Gordon Fletcher

Efforts to explain Bitcoin and cryptocurrencies in general have generally focused on how they are both a new form of money as well as a challenge to existing forms of money.

Cryptocurrencies are novel as they are only possible because of the ready availability of high-speed computing and networks. They are a challenge to today’s currencies because of their decentralised nature, taking them out of national governments’ control. Small signs that Bitcoin has filtered into the popular imagination include its appearance in US courtroom television drama The Good Wife, in an episode called “Bitcoin for Dummies“.

What has been given less attention is the mechanism that makes the bitcoin network possible, the blockchain. To own and use bitcoin or any other cryptocurrencies requires no knowledge of how the blockchain works. Nevertheless the concept is relatively straightforward. It is best thought of as a complete ledger of every bitcoin transaction ever made, of which every bitcoin user has a copy that is constantly updated as new transactions are made.

But this accounting analogy is something of a disservice; the bitcoin blockchain has the potential for so many other uses beyond exchanging value that it shouldn’t be ignored.

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Bitcoin logo

Over the last few months this seemingly simple question has crossed the minds of academics, reporters and many others. In the Centre for Digital Business our discussions have focussed on the real impact that bitcoins will have on mainstream eCommerce.

For the moment we have no definitive conclusion. However, the technology press picked up on the rapid increase in the exchange value of these things called bitcoins and, slowly, ripples of awareness have spread more widely. The enthusiasm is explainable.

The exchange rate for bitcoins has risen from around $US100 in recent months to as much as $US1,000.

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