Innovation By Design
I have contributed to Engineering’s Ingenium webzine talking about how open source is the innovation backbone powering the Bitcoin revolution. Below you find the English version, read more at the Engineering site.
2013 was considered the year of Bitcoin, the new cryptocurrency. Bitcoin is a peer-to-peer communication protocol that provides a secure and decentralised system for the transfer of property rights. Each block in the chain of transactions is certified by network nodes which are paid for this activity. Known as “mining”, this activity is financed by the limited and controlled production of new Bitcoins. To circumvent the system’s security it is necessary to invalidate the rules applied to each transaction, and this requires obtaining control of more than 50% of the network nodes. Investing in Bitcoin is not without risk. In December 2013, China banned bitcoins, on 28 February 2014 the main exchange (Mt Gox) declared bankruptcy and, more recently, the U.S. administration has expressed its willingness to fiscally regulate the cryptocurrency. Each time the market has reacted negatively and then recovered, but it is certainly premature to express an opinion on the future of this means of payment. But a question is worth asking: why are innovation and Open Source inseparable in Bitcoin?
The protocols underlying internet, and Bitcoin is no exception, are based on “rough consensus and running code”, that is, on public discussion and implementation. If Bitcoin had been a private protocol it would have been impossible to verify collectively the effectiveness and an ecosystem would not have been developed which to date has already attracted 100 million dollars’ worth of investment by venture capital, and has already been able to cope with problems in software thanks to the timely mobilisation of the community of developers. The Bitcoin project is in fact developed on GitHub and distributed and discussed on SourceForge.
But if cryptocurrency is the first practical application of the protocol, it is not necessarily the one with the greatest potential for innovation. Today, applications are being designed that intend to extend the principle of operation of this protocol for the transfer of ownership of other assets, such as the management of derivative instruments like ‘Contracts for Difference’. Developments are also being conceived that will enable the creation of “virtual companies” in which each stakeholder will participate through the purchase of “shares” or receive them in exchange for their contributions, thus achieving the business rules of the organisation ‘cabled’ into the code. It is the cooperative model underlying the Bitcoin community, and more generally the Open Source community, which transforms the very way in which the business is established and evolves. Bitcoin could be the platform on which businesses, customers and users will find a new way to exchange value, products and services.