What is Bitcoin and why do we need to know

bitcoin
Date Posted: 10/11/2017 Category:
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What is Bitcoin and why do we need to know

Date Posted: 10/11/2017 Category:
With Bitcoin being somewhat of a ‘hot topic’ in the Procurement scene at present, we thought we’d put together some information about what it is and what it means for the supply chain and procurement function.

What is Bitcoin?

Bitcoin is the global online peer-to-peer currency, free from the interference of regulators and nation states. Formed in 2009, Bitcoin has been described as being to the financial system what the internet is to publishing- revolutionary.

To obtain Bitcoin, here are a few options:

  1. Exchange for your normal currency
  2. ‘Mine’ Bitcoin

The first option is pretty self-explanatory and happens in the same way as one would exchange for any currency. Mining, however, is quite different. This is the term used to refer to the processing of the transfer of money and is done by individuals across the world. In large banks, there are billions of pounds worth of processing equipment, but as Bitcoin is purely digital, and transactions are processed on a P2P(peer to peer transactions) basis. Bitcoin remains an affordable option because there is no centralised clearing house, resulting in lower fees. So what does this mean for our industry and how can we as a community enjoy these benefits?

How can Procurement Benefit as an industry?

One of the most valuable aspects of our industry that Supply Chain and Procurement aim to seek is transparency. Through the use of this open trading system, Bitcoin allows new sorts of trading to take place in a more affordable manner. Bitcoin payments are logged via a transactional system called blockchain. Blockchain essentially allows all transactions to be recorded and guaranteed. This recording can be accessed by anyone (with a high level of IT skill!) and thus makes it a very transferable way of trading, guaranteeing validity and authenticity of sellers, creating a secure platform to transact in a transparent manner.

This was best described by ‘Supply Chain 24/7’ who wrote an article on the transparency of Bitcoin and what it means for Procurement. You can read this article here and we definitely recommend doing so for an in-depth look and understanding of the workings of Bitcoin/Blockchain and specific examples of how this technology could overcome the transparency issues that have affected our industry for many years.

Although Bitcoin was first started in 2009, we are yet to see much use of it in everyday life. How do we think Bitcoin use will transcend into our daily lives? Is it possible that we aren’t ready for it yet, from a technology perspective, as was the case with the first emergence of cloud-based software?

It will be interesting to see how Blockchain transparency fixes develop with the expansion of other technologies such as the Internet of Things and how this will in turn transcend into the b2b (business to business) environment.

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