The emergence of cryptocurrencies, especially Bitcoin, has raised many to speculate whether the concept of a global digital currency is inevitable in today's society. Andrew "Flip" Filipowski, founder and former CEO of PLATINUM technology, inc and current Chairman & CEO of SilkRoad Equity, believes that the value and promise of Bitcoin can completely revolutionize the global economy and has the inevitable potential to bypass banks altogether. Think of it as the Bank for Humanity.The Bitcoin protocol is the genie that has left the bottle never to be contained again. Enormous decentralized businesses will be created out of this protocol that will change the landscape of global business forever. A new cycle of disintermediation has begun and all existing business must adjust or they will be marginalized.

Bitcoin at its most fundamental level is a breakthrough in computer science - one that builds on 20 years of research into cryptographic currency, and 40 years of research in cryptography, by thousands of researchers around the world.  In its' youthful history it has been attacked relentlessly and shown its' resiliency repeatedly.  "In the simplest of terms, think of a bitcoin as currency melded with a public stock certificate of a fast growing startup," says Flip. "Think of it as owning a share of Facebook rather than a dollar, but you can electronically spend a bit of your share and buy a hamburger."  Your remaining bitcoin fraction can continue to appreciate even when pieces of it are spent.

Flip explains that while the concept of Bitcoin may be hard to comprehend for those without a fundamental understanding of cryptography currency, bonds and banking, there are a few points that prove Bitcoin has the edge over banks. The opinions expressed are his own. 

Bitcoin is a Peer-to-Peer Network 

The beauty of a peer-to-peer federated system (such as the one Bitcoin uses) is that it cannot be shut down because it does not rely on a hub.  Think Napster vs BitTorrent.  You can shut one down and not the other.  Bitcoin is an OpenSource project consisting of charitable contributions from developers who receive acknowledgement, peptides for their receptors and the knowledge that their valuable skills are contributing to something meaningful in addressing human need. In fact, Bitcoins adds economic incentives to the equation making it even more compelling to create the building blocks of a new era in business.  Unlike banks, Bitcoin exists as a network that rewards users who contribute to the network by managing the Blockchain, by adding the newest Bitcoin "Block" to the distributed ledger and for providing the physical servers composing the network that processes the transactions of a global digital economy.

Bitcoin is not Subject to FIAT Manipulation  

All national currencies in circulation, issued, and managed by respective central banks are FIAT currencies.  Collectively, the banks have manipulated FIAT currencies by creating and printing additional money to create cycles of opportunity, which has led to debilitating consequences and even war. "The network rules for Bitcoin are that a maximum of 21 million Bitcoins will be created," says Flip. "The very fact that Bitcoin was designed to have a maximum number of bitcoins is part of the scheme that protects the Bitcoin currency from the kind of manipulation that other FIAT currencies have experienced."  The banks and especially our central bank are continuously counterfeiting our currency and lending 10 to 300 times the actual reserves they have.  Even the reserves are nothing but government debt.

Bitcoin has Minimal Fees 

Of the world's population, nearly 5 billion of the 7 plus billion people have no access to a competent banking system. They pay exorbitant fees (upwards of 10 to 40 percent) for simple transactions and Bitcoin holds the promise of doing the same for a micropayment sized fee. "Nearly 6 of the 7 billion people across the globe have access to mobile technology and live in countries where the local currencies are not investment grade or trustworthy," says Flip. "This underbanked population has every reason to feel that it would be better served by a trustworthy electronic cryptocurrency like Bitcoin. By eliminating banks as an intermediary from the consumer end of the equation it will take out the commissions and fees we are currently subjected to."

Bitcoin Has Fraud Protection

Bitcoins manifest themselves only in digital form, as a pair of private and public keys, existing entirely as zeros and ones. To make generation of Bitcoins difficult, the Hashcash cost-function is used which allows Bitcoin blocks to be verified only by assembling the public and private key. The complexity of the design also carries with it foolproof features that prevent any duplicity in bitcoins and provide infallible protection to the integrity of the transaction between participants. For example, unlike credit cards a Bitcoin transaction can not be fraudulent and needs no security provisions. All the fraud detection and call centers that support traditional banking and credit card processing are eliminated with Bitcoins and merchants (as well as consumers) will have exponentially less costs involved in all transactions.  Also, It would be impossible to end up with the 130 million compromised credit cards that Target and its' customers experienced.

Extra credit section

Bitcoin is the first practical solution to a longstanding problem in computer science called the Byzantine Generals Problem. To quote from the original paper defining the B.G.P.: "Imagine a group of generals of the Byzantine army camped with their troops around an enemy city. Communicating only by messenger, the generals must agree upon a common battle plan. However, one or more of them may be traitors who will try to confuse the others. The problem is to find an algorithm to ensure that the loyal generals will reach agreement."

More generally, the B.G.P. poses the question of how to establish trust between otherwise unrelated parties over an untrusted network like the Internet.  It basically solves the problem of not needing trust-worthy intermediaries when we can safely develop systems that provide absolute security in a network of untrustworthy nodes.

The practical consequence of solving this problem is that Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.  When you get this you really get Bitcoin.

What kinds of digital property might be transferred in this way? Think about digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds ... and digital money.

All these are exchanged through a distributed network of trust that does not require or rely upon a central intermediary like a bank or broker. And all in a way where only the owner of an asset can send it, only the intended recipient can receive it, the asset can only exist in one place at a time, and everyone can validate transactions and ownership of all assets anytime they want.

Herein lies the ultimate value of a Bitcoin and how it will continuously appreciate. These distributed networks are capable of creating tremendous wealth by providing a protocol for many useful activities to take place on the network.   When used to create distributed, or as I call them, Federated Corporations that can take on existing enterprises and not only effectively compete with these traditional business but have their economic value reflected in the price of Bitcoin. In fact, Bitcoin is more of a share of stock then a currency as it is the universal solution to the B.G.P. Why have eBay, Drop Box or JPMorgan Bank which all carry the burden of a centralized hub of operation when you can Federate them all into corporations that function on a peer-to-peer basis.

Basically taking a nearly free ride on the Bitcoin transaction servers (the idea, the protocol and the physical servers) that have been assembled inadvertently to support Bitcoins and can be co-opted to support Altcoins, transactions and virtual Federated Corporations. This is the genie that has been let out of the bottle as Federated Corporations have a security, durability and cost advantage that cannot be reckoned with as a centralized corporation.  Why do we need eBay to be the intermediary for a transaction between two parties wanting to exchange bitcoins for head vases when a Federated version of eBay would just connect the two parties and facilitate the transaction for a very very small fee. Why do we need Drop Box if the network and every peer-to-peer node can contribute the storage.  

Micro payments accruing to everyone providing access to the network of storage as well as extending to providing access to the mesh network that is the foundation of a Federated Telco.  

Why have a JPMorgan when the network can provide the loan, the account, facilitate the transfer, etc.. Some of these corporations will be created so that they can function with almost no employees and the employees will resemble open source contributors and simultaneously as shareholders with the value of these corporations reflected in Bitcoins or other alt-currencies that will in fact merge into a digital token that has the combined virtual face of currency and stock.

Therefore we will be able to have a share of Facebook from which we can slice off a small fraction to buy a upsized hamburger, fries and a big-gulp. The Bank for Humanity is around the digital corner.