Blockchain is the Money Transfer Protocol that the world needs!
What is Bitcoin, Blockchain and Money Transfer Protocol?
TL:DR The modern internet relies on different protocols to function, protocols are a set of rules governing the exchange or transmission of data between devices. Some of the most well-known protocols are TCP/IP (Transmission Control Protocol/Internet Protocol), HTTP (Hypertext Transfer Protocol) and FTP (File Transfer protocol). Bitcoin was the first MTP (Money Transfer Protocol), an agreed set of rules governing the exchange or transmission of digital currency (money) between devices.
The need to connect computer networks with each other in the 1960’s and 70’s gave birth to the internet that we know today. The internet works on protocols and form the backbone of all operations. Protocols are sets of rules governing the exchange or transmission of data between devices. Many different protocols exist today (HTTP, FTP, SMTP, ARP, DNS, IP/TCP) and each has a different function.
Internet protocols are free, open source and available for use by anybody. Entrepreneurs and corporations used innovative business models to build applications on top of the protocols. Examples include:
The world created protocols for email, filesharing, linking, automation, bluetooth, instant messaging, security, routing and many more. However, we did not create and implement a “Money Transfer Protocol” till 2008.
Bitcoin is the first money transfer protocol that created a digital currency for the internet. “Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries”.
The Bitcoin protocol uses a specific type of data base known as a Blockchain. “A Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain”.
Bitcoin was the first MTP/digital currency and paved the way for other digital currencies to follow: Ethereum, Dogecoin, Polkadot, Solana and Cardano are all examples of different money transfer protocols that were build using blockchain technology. Each blockchain (protocol) is designed and build different from one another, thus different blockchains have pros and cons, and perform different functions.
Crypto currencies have the ability to be programmed with a smart contract. A smart contract is simply a program stored on a blockchain (money transfer protocol) that run when predetermined conditions are met. “Smart contracts are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss”.
Google, Amazom and Facebook build successful businesses on top of the different internet protocols. Similarly, new companies will use smart contracts to build innovative business models on blockchains. Uniswap and AAVE are examples of successful projects build upon other blockchains.
Next week we will have a deeper dive into Cardano and explain the reasons why Bora Finance decided to build on the Cardano blockchain.
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