Bitcoins, Blockchains, and Cryptocurrencies: What You Need to Know

March 22, 2018

According to Google’s "Year In Search 2017", “How to buy bitcoin” was one of the year’s most searched terms. So, we got to asking: how do you buy bitcoins? And before we even go there, what is Bitcoin in the first place? Or blockchains? Or cryptocurrencies? Should we even care? Does it even matter?

Those answers, our friends, are blowing in the wind. Just kidding, we’ve got them for you below. But, long story short: All of the above are currently disrupting the financial industry, so yeah…we all should care (or at least take note).

Bitcoin is an independent digital currency (also known as a cryptocurrency), meaning that it’s not reliant on a single computer or server to function. Like a traditional currency, you can use bitcoins to pay for goods and services through the Interweb. However, unlike a traditional currency, Bitcoin is decentralized. In other words, the system operates without the use of a central bank or administrator. Bitcoins are instead transferred via a peer-to-peer network; transactions are verified by network nodes through the use of cryptography, and recorded in a publicly-distributed ledger called a blockchain.

In the language of cryptocurrency, a block is a record of valid transactions (which can take any form really, from peer-to-peer transfers of bitcoins and other digital currencies, to medical data and voting records). Once a block is complete, it’s linked to the prior block in the chain to create a continuously growing list of records known as a blockchain. By design, a blockchain is inherently resistant to the modification of data, as once recorded, the data in any given block can’t be altered retroactively without the alteration of all subsequent blocks.

If you “own” bitcoins or other units of cryptocurrency, it means that you have a private key (basically just a long password) to their address/location on the blockchain. With this key you’re able to withdraw currency to spend or transfer to someone else, but if you lose it, you’re SOL—there’s no way to get your money back. Any bitcoins you own will also have a public key, which allows others to send cryptocurrencies to your account/digital wallet (the place you hold or store bitcoins).

Some claim that cryptocurrencies and blockchains are disrupting finance in the same way that the internet did the publishing industry. Where we previously had to rely on traditional media like television, radio, and print (many of which were/are controlled by huge conglomerates), the internet has allowed everyone to have a voice (for better or worse). In a similar vein, cryptocurrencies and blockchains are making it easier to transfer money across the world by bypassing traditional middlemen like banks—and even governments.

However, precisely because the government isn’t able to regulate Bitcoin and other cryptocurrencies, their open nature has started to lead to the proliferation (gasp) of darknets (double gasp). This is where things can get a bit scary.

Many people confuse the deep web—hidden parts of the internet that aren’t usually indexed by Google and other search engines—with darknets, which are instead niche spaces that promise anonymity for engagement in illegal activities. People go to a darknet to sell and buy drugs, guns, ammunition, security exploits (malware, ransomware), and your hacked data (passwords, credit card numbers, and more). Cryptocurrencies have, unfortunately, helped fuel activity in the dark corners of the internet since their encryption makes tracking transactions nearly impossible.

But you can’t just hop on a darknet like you would, say, Google. To access these hidden crime bazaars, you actually need special software, you need to know where you’re headed, and you need to have a bit of technical prowess.

Despite the bad happenings in these spaces, though, there’s plenty of good activity taking place as well: whistleblowers hoping to shine light on wrongdoings, political dissidents looking for asylum, and investigative journalists hunting down leads. As cryptocurrencies gain popularity and the ecosystem continues to blossom, we’re likely to see more activity in darknetsand with that, added layers of protection, and training for law enforcement on how to navigate the crevices of these dark spaces. It’s certainly an interesting time we’re in, but rest assured: there’s light at the end of the tunnel.

Oh, and in case you just can’t get enough, here are some hacker terms to sprinkle into your next conversation to really sound like you know what’s up:

Crypto:

Cryptography (or “crypto”) is the art and science of encrypting data—as well as breaking that encryption.

Deep web/net vs. dark web/net:

The deep and dark web/net are actually two different things (though they’re often confused). The deep web or deep net is the vast trove of data that isn’t indexed by search engines; spreadsheets, databases, and more that are stored on servers make up this space. The dark web or dark net, on the other hand, is made up of sites that are invisible unless you know how to use a special network to access “the dark side” (yes, really). Once there, you’ll find what you might expect: pirated software and content, illegal drugs, human trafficking, and worse.

Encryption:

The use of special code or software to scramble data so that it can’t be read by a third-party—even if intercepted.

*Data and learnings from Amy Webb and her "2018 Future Today Institute Emerging Tech Trends Report," Wikipedia, and googling “How to buy bitcoin.” (Yes, we did it, too.)