How forms of payment and technology are evolving as adoption of the “cloud” increases, another technology trend rides along. It is a move towards decentralization of technology and information that is paradoxically restoring ownership to the very same people who are moving their data and applications up into that same nebulous cloud.
Unlike like the Gold Rush of 1849, Bitcoins have been mined digitally since 2009. Instead of using picks and shovels to dig gold from a mine, people use computers to create them.
So the Bitcoin (BTC) is, in essence, a digital, computerized and decentralized form of currency. No one entity has complete control over its use, supply, or production.
Decentralization may be an old concept but it is at the core of digital currency, social networking, and ultimately the Internet. Keep an eye out on the early adopters of these new technologiesand new paradigm shift. They could later be the new trendsetters and change how business is conducted.
Regardless of whatever new technology comes out in the next six minutes, technology will always change. That applies not only to technology, but also to decentralization and ultimately life itself.
A look at the bitcoin
Based on Wikipedia, there is a total limit of how many Bitcoins will be produced which is 21 million. Recent information suggests there are already 11 million of them in circulation.
The Bitcoin works through a distributed and decentralized peer-to-peer network. Using computer algorithms it governs how long itwould take for a computer to mine and produce a Bitcoin. As more come into circulation, it becomes harder to produce another one. This prevents any one person from monopolizing the artificially limited supply and renders it is a decentralized, community-driven system of monetary exchange.
This can seem like a virtual video game and public adoption has taken time. In the past few years, there have also been well-publicized cases of hackers breaking into the system and stealing Bitcoins. Like all systems, it takes time to workthe kinks out. The constant improvement and innovation will make adoption easier, and more importantly, is likely to boost trust and confidence in the system.
New businesses have been built around the Bitcoin economy, from ATM machines and pre-paid Visa and Mastercards, to merchant services. Bitcoins can be exchanged for both currency and precious metals. Near the end of 2012, Wordpress, which provides tools for website production and maintenance, announced it would begin accepting payment in Bitcoins.
Other payment Ideas
A payment gateway company called Ripple (ripple. com) also intends to make Bitcoin payments easier than PayPal transactions. Ripple is new and stillin the testing phase but the Bitcoin community is keeping an eye on this promising company. A generally accepted payment processing system for Bitcoin will add tremendous value. Ripple also offers its own currency called Ripples (XRP) and has set a hard limit of 100 Billion units on it. In that regard, perhaps Ripple will be to silver as Bitcoin is to gold in the digital frontier.
Decentralizationhas affected othercompanies in paymentprocessing as well.Companies likeEstonia’s Transferwise and France’s Paymium are challenging the traditional banking system by offering extremely low-cost money transfer fees, directly competing with the traditional international bank transfers. These companies are also directly competing with PayPal as payment methods.
With new technology come security risks. Companies like BitInstant—which help facilitate exchange between Bitcoin and currencies—have been hacked into causing loss of clients’ Bitcoin accounts. To combat the ongoing online attacks; companies in the business of Bitcoin often apply a second layer of password protection for transfers, using Google Authenticator (which is like having a Token), SMS text or other methods. Time will tell what systems prove trustworthy and earn confidence.
Decentralization of money and payment systems has also influenced the social networking community. Many new networks are popping up, but one in particular took an extra step forward and decentralized their entire social network. Diaspora is a new network that allows you to completely own the information that you produce and gives you full control of what to share.
Changing social media
Unlike Facebook, Diaspora does not own any information you post or share and doesn’t decide what information should flow into the network. It lets the community members decide for themselves. There have been stories of Facebook shutting down certain sites or posts that it finds to be in conflict with its policies. The founders of Diaspora believe they can help people socialize on the Internet without requiring ownership of other people’s information. Diaspora’s social network operates with computers and servers all overthe world and claims that, unlike Facebook, even a company shutdown won’t stop their decentralized social network from running. A good analogy is to think of Diaspora as made up of member controlled mini- Facebooks, with local control of member’s shared and posted information.
Both Bitcoin and Diaspora are decentralized, open-source technologies for community building and growth. Their technology continues to progress and improve.
Decentralization has even enabled communities to build up their own hubs and nodes of the Internet. Traditionally, Internet access is through Internet Service Providers (ISPs) such as cable and telephone providers or Google, Yahoo, or Cisco Networks.
An upstart Kansas foundation is offering a solution where groups of people can become their own ISPs, bypassing the traditional ISPs completely. The Free Network Foundation’s philosophy is that, “Anyone may join, use and expand the network, and must allow others to do the same.” Usinga collection of microwave dishes, small towns, communities, or groups of people can create a wireless Internet connection, hence powering a decentralized Internet.
Along those same lines, Mycelium is powering a decentralized wireless network based upon a swarm of credit card-sized communication devices self organizing into their own communication network. These cards will need to be within about 300 meters of each other, and the company claims that the network is infinitely expandable, with a minimum of a few cards per city block to keep the network active.
The cards are all powered by photovoltaic cells and communicate by radio in a license-free spectrum. The current system goals include pushing personally directed advertising to potential customers, with the ability to charge the maximum the cardholders are willing to pay (price discrimination), based upon their purchase history and what other merchandise they are browsing. The cards will even let merchants know everywhere the cardholders went in their stores and how much time they spent in each place, as well as their sequence of stops.
The cards should also allow direct card-to-card money transfers and payments without the customers needing to remove the cards from their wallets or purses. The system is also planned to allow passing text messages and pictures.
You can either surf the unforgiving wave of change feeling utterly alive, or get crushed by it and slide away in the undertow. Technological decentralization is exploding the old traditional paradigms, giving people more choices, more possibilities and ultimately more freedom.
So let’s go out and surf.
LEONINE LEE has experience in data technology consulting, information architecture and currently focusing on intuitive investing. She witnessed the Dot-com bubble and burst and real estate crash that followed during the late 1990s and the millennium year and enjoys presenting technology at a level where anyone techie or not can understand.