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Currencies BitCoin Bitcoin’s Technology Could Revolutionize Finance, Says BOE

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It has been another uninteresting day for bitcoin. The crypto spent most of yesterday and the early part of today’s trading session drifting around aimlessly around $470. Prices seem to be settling into another range, as can be seen from the chart below that displays the last five days of trading. The top and bottom of this possible congestion are $485 and $460 respectively, although a case can be made that the real support and resistance levels will be further out at $450 and $500. On BTC-E, one coin is currently selling for $471.40. On BitStamp prices are slightly higher at $474.30.

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The Bank of England published a new paper on digital currencies. The paper argues that the key innovation of bitcoin and other digital currencies is the technology behind it and not necessarily the currency itself: ”key innovation of digital currencies is the ‘distributed ledger’ which allows a payment system to operate in an entirely decentralised way, without intermediaries such as banks.”

The BOE even made a short youtube video to explain how digital currencies work and the difference between them and the traditional banking system. The 4 minute vid does a good job of explaining bitcoin’s decentralized payment system. According to the Bank, the two main advantages of a fully open and decentralized payment ledger (like the one that is the foundation of bitcoin’s network) are eliminating the credit and the liquidity risks.

The Bank thinks that this ledger technology could revolutionize finance: ”Some developers have already implemented so called ‘colored coins’. which means using digital currencies as tokens for other assets by attaching additional information. This development could allow any type of financial asset, for example shares in a company, to be recorded on a distributed ledger. Distributed ledger technology could also be applied to physical assets where no centralised register exists, such as gold or silver.”

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