How bitcoin is fixing some of the web’s biggest problems


The web has changed how we communicate, entertain, learn, make money… the list goes on and on. Still, there are so many people who take advantage of the system due to traditional limitations. To name just a few areas in need of remedy, cyber crimes such as fraud, piracy, censorship, and monopolies are all hungry for innovation.

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Luckily, the web has managed to give birth to new technologies that can help it fix itself. Very notably, bitcoin is one of those. Apart from its use as a currency, the technology first introduced in 2009 by Satoshi Nakamoto is revolutionising the way we understand (and ultimately use) vital concepts like security, value, communities and freedom.

Bitcoin’s not just a currency. It’s a technological tool that’s being used, among other things, to trade for goods or services. It’s a protocol for exchanging value over the internet without an intermediary. The so-called bitcoin 2.0 concepts and startups help personify this movement where the tech’s infrastructure is leveraged to easily exchange property and execute contracts.

There are also some critical hills left to climb for the technology to mature.

The proof is in the pudding

Humans don’t really like trusting each other. So instead of dealing with each other directly, we go to an agency that acts as a professional, established middleman. These intermediaries are our banks, law firms, and many public bodies that also have the dedicated time and skills at their disposal.

These established third-parties handle valuable assets of ours, and are far too often compromised either internally or externally. Whether this refers to credit card theft, scams or tardiness, they can all be avoided.

Bitcoin’s technology can help strengthen these middlemen. It uses what’s called the blockchain, which is a system that runs and secures distributed ledgers online. Apart from tracking money transactions, the public ledger can also be used for many other things. It changes the game really.

Picture of a very old, outdated company ledger

Co-founder of an upcoming micro-tipping startup, Simon de la Rouviere, shares his input on how this tech can be leveraged to our benefit:

“The main problems that will be solved when running systems through these ledgers are that you reduce overhead substantially. Less fees and no requirement for human arbitration or dispute mediation. In some countries, there’s a complete lack of proper infrastructure to even do basic things such as title deed registration and transferring. It will be very useful.”

So apart from money, other valuable assets can also be transferred from Point A to B. Think lease contracts, identity management documents like passports, SIM cards, escrow, wills and domain names.

This is just to name but a few significant tools that, with the help of bitcoin’s mobility and security, can change how we operate.

A fascinating yet simple project called Proof of Existence is a fitting example. It uses a full-proof system online which can be employed by anyone to demonstrate data ownership like copyrighted materials and patents.

Have you ever thought about how long, tedious and sometimes unreliable the traditional process of filing a patent is today? Not to mention other forms of copyright protection.

Another interesting startup is Monegraph, which uses cryptocurrencies to enable digital artists to claim their artwork. By using Namecoin, which creates a unique DNS, artists can submit their unique URLs to their work which are then linked or tied to a blockchain. Copyright infringement is thus kept to a minimum.

Piracy peeves

Apart from fraud, let’s consider one of the other big upsets the web has been responsible for, namely piracy of content. A suspected $75-billion goes down the throats of hungry consumers every year because they opt for unoriginal copies of music, videos, games, software and books.

The fact that cryptocurrencies carry unique online signatures means that they can theoretically be tied to existing online media like music, movies, and ebook licenses.

A list of popular piracy site Piratebay’s top 100 most popular torrents.

In most cases today, online products rely on certain digital rights management (DRM) techniques which essentially try to limit the use of content either legally or technically. These methods are far from foolproof.

Unlike physical goods like DVDs and books that we own, we can’t legally lend digital products because of the Copyright Act. This is referred to as the digital first-sale issue.

As explained by Reason, music files for instance could be associated with a particular user’s public bitcoin address and encrypted in such a way that the user’s corresponding private key is needed to play the songs.

Bitcoin tech thus allows publishers to “trust” customers of digital content to do what they want with their property without the fear of them making copies. “Selling, lending, or giving away a song or a book would be as simple as sending it to someone else’s public address. And this would all be cryptographically provable, without requiring trust,” writes Jerry Brito.

Empowering content creators through micro-financing

The internet might help people with new tools and open new markets, but content creators are still left between a rock and a hard place when it comes to their return on investment.

Big players are crippled by things like piracy while small, independent up-and-coming artists, journalists, developers and startups, struggle to find sustainable incentives that adequately reward them for their talents and efforts.

De la Rouviere’s upcoming micro-tipping service is based on bitcoin’s secure, cheap payment technology that makes transactions almost entirely frictionless and almost eliminates remittances. It not only plans to create a service that can break down the barriers and empower content creators, but also one that brings fans closer to the people that make what they love.

Enjoy a song? Tap a button on the app and tip a dollar, or 20c. Why not? It’s an upbeat song after all, and one dollar isn’t really going to be missed from your proverbial wallet. But see a couple of thousand people go about the same way, and talent finally pays off. Artists can continue to make more good music and finally be able to make a living out of it. You can tip musicians in bitcoin but credit cards are also in the pipeline.

The popularity of Kickstarter-inspired crowdfunding platforms is revolutionising the way people make money, validate products and market themselves online. Add micro-financing to the mix and the process is seamless and easily distributable. Bitcoin’s tech is ideal for this.

Swarm is a fairly new platform that uses these two concepts in order to let the web crowd finance and invest in startups. A startup can sell coins, called Swarmcoins, online in order to raise funds which, in turn, become more valuable as the company grows. It’s crowd-investing in its purest form.

It allows independent content creators to grow and execute their ideas, and so help level the playing field.

Less human hassle, less risk

Cloud storage has revolutionised the way we use software. There’s no need for physical software products really. But what happens when a tornado hits your service operator’s data centre?

The fact that bitcoin is purely digital, public, secure and peer-to-peer (P2P) means that computers can perform tasks together and based on rewards automatically. This is often referred to as automated agents.

Because computers speak in well defined, standardized units (CPU seconds, gigabytes of RAM/disk, megabits of bandwidth) it becomes possible for software to automatically find and negotiate with providers who accept bitcoin.

StorJ is based on the bitcoin’s blockchain and P2P technology to provide the secure, private and efficient cloud storage. Anyone can, for instance, put his or her computer to work by “lending” their storage space to the StorJ network, and earn money in the process. By communicating with each other, computers can efficiently allocate resources of the network depending on the nature of the situation.

But other than moving assets, the process of issuing or implementing can become much “smarter” and be set by specific conditions. This concept of automated agents can further help eliminate complex, high-risk tasks that are traditionally required to rely on people.

This means there’s also no room for fraud or human error. There is also no need for something like faith in a brand or service, the technology is there as its evidence.

Global democracy, global community

The web in all its crazy beauty and shenanigans, is prone to monopolies. Big companies can easily squeeze the little guy. As an article on The Verge noted, The Internet’s F*cked. From the telecoms that provide the infrastructure to the multinationals that supply the services and the organisations that regulate all of this, the ecosystem can easily tilt in the powerful minority’s favour. Think NSA. It’s one of global capitalism’s bitter ironies.

Furthermore, the developing world can benefit by increasing consumer protection and overall accountability. De la Rouviere explains that “what will happen is that people can now get access to financial services from around the world through a feature phone (you don’t even need a smartphone). That’s powerful and useful.”

Kipochi, BitPesa and M-Pesa are pivotal players in this arena, allowing East Africans (and the greater developing world) with the so-called bitcoin remittance revolution — cheap transfers that are figured to quench the massive total of US$1.8-billion that’s being charged for Africa’s diaspora who send money from abroad back home.

Bitcoin can help level the playing field. The same way the web is doing so with information, bitcoin does so with value.

De la Rouviere reiterates this, noting that while Wikipedia is free information for the whole world to consume, at least the option can now exist where anyone can get access to financial services. “It is still up to the people to use it though. It’s not a magical bullet,” he says.

Hurdles, hindrances, hiccups

The tech behind bitcoin can be as powerful as we make it out to be, but the fact of the matter is the majority of people remain to be unconvinced. So, where to from here? Which popular hurdles should be overcome?

Timothy Stranex, co-founder of South African bitcoin exchange BitX, says “The volatility of bitcoin is also a hurdle in developing markets where people tend to have less disposable income available for experimentation with new technologies.”

Stranex does further note that “trust will be earned as Bitcoin becomes more widely accepted by recognised merchants and institutions, and as the bitcoin industry matures and attracts more professional management teams and entrepreneurs.”

So far, as of 9 July 2014, 4 895 merchants have been mapped by CoinMap — the largest site which maps out merchants accepting bitcoin as currency. That’s a massive spike since it listed less than a thousand in November 2013.

The technology is here, and it works. One of the greatest hurdles to its adoption and popularity is therefore familiarity. It’s counter-intuitive to what people have grown up with, politically and socially. It’s still in our nature to want to trust a person to be responsible for something.

Think about it. “It doesn’t make sense that there’s no entity, or a person being held accountable or that ‘sits’ behind some desk in some office somewhere,” says De la Rouviere. He elaborates:

“Most people don’t understand how current monetary systems work, but they are happy to accept Rands, because tomorrow they can go buy a bread with it. At some point, bitcoin will be as ubiquitous and it won’t matter if it is some ‘digital funny money’, as long as people can spend it again: a promise to pay a future debt.”

Images: Josep Ma. Rosell via Flickr, comic by Bannerman via JoshReads.

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