As an investment, cryptocurrencies have been hailed and denounced in equal measure. Bitcoin has seen its value surge from a £130 in 2013 to almost £15,000 and [in late 2018] is now worth £4,200.
The figures are dramatic: One of the first real world Bitcoin transactions in 2010 – for two pizzas, paid for with 10,000 Bitcoins – would see those same pizzas worth approximately £49 million, at today’s exchange rate. However, cryptocurrencies were originally designed to free money, payments and people from centralised entities, not to fuel speculators’ greed.
London Business School (LBS) MBA alumnus Brian Forde, former White House Senior Tech Advisor to Barack Obama, has a life-long interest in using technology to improve people’s lives and he brings this unique perspective to cryptocurrencies. He is less interested in what Bitcoin is worth and more interested in what its technology can enable business to do. Business leaders need to understand the founding principles of cryptocurrencies and how it will disrupt existing business models.
How crypto works
Cryptocurrencies, like Bitcoin, work using a blockchain, which keeps a ledger of all transactions. Each Bitcoin is stored in an electronic wallet. And each transaction’s details is stored and verified by the network. Trust is distributed: there is no central authority that determines the ledger and a coin’s value is connected not to a resource like a commodity or a nation’s economic performance but to what people are prepared to pay for it, like gold or diamonds.