How Bitcoin changed the Transaction System
15 years ago, the idea of paying for something using a currency that doesn’t exist in a physical sense would have been laughable. That such currency would not only be used and traded in a large scale but also have its value climbing up to more than $USD1000 within 10 years of its inception would have been a ridiculous notion.
Let’s start with a brief history of the transaction system. First we have the players: a seller and a buyer. Before the advent of online transactions, a buyer pays a sum of cash to the merchant in exchange for a product. Easy. The downside: you have to carry cash with you all the time.
With urbanisation, people began to demand for a more secure way of paying (carrying around a large amount of cash is just asking for trouble). The first credit card, then called charge card was invented and banks started issuing these card to their customers. Naturally, they became an intermediary between the seller and the buyer.
As with all businesses, banks had to find a way to make money out of it so they started charging annual fees and later on, interests. Cross-border payments have also allowed banks to make profits by charging fees on overseas purchase as well as exchange rates. Additionally, data security was still an issue as all the personal data available are just identity crimes waiting to happen.
Fast forward to 2009. Satoshi Nakamoto had published a paper on a cash transaction system based on a peer-to-peer network. The main concept behind his idea is to create a system that cannot be controlled or manipulated by any one party; essentially a decentralised system using cryptocurrency as medium.
Thanks to Satoshi Nakamoto, the way transactions are managed have eliminated the need for intermediaries and consequently, reducing cost of transactions. Bitcoin has changed the way transactions happen, ensuring that all transactions are transparent and its integrity remained.
Interestingly, the technology behind the system, blockchain, is not only limited to financial services. A lot of industries have began to apply blockchain technology in their processes: from the supply chain sector, to music industry and even education. And the list goes on.
However, neither bitcoin nor blockchain are without flaws and we’ll touch on that in another post. Suffice to say that bitcoin is spearheading the new era of digitisation. Will it stay at the top? Only time will tell.