In 2008, as financial markets collapsed in the world’s greatest economic crisis since the 1930s, Satoshi Nakamoto published a white paper outlining his Bitcoin network and blockchain technology that was used to activate it. (By convention, Bitcoin with an uppercase “B” generally refers to the Bitcoin network as a whole, while bitcoin with a lowercase “b” refers to the digital asset of the Bitcoin network.) Since then, as the markets have been rising are straightened out, Nakamoto creation flourished and spawned countless others “altcoins”As well as new uses and applications for its blockchain technology and its derivatives.
As the Bitcoin network and blockchain technology have become key parts of today’s digital economy, it is important that lawyers and others understand the terminology and basic characteristics of this technology. This article provides high level explanations for this.
So what is “bitcoin”?
In fact, bitcoin is the “digital assetOf the Bitcoin network and is sometimes referred to as “virtual currency” or “digital currency”. Unlike a traditional (government-backed) fiat currency (e.g. the US dollar), such as a piece of paper or a metal coin, bitcoin is a digital asset that only exists electronically.
Of course, Bitcoin was not the first form of electronic money. In some ways, credit cards and online banking are also digital currencies.
Bitcoin is not even the first “virtual currencyCoupons such as green stamps or the ubiquitous Frequent Flyer miles of airlines are also virtual currencies. The once popular virtual world, called Second Life, even had its own virtual currency known as “Linden Dollars.” .
That said, Bitcoin is more than a digital currency, it is also a “cryptocurrency.In other words, it uses advanced cryptography to protect your bitcoin from theft. Every bitcoin owner has a “Public key“, which is information that anyone can see, such as an account number, and a”Private key”, Which is a secret number used to unlock the account for transactions.
Enabling blockchain technology
In traditional bank accounts, your account balance is kept secret on a “private ledger”, Usually a locked computer database managed by your bank. It is private because only you and other authorized staff can access your account history.
Bitcoin differs because it uses a “public ledger” – known as “blockchain”Technology – to ensure that anyone participating in the Bitcoin economy has a copy of every transaction that has ever taken place. Blockchain technology has proven to be very useful far beyond Bitcoin and has favored others alternative parts (Where “altcoins”) And other public or quasi-public ledger systems that use the same basic framework.
The Bitcoin blockchain is maintained by a global crowdsourcing group “Minors.“ In order to process a transaction, various miners compete with each other to be the first to solve a difficult math problem. Resolving this issue allows minors to add a “to block“(Associated with the last transactions) to”blockchain”(A chain of records of all past transactions within the Bitcoin economy). Miners typically control large computer networks, often with special hardware developed specifically to solve these difficult calculations.
What motivates a miner to make the substantial economic investment to build and maintain these computer networks?
First of all, at least for the next several decades, miners will receive a significant number of bitcoins – say, 25 bitcoins every 10 minutes – if they are successful in solving the problem. At $ 4,500 per bitcoin, a miner can earn $ 112,000 for just 10 minutes of work. (Each block on the blockchain is mined every 10 minutes.) However, the number of bitcoins allocated for successful mining of a block will be reduced over time and, at some point, will be zero.
Second, in order to encourage minors to include a particular transaction in a block, participants can “tip” the minor and pay transaction fees. While this is not a driving force today, it is expected that in the future, as the number of Bitcoin allocated for each block is reduced or eliminated, tipping will likely become more frequent.
What are the key attributes of Bitcoin?
So what are the attributes that make Bitcoin special to their true believers?
First of all, It is “pseudonym.“ Each account is only identified by its public number – so no name is necessarily linked to the account.
Second, all transactions are transparent. Thanks to its distributed public ledger, anyone can view the balance of any account at any time. This is because the full transaction history of any specific bitcoin can be traced from the day it was first mined, across each account through which it was transmitted.
Third, It is independent of any government or central authority. For true libertarians, this is considered one of Bitcoin’s greatest strengths. It’s also a trait that some people feel uncomfortable with. There is no central bank to regulate Bitcoin.
Fourth, It is irreversible. Once a transaction is signed and added to a block on the blockchain, it cannot be reversed.
Don’t forget the Bitcoin risks
These attributes also lead to various associated risks, including the following:
The price of bitcoin tends to be very high volatile. Because, unlike the dollar when it was on the gold standard, the value of bitcoin is not supported by anything other than the owner’s confidence that someone else will be willing to accept bitcoin in a future transaction for an acceptable value.
Since Bitcoin is still relatively new, regulation associated with it is still a work in progress. In many jurisdictions, there is no regulation on Bitcoin. In other jurisdictions, such as New York State which seeks to be Bitcoin-friendly, Bitcoin is subject to balanced regulation designed to foster innovation. However, in some jurisdictions, where Bitcoin is perceived as a risk to the stability of the local currency, Bitcoin may be heavily regulated or even banned.
Since there no central authority regulating Bitcoin, there is uncertainty in the governance of Bitcoin that can lead to chaos. Generally, the rules of Bitcoin are governed by the behavior of the majority of those who participate in the Bitcoin economy. Sometimes Bitcoin “forks“happened. In other words, when substantial dissent arises with respect to a transaction, the blockchain can split into two separate blockchains. This happened recently when the Bitcoin network was split. , creating a new network called Bitcoin Cash.
What are altcoins?
There are now many other cryptocurrencies that copy or modify the basic bitcoin software. One of the first altcoins was the “Litecoin”.“ A larger altcoin is the “Ethereum.“
Ethereum is particularly important because it allows “smart contracts”, That is to say the contractual conditions coded in the part itself, as well as“tokensWhich code the coin to track other assets such as inventory, inventory, or other valuables.
The Business plans Associated with Bitcoin, altcoins and blockchain technology continue to evolve and are likely to become increasingly important in our digital economy.
After that ?
Expect more cryptocurrencies to be created, like Burger King just did with Whoppercoin. Blockchain technology for business will continue to explode outward, with new applications in games, digital identity, real estate and even cannabis. Partnerships, funding and deal-making will also multiply globally, as more organizations, institutions and governments join in action to avoid disintermediation. And Bitcoin and blockchain rockstars will emerge, whether from successful releases, notorious hacks, or landmark achievements.
Block some time this week
On Thursday, September 14, 2017 at noon EDT, we will be host a webinar to discuss whether to stay up to date with Bitcoin and Blockchain, using smart dashboards maintained by Intellar.com to follow global players, technologies and events in this explosive field.
For more information on Bitcoin, blockchain, altcoins and the intellectual property issues associated with them, please contact the author at firstname.lastname@example.org and for more information on Intellar ™ dashboards powered by Perception Partners ®, please contact the author at email@example.com.
Charles R. Macedo is a partner at Amsterdam, Rothstein & Ebenstein srl, where he advises and advocates in all areas of intellectual property law, including patent, trademark and copyright law, with a particular focus on complex litigation. He also assists his clients in obtaining, maintaining and applying patent and trademark portfolios. He has successfully recovered domain names registered for others using his clients’ brands.
Mr. Macedo is also the author of The Corporate Insider’s Guide to US Patent Practice, originally published by Oxford University Press.
For more information or to contact Mr. Macedo, please visit his Company Profile Page.
Barry Brager is a leading intellectual property strategist, recognized for the past 9 years in the IAM 300 global list, most recently in 2017. He is a Certified Licensed Professional (CLP), Registered Technology Transfer Professional ( RTTP) and the founder and Partner Director of Perception Partners®, an innovation services firm specializing in intellectual property strategy operations, competitive intelligence and patent brokerage. Barry helps start-ups, F500 companies and research institutes leverage organic capital and investments to improve business outcomes, monetize intellectual property, commercialize disruptive technologies and create competitive advantage. Barry’s firm provides executive-level software tools and information on complex intellectual property matters to senior management, in-house intellectual property counsel, external patent advisors, R&D managers, business development managers and to those responsible for economic development.
Barry is also the CEO of Starpound Corporation, which licenses to turn cell phones into remote control devices. Barry has six patents with more pending related to these efforts.