Where did Bitcoin Come From?
Someone by the name of Satoshi Nakamoto, a pseudonym of one or more individuals, introduced to the world the concept of the Bitcoin in 2008. The white paper he or they published highlighted the limitations of the traditional banking system. Realities such as transaction fees were identified as catalysts to friction between banks and their constituents. Banks were becoming more and more unpopular. Consumers needed a better way to handle their financial lives. Bitcoin would become a way around traditional financial institutions. It would operate on a peer-to-peer network that would facilitate fast and affordable transactions.
Bitcoin and Peer-to-Peer Lending Shared a Goal
This idea was not new. The innovators of peer-to-peer lending in 2005 were motivated by a similar reality. Access to financial assets was complicated by the traditional banking system. In the case of peer-to-pending lending, the goal was to improve the environment for consumers to access loans. Traditional banks were not friendly to consumers who needed a quick, small loan. This was even more so if the consumer had less than an excellent credit rating. But more importantly, traditional banks required meetings with lending officers during specific hours. The process involved a lot of paperwork and there was a long wait-time before being answered. Banks also imposed high fees and rates.
Peer-to-peer innovators recognized the reality of a digitized consumer world. No one has time to deal with store hours. Consumers are on the go, juggling multiple digital devices and operating almost completely in an online world. They needed access to financial assets more quickly and less expensively. P2P lending was created to remove the “middle man,” i.e. the bank. A new financing paradigm would be established where people would lend to people. The concept caught fire and there is P2P lending today in just about every country in the world.
Like P2P lending, Bitcoin took off, becoming a major disrupter of the traditional financial paradigm. It has solidified itself in the ever-growing world of fintech—financial technology. Its popularity and success defy all odds. Today, a Bitcoin costs roughly $17,000. It was $1,000 at the beginning of 2017.
The Bitcoin: What is it?
Bitcoin is a cryptocurrency—a digital currency created and held electronically. There are no printed versions of the currency. It circulates through peer-to-peer networks operated by individuals who are called miners. However, the network itself is independent—no institution owns it. Your bitcoins are kept in your digital wallet and can be easily transferred to someone else. The digital marketplace has created huge opportunities for the Bitcoin. You can use it to purchase a wide variety of stuff. Here is a great video that explains it all in a nutshell.
Success Breeds Success: Litecoin
On the heels of the unexplainable massive success of Bitcoin, comes Litecoin, referred to as the brother of Bitcoin. Litecoin entered the cryptocurrency world in 2011. It was initiated by a former Google exec—Charlie Lee. What is the difference between Litecoin and Bitcoin? Litcoin’s peer-to-peer network is much speedier, meaning that Litecoin transactions can happen much more quickly. This means your purchase and money transfer transactions will run more smoothly and cheaply. There are other more complex differences too, but we will not go into that here.
Litecoin has really taken off, growing 3-4 times in the past six days. Bitcoin launched its initial listing on the Chicago Board Options Exchange, paving the way not only for Litecoin but the future of cryptocurrency in general. Litecoin’s speedier transaction rate and lower fees also contribute to its meteor rise.
And About Those CryptoKitties
Do any of you remember the Beanie Baby craze? Fast forward to the new age of virtual reality, where currency is digital and everything is operating on a blockchain platform. CryptoKitties has become the latest craze in the cryptocurrency world, resulting in millions of dollars being spent by consumers around the globe.
CryptoKitties is basically a game that runs on the Ethereum blockchain platform. The kitties are digital. You can buy a CryptoKitty with your digital currency. They have highly specialized DNA and depending on their genetic level, they can fetch quite a bit of money. CryptoKitties can be bred producing potentially millions of these digital kitties.
You can buy and sell your CryptoKitty at auction, using Ether, another cryptocurrency similar to Bitcoin. CryptoKitties can fetch tens of thousands of dollars. It is definitely a game of this millennial generation. Nevertheless, CryptoKitties have become so popular that they have overtaken the Ethereum platform. They are kind of cute, and definitely maintenance free.
Too Much Success can also be a Liability
Unfortunately, the problem that Bitcoin was designed to address has become its nemesis. Transaction fees have crept upward as the cryptocurrency has skyrocketed in popularity. Digital infrastructure has not kept up with demand, to support the peer-to-peer networks that power Bitcoin.
The good news for peer-to-peer lending is that its original objective continues to be met—consumers can access loans, via the internet, according to their own schedule. The response rate is quick, and fees and interest rates are reasonable. P2P loans are assisting thousands of consumers to cover the costs of unbudgeted expenses and also repair their credit.
While the future of Bitcoin, Litecoin, and CryptoKitties is anyone’s guess, the future of P2P lending is bright.