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It is fall 2013, Bitcoin hits the news as a new kind of digital currency, which was rapidly gaining in value. It was a currency invented by a mysterious person or group called Satoshi Nakamoto in 2008 and since then mainly used by geeks and criminals. Bitcoin was bubbling with the speed of light and gained almost 1000% of its value in just 2 months, being worth $1167. After obtaining this all-time high the bubble popped, resulting in the price as well as popularity of the digital currency to decline rapidly. Many people saw Bitcoin as a one day fly which had its moment of fame, but those people were probably only looking at the price and not at the innovation behind this nerd money, because Bitcoin is here to stay.

Before we can even think of a digital currency, we need to answer 2 questions. The first one is: how do I know my money is not double spent? In other words, how can I be sure that no one else can claim that this money belongs to him and not to me? The second question is, how can I trust the money to be authentic and not counterfeit? With our euros this is regulated by banks and physical money, Bitcoin uses math to do this. Personal cryptographic signatures which can easily be calculated in one way, but are nearly impossible to calculate in reverse, enable users to sign digital assets or transactions providing the ownership of that asset.

The existence of digital currencies is not as new as you might think, it actually is pretty old and dates back to the 1980’s. There was only one problem, these digital currencies were centralised and used a central clearinghouse to settle all transaction, just like banks do today. Therefore these currencies were very vulnerable to attackers, who could attack or manipulate the system by hacking only one central clearinghouse. Bitcoin eliminates the need of a central authority with a network of computers which are connected through the internet and work together to verify and process all bitcoin transactions using CPU and GPU power. Everyone with access to the internet can send and receive bitcoins directly to each other without interference of banks, it is a peer to peer payment system.

When a transaction is made its existence is spread along the whole network and is contained in a so-called block. The blocks contain all transactions made on the bitcoin network in the past 10 minutes and are calculated by so called miners. These miners are solving mathematical problems and if the problem is solved, the block is created. If a bitcoin is spent twice, the network disagrees over the transaction and the network simply refuses to include it in the block. All the transactions ever made are recorded in blocks and all these blocks together are called the block chain. It functions as a huge public ledger that is not in control of a single person, but of everyone. In this way a shared single source of truth is created. Because of the network, this digital currency is de-centralised and in order to tamper with it, you would have to be in control of more CPU and GPU power than the whole network combined, in practise an impossible task and so this block chain solves the safety problem digital currencies had in the 1980’s.

So the genius part of bitcoin is not the coin itself but the concepts which make it possible to create an electronic system that can handle valuables in a secure, fast and reliable way. After the creation of the internet of information in the 1990’s this is the second revolution and can be seen as the creation of the internet of value. All these concepts are very complex and impossible to fully cover in this article, but the most important thing to keep in mind is, that with the help of these concepts which are the foundation of bitcoin, we can build a trust machine independent of trusted third parties. In this way my valuables such as votes, money or even my certificate of ownership can be recorded and stored without the interference of anyone who could have interest in them. Bitcoin is only the tip of the iceberg of what you can do with these concepts. The way we trade or keep track of our valuables will change and I assure you, within a few years you will use Bitcoin’s technology for a lot of things.

- Ruben Bos