Blockchain Is Changing the World. Should You Buy Bitcoin?

In 2009, the mysterious Satoshi Nakamoto published the now famous white paper that introduced Bitcoin (CRYPTO:BTC). In its pages, the unknown individual (or individuals) proposed a new type of financial system built on blockchain, an innovative record-keeping technology. And Bitcoin was created as the currency for this new system.

Since then, both Bitcoin and blockchain have changed the world. Bitcoin especially has captured the interest of investors and the mainstream media, as its value has soared roughly 10,000% in the past five years alone. Moreover, Bitcoin is built on blockchain, a platform that promises to make financial transactions more efficient. But does that mean investors should buy Bitcoin? Let’s take a look.

The benefits of blockchain

Blockchain transactions work more like cash than payment cards. In fact, when Nakamoto published the white paper, he/she/they referred to Bitcoin as a “peer-to-peer electronic cash system.”

Image source: Getty Images.

Consider the complexity of a typical credit or debit card transaction. When a consumer swipes (or taps, inserts, etc.) a payment card, the merchant’s acquirer sends an authorization request through the card network to the consumer’s bank. If the bank authenticates the transaction, it sends approval back to the merchant. Then the merchant’s acquirer sends the approved transaction through the card network to the consumer’s bank, and the bank transfers funds through the card network to the merchant’s bank.

While this is happening, everyone takes a cut: The consumer’s bank charges an interchange fee, the merchant’s acquirer charges a processing fee, the merchant’s bank collects a discount rate, and the card network charges assessment, clearing, and settlement fees.

Now consider a cash transaction: Money moves from the consumer’s wallet to the merchant’s register — no fees are charged in the process. However, cash is less secure and less convenient, and that’s where Bitcoin, and blockchain, offer a solution.

In a typical Bitcoin transaction, digital funds travel through the open internet, moving from the consumer’s digital wallet to the merchant’s digital wallet. Blockchain makes this system possible. Blockchain is a self-governing and highly secure database that eliminates the need for a central authority to create, manage, and keep records regarding a currency. In other words, blockchain transactions involve fewer parties, meaning there are fewer fees.

That efficiency could significantly change the financial industry. In fact, a study by Santander FinTech suggests that distributed ledger technology could cut financial infrastructure costs by $15 billion to $20 billion per year.

The benefits beyond cryptocurrency

Blockchain is not limited to financial transactions. It is an efficient means of storing and distributing many different types of information.

For instance, blockchain can be used to power smart contracts. In this case, the conditions of a contract are written in computer code, and once the terms have been met, the contract automatically executes. For example, Microsoft uses blockchain-powered smart contracts to simplify and expedite the payment of gaming royalties between itself, publishers, and developers.

Blockchain can also be used to monitor supply networks and track supplies. For instance, the IBM Food Trust is a blockchain system that connects farmers, wholesalers, and retailers, improving visibility and accountability in the food supply chain.

Blockchain is also a highly secure means of storing data. That means healthcare providers could keep patient records in blockchain-powered databases, ensuring they remain confidential and unaltered. Insurance companies could do the same thing, but in this case it would facilitate the distribution of verified consumer information (e.g., past accidents, insurance claims, etc.), which could help prevent fraud. And the list goes on.

The case for Bitcoin

Bitcoin…