How secure is the Bitcoin protocol

Bitcoin transactions simply explained

The really revolutionary thing about Bitcoin (or the Bitcoin protocol) is that information is digitally, once and securely moved between two people (users) and that this transaction can be booked in a public ledger (the so-called blockchain) in a forgery-proof way.

The blockchain works in a similar way to a land register. With the Bitcoin application, the information is a value and thus achieves the functionality of digital cash - it serves for simple payment processing. No bank account or other intermediary is required. The digital money can be safely and verifiably moved directly from one person to another. This reduces the transaction fees or eliminates them altogether. Bitcoin can be used worldwide. Furthermore, in contrast to traditional currencies, Bitcoins are more forgery-proof.

The risks with Bitcoins are currently mainly due to the high volatility of the currency. Then there is a certain defectiveness inherent in software. In the case of security gaps there is also the risk of hacker attacks on private password storage (which has nothing to do with the Bitcoin protocol).

Blockchain technology, however, offers far more options than the mere processing of payments: The technology can be used wherever a legally relevant process needs to be documented in a forgery-proof manner (e.g. when transferring ownership, usage rights or revenue sharing). It is not foreseeable how many new business models can be created by this disruptive technology. The development has only just begun, but is progressing rapidly. This is an excellent opportunity for Switzerland as a business location to present itself as a hub for innovative fintech companies and to play a leading role worldwide in this area. It is therefore necessary to look for tailor-made solutions as to how innovative start-ups can be promoted without restricting their development through excessive regulation.

Download an explanatory diagram here (JPG, 2.2 Mb).

* Luka Müller-Studer | Simon Bohi

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