magical coins, their value grows.
In one sentence: Bitcoin is to the monetary system like Email is to the mail and telephone system.
Q: How do you see bitcoin changing the world? Will we still have banks, for example?
Banks will always exist, as they provide a valuable service of keeping ones money safe and secure.
Bitcoin in my view will reduce the financial friction among people on a global scale, it will allow us to make more business transactions, support the community (philanthropy) in a more transparent and honest way and reduce the costs of goods and services by a high amount to the point that they are practically free. The same way that information is practically free today, goods and services in the near feature will cost almost nothing thanks to tools like Bitcoin.
Q: What do you consider to be a threat to Bitcoin and it’s success in widespread adoption?
The biggest threat that I see for Bitcoin is the unknown. For me honestly I don’t see any other threat as real towards Bitcoin. Almost any scenario that you will throw at Bitcoin as an attack can be mitigated at worse case scenario, and in best-case scenarios it will amplify Bitcoin’s power.
Realistically for me Bitcoin is non stoppable at this point, no single entity or corporation or government can hurt it in such a way that it will collapse or wither and die. There would need to be something very drastic like shutting down the whole internet to stop Bitcoin, something that I don’t believe is possible even if tried today thanks to networks like mesh networks and distributed networking.
Q: What are your thoughts about GHash controlling 51% of the network? How big of a threat is this?
I think it only makes sense for a given miner to mine for the biggest pool out there, the incentive in the short term is far to big especially if like GHash.io you’ve invested millions into mining hardware, and in the long term you “believe” that the market will correct itself.
I myself mined for a short while for BTCGuild last year and they were in the same position as GHash, and eventually the market corrected itself. Even with 51% of the hashing power, assuming it is fully controlled by a single entity (unlike the mining pools that are essentially a large group of people cooperating together with a true central control) the possibilities of attacking the network are very limited, and would hurt the miners that invested large sums of money into their equipment, so their incentive is aligned with the rest of the network, so I’m not really worried.
On top of that the network hashing power grew more than a thousand folds just in the last year, so the possibility of a malicious entity trying to take over the network by gaining a large portion of mining power is diminishing by the minute, Today this would cost staggering amounts of money and in one year it would be 10,000 times that. This threat in my opinion isn’t really a threat.
Q: Who makes money in the Bitcoin world when the transaction fees are so low? Will they ever rise?
In my opinion the transaction fees are almost five cents, which is very high at the moment. Right now those fees are negligible compared to the block-reward that the miners get for finding a block, but in the next two years as Bitcoin adoption grows and the amount of transactions grow with it at an exponential rate, the fees will take a much more prominent position in the revenues that the miners get.
As time goes by and more people are joining the network the fees will be lowered, as miners will compete amongst themselves to provide faster clearance for a cheaper price. Even today, at this early stage there are miners who “permit” transaction fees, essentially allowing users to use the Bitcoin network absolutely for free, but at the cost of delayed confirmation times. This trend I believe will grow also as the network grows.
Q: What’s your take on Bitcoin’s peaks and troughs? Is the recent upward rise likely to hold?
Like the story with the apples in the beginning of this interview, Bitcoin provides infinite value to its users, and the amount of Bitcoin, the supply of Bitcoin will forever remain low. Since there is a limited amount of Bitcoins in circulation, the demand has risen at an exponential rate for the past half decade, and it doesn’t seems like it’s going to slow down anytime soon, I truly believe we’re in for some very high peaks in the upcoming couple of years. I wouldn’t even bet against a single Bitcoin for seven figures.
Q: Do you believe larger retailers will begin to follow the lead of overstock.com and begin accepting bitcoins?
Absolutely. They have huge benefits and very little reservations (apart from the fear of the new), the more retailers join, the more will follow.
Q: Lastly, will we ever find out who Satoshi Nakamoto is? Is it you??
Haha, thankfully I’m not, I like my sanity and privacy 🙂
The answer is yes, eventually Satoshi will be found, nothing can remain a secret for very long, and this secret is just to juicy to stay that way. Once people truly start digging, they will find him.
Currently there are two likely candidates: Nick Szabo (pseudonym), and Adam Back – both are very fitting to the description, and are very knowledgeable in the Bitcoin space. Who knows, it might be one of them.
Eli Sklar is a Bitcoin enthusiast, a web developer, and a product designer. Eli found out about Bitcoin in early 2011 and since then devoted his time to bringing Bitcoin to the masses by making the use of Bitcoin easier, more secure, and user friendly.
Eli can be located at: [email protected].
