This is how the US uses Bitcoin and Blockchain for consumers

President Donald Trump has just announced plans to create “American crypto capital” and create a “crypto-strategic reserve,” and it is worth reviewing exactly what Bitcoin and crypto-clauses are.

Widely misunderstood blockchain technology and crypto assets are often mislinked to disorder and upheaval. In fact, the blockchain community is a heaven for tech nerds who believe they are solving important issues. Given the wise policies of government, this great community can bring meaningful value to the broader economy. However, poor policies can cause fraudulent activities to multiply.

I study and teach cryptoeconomics, and I can tell you that blockchain technology is becoming more and more difficult. There are many attention, but there are many opportunities too.

First, a little history. The Cryptoasset trend began in 2008 with the release of Bitcoin Whitepaper, a short technical document. This proposed a technology that is now known as the Bitcoin blockchain. Simply put, it is a digital ledger that records the transfer of Bitcoin, a digital asset created in Bitcoin ledger. Transfers of Bitcoin assets are recorded in chunks known as blocks, which are sequenced into chains over time. This is a blockchain chain. This is a publicly auditable trail for all Bitcoin transfers.

Bitcoin is “not allowed.” In other words, blockchain does not require a central authority, such as a bank, to resolve payments. A properly processed crypto assets can create a more competitive market that benefits consumers. Certainly there are some bad actors in the CryptoAsset sector as well. Therefore, there are several risks associated with its growth.

There are two particularly important things to understand about Bitcoin. First, Bitcoin relies on established computer science methods, such as cryptographic digital signature systems, cryptographic hashing capabilities, and spam fighting protocols (proof of work). In other words, Bitcoin relies on solid intellectual foundations.

Second, the true importance of Bitcoin is that it solved the key economic problem: the double spending problem. In the traditional financial system, all payments go through a bank or other centralized intermediary. This simply refuses payments that exceed the user’s balance. However, users of unauthorized payment systems can use the same balance twice to effectively fraud the system.

The genius of Bitcoin is to build a Nakamoto protocol, which is the new adjustment rule, allowing an unlimited set of central central parties to be adjusted and eliminates double expenditures without the need for central intermediary. Ultimately, this is something that interests tech nerds around the world, and it has led developers to key in to the blockchain.

That said, Bitcoin is no longer the main focus of the blockchain community. In 2015, the Ethereum blockchain was launched, shifting the paradigm. Bitcoin is just a payment system, but Ethereum is a virtual computer, bringing a much broader set of applications. The Ethereum blockchain allows for the deployment of programs that can be coded to provide financial services without intermediaries. This creates a competitive market and benefits customers as anyone can deploy computer programs to the Ethereum blockchain. Financial services offered by the Ethereum blockchain include transactions, borrowing and financing.

Designing computer programs to provide intermediate financial services is difficult. Such programs must be rigorous at the same time to ensure transparency, but are flexible to maintain solvency during disadvantaged market conditions. Nevertheless, the blockchain community has made incredible progress. Billions of dollars travel daily through these computer programs.

Bitcoin was an intellectual spark that started a fire. We currently have an incredible army of developers working to improve the delivery of financial services through computer programs. Against this backdrop, it is important to recognize that government policies are effective or underpinning technological and economic advances.

The president has already issued executive orders on cryptography. It’s wise to accept Crypto as a reality rather than ignoring it or, even worse, pushing it away. Policymakers should work together rather than oppose crypto, and strive to play the role of appropriate infrastructure, as governments have on the Internet. In this way, policymakers support the intellectual firepower of the blockchain community while also providing reasonable safeguards to protect users.

Dr. Fahad Saleh is an associate professor at the University of Florida’s Warrington University of Business. His research examines economic issues related to blockchain and crypto assets.