Here’s how the United States can work with Bitcoin and Blockchain for consumers

Now that President Donald Trump has promised to do “America Cryptographic capital“And has just announced his intention to create a”Crypto Strategic Reserve“, It’s worth examining exactly Bitcoin And the cryptocurrency are all about.

Widely misunderstood, blockchain technology and cryptocurrency are often wrongly associated with anarchy and upheavals. In reality, the blockchain community is a paradise for technological nerds that believe they are solving important problems. Given the judicious government policy, this brilliant community could offer a significant value for the broader economy. But bad policy could make it possible to proliferate fraudulent activities.

I am looking for and teaches cryptocurrencyAnd I can tell you that blockchain technology arrives quickly and hard. There are a lot of warnings, but there are also a lot of opportunities.

First of all, a little story. The enthusiasm of cryptocurrency began in 2008 with the release of a short technical document, the Bitcoin white paperWho offered a technology that we now know under the name of Blockchain Bitcoin. In short, it is a large digital book that records Bitcoin transfers, a digital asset that is created on the big Bitcoin book. Bitcoin active transfers are recorded in pieces called blocks, and the blocks are sequenced over time in a chain. It is a chain of blocks – a blockchain – which is a public trace of all Bitcoin transfers forever.

Bitcoin is “Without permission,“This means that blockchain does not require any central authority, such as a bank, to settle payments. Crypto-evaluators, properly managed, can create a more competitive market for consumers. To be sure, there are also bad players in the cryptocurrency sector and, therefore, certain risks associated with its growth.

There are two particularly important things to understand about Bitcoin. First, Bitcoin is based on well -established IT methods, including a cryptographic digital signature system, a cryptographic hash and a spam combat protocol (proof of work). In other words, Bitcoin is based on solid intellectual foundations.

Second, the real meaning of Bitcoin is that it has solved an important economic problem: the problem with double expenditure. In a traditional financial system, all payments go through a bank or other centralized intermediary, which simply rejects any payment which exceeds the user’s balance. But a user of a payment system without authorization could spend the same balance twice, effectively fraud the system.

Bitcoin’s genius is that it builds a new coordination rule, the Nakamoto protocol, to allow an unlimited set of decentralized parts to coordinate to prevent double expenditure without the need for a centralized intermediary. In the end, this is what interested technical nerds around the world and led the developers to pay the blockchain.

That said, Bitcoin is no longer the main objective of the blockchain community. In 2015, the Ethereum blockchain launched, deploying the paradigm. Bitcoin is only a payment system, while Ethereum is a virtual computer, bringing a much wider set of applications. Ethereum blockchain allows the deployment of programs that can be coded to provide financial services without intermediary. Since anyone can deploy a computer program on Ethereum blockchain, this creates a competitive market, which benefits customers. Some of the financial services offered on Ethereum blockchain include trading, loan and loans.

It is difficult to design IT programs to provide intermediate financial services. These programs must be simultaneously rigid to ensure transparency, but flexible to maintain solvency during the unfavorable conditions of the market. Nevertheless, the blockchain community has made remarkable progress: billions of dollars move daily in these computer programs, which have maintained solvency despite large market fluctuations.

Bitcoin was an intellectual spark that sparked a fire. There is now an army of brilliant developers who work to improve the provision of financial services through IT programs. In this context, it is important to realize that government policy can allow or reduce technological and economic progress.

The president has already published a executive decree on crypto. It is wise to kiss crypto as reality rather than ignore it or, worse, to repel it. At work with rather than against Crypto, political decision -makers should seek to play an appropriate infrastructure role, as the government has done for the Internet. In this way, political decision -makers can support intellectual firepower in the blockchain community while offering reasonable guarantees to protect users.

Fahad Saleh, Ph.D., is an associate professor at the Warrington College of Business at the University of Florida. His research examines the economic issues associated with blockchain and cryptocurrency.