Bitcoin and blockchain technology offer a hint at what is to come
Bitcoin has been in the news quite a bit lately. As the most popular cryptocurrency, Bitcoin has drawn attention from private citizens to government agencies. Included are reports of people losing large sums of money investing in Bitcoin. Which is why an overview of Bitcoin was most timely. Tom Portz, a financial adviser and frequent speaker on the topic, visited us on Sept. 11.
The concept behind Bitcoin was introduced to the world in 2008 through an essay published online. The author was Shatoshi Nakomto, but, Portz says, no one knows who that person is. Or if it is a person, an organization, or nothing at all. A true enigma.
All transactions take place on a peer-to-peer basis; there is no banking or credit card system. A host of computers around the world authenticate and store the transactions. A sophisticated algorithm, developed by the National Security Agency, helps protect the data. Successful transactions are stored permanently in the computers in what are known as blocks. Those blocks form the foundation of blockchain technology.
The first retail transaction involving Bitcoin occurred on May 22, 2010. A person in Jacksonville, Fla., purchased two pizzas for 10,000 Bitcoin, or about $40.00, Portz says.
Bitcoin has been in the news recently due to its widely fluctuating value. (Current value is approximately $6,400 per Bitcoin.) Some purchasers have lost millions of dollars' worth of Bitcoin. Portz, a Certified Financial Planner with more than 30 years in the business, advises against investing in Bitcoin at this time.
But his firm, Sterling Capital Management, Inc., in Waukesha, Wis., tracks Bitcoin because they see opportunities for indirect investment. Educated at Cambridge and Oxford, Portz has studied businesses and economies in dozens of countries. He sees value in the blockchain technology.
Approximately 2.5 billion people are "unbanked," meaning they don't have access to a bank, ATM or other method to drawn cash. However, many people have smartphones. With the proper app they can buy and sell goods and services.
Blockchain technology could be valuable in numerous industries and processes, including health care, shipping, and warehousing. During a recall, for example, investigators could find the specific item in a container of goods without having to destroy the entire shipment.
Your entire health records would be accessible by your smart phone. No need for one clinic to send your records or X-rays to another facility. Just show up with your phone (or even smart watch).
Cautions abound with Bitcoin. In addition to its market volatility, Bitcoin owners must make sure never to lose or forget their password. If that happens, there is no way to access their "wallet." And no way to retrieve the password. Those individuals lose all the Bitcoin they've purchased.
Yet Portz noted that the blockchain technology has merit. It remains to be seen how that evolves and is employed throughout the world.