Answering the question "What is BitShares?" has been one of the most difficult challenges I have faced. BitShares is so many things to different people and there are a thousand different ways of understanding what BitShares is. This post will tell you what BitShares is to me, its founder. Before getting into the long-answer to this question, let me give you the executive summary. BitShares is one of the most important tools that any community can use to secure their freedom; an idea whose time has come. After reading this post I bet you will agree.
All the forces in the world are not so powerful as an idea whose time has come. - Victor Hugo
There are many different layers at which we can understand BitShares. Each layer has its own benefit and usefulness.
BitShares is software
At its most inner layer, BitShares is software. To be more specific, BitShares is a distributed multi-user database with update permissions managed by a defined set of rules and public key cryptography. At this level it isn't very interesting to most people, but is still very important. Software is open source, easily copied and modified, and most importantly protected by free speech. This means that almost nothing can stop BitShares at this layer short of a global event that destroys almost all digital data. Governments once attempted to regulate cryptographic software as a weapon and impose export controls. Governments lost that battle long ago and no longer attempt to regulate or control the spread of free software. In the case of BitShares the software is in the Public Domain.
BitShares is a network
Moving up a layer, BitShares is a network. A network of computers owned by individuals all over the world run the BitShares software and keep their databases synchronized according to the rules defined by the software. The BitShares network can survive as long as there are at least two computers that can communicate with each other over the internet. This network of distributed computers ensures that the database is robust against failure. Every single computer on the network maintains a full copy of the database which means no one can change the public record. This immutable public record becomes the foundation of higher layers.
BitShares is a Ledger
A ledger is a database containing account balances and transfers among them. Every bank, company, and organization that deals in financial matters has a ledger that tracks who owns what. The BitShares ledger is very robust because it is built on the prior two layers: highly distributed network, that is fully transparent, and secured by the latest cryptography.
Compare this to ledgers in use all around the world today. Ledgers based upon paper can be lost, stolen, modified, burned, or miscalculated. Digital ledgers managed by software such as Quick Books or Quicken are centrally managed, can be updated, changed, back dated, corrupted or otherwise misused. Advanced ledgers such as is in use by our banking system are still subject to human error, lack transparency, are only backed up a hand full of places and often times are internally inconsistent.
Just ask the owners of MF Global where the depositors' funds went? Ask any of the big banks who really owns the gold and how many times the same ounce of gold has been used as collateral; they cannot tell you with any degree of certainty. The ledgers in use today around the world are fundamentally broken when it comes to reliably tracking property rights. How do we know they are broken? Have you ever heard of cooking the books? Today's ledgers have insufficient technological barriers against fraudulent edits; the ultimate protection is a manual audit, but audits are time-consuming, expensive, non-public and only as trustworthy as the auditor (think about Enron).
The BitShares ledger changes the game by providing a badly needed advancement in accountability.
BitShares is a Company
Companies are merely a ledger tracking joint ownership in a common venture. Companies issue stock which is nothing more than a ledger entry tracking what percent of the company each individual owns. Companies are managed by a board of directors which is elected by the shareholders, the votes of which are logged in the companies ledger. Companies have a business model that hopes to earn profit for the shareholders and they maintain detailed records of all business transactions which, in theory, can be audited by the shareholders to ensure management isn't embezzling money.
In the case of BitShares, the database tracks ownership of shares known as BTS. Each share can vote for 110 delegates, the top 101 delegates by vote become responsible for running the software and maintaining the network as well as performing other tasks for which they are paid by the shareholders. BitShares is a company in the business of processing transactions for a fee and the profits from this business are shared with the shareholders via stock buybacks.
BitShares is an Exchange
The New York Stock exchange is a company that maintains a ledger to track ownership of stock and debt issued by other companies. It earns money from transaction fees and has its own stock as well. Like the New York Stock exchange, BitShares allows people to issue their stock or debt to be tracked and traded on its distributed ledger.
BitShares is a Bank
Banks are companies that maintain a ledger to track debt collateralized by other assets such as housing. This debt is the money used around the world, denominated in dollars, euros, yuan, etc. Banks earn income by charging interest to the borrowers and attract capital by paying interest to depositors. BitShares creates dollar denominated debt collateralized by BTS. This dollar denominated debt is a BitAsset known as BitUSD. BitShares supports any number of BitAssets including BitGold, BitSilver, BitOil, etc. Whereas normal banks practice the unsustainable business of fractional reserve banking, BitShares uses at least 200% reserve and is often over 300% reserve. Whereas normal banks use illiquid assets to back (collateralize) debt payable on demand, BitShares uses highly liquid BTS as collateral. Whereas normal banks are bailed out by tax payers, BitShares depositors have direct claim on the collateral.
Overall BitShares is better banking. For a more detailed understanding see my article on "BitShares as a Bank" or Lance Kasper's detailed article explaining how BitShares Market Pegged Assets operate. I highly recommend these article to everyone.
BitShares is a Currency
Anything can be used as money in the right circumstances. Gold, silver, giant stones, paper, debt, and cigarettes have all been used as money. The rich and powerful have often used bearer shares (paper stock certificates) as a form of money. In the case of BitShares there are many different assets that can be used as money including BTS, BitUSD, BitGold, and BitSilver. All of these assets have the property of being fungible, divisible, transportable, and impossible to counterfeit.
I have previously said that the best money is like a Flux Capacitor
Bank deposits are very efficient at moving value through space via wire transfers, but they are still expensive and relatively slow (days). Bank deposits can also lose all of their value far more often than paper dollars because banks regularly go bankrupt.
With BitShares and BitGold, you get many properties of gold (such as price stability and freedom from counter-party risk), as well as the benefits of bank deposits (you can transfer millions of dollars worth of BitGold to the other side of the world in seconds).
Whether you use BitShares (BTS) as virtual bearer shares, BitGold as a 300% collateralized virtual gold deposit, or BitUSD as an alternative to fractional reserve bank deposits, BitShares provides the best money/currency in the world.
BitShares is a Community
A piece of software powering a distributed network is worthless without people coming together to give value to the BTS on the ledger entries. Each and every person that joins the BitShares community adds value to the ledger and gains value from the fellow community members. All things start small with just a few people. Over the past year and a half, BitShares has grown from an idea to a global community with thousands of people.
Communities are brought together around common values and principles. They support each other through thick and thin. As the founder of BitShares, this community is largely brought together by the principles I espouse on this blog: Creating decentralized, market-based solutions to secure life, liberty, and property for all.
BitShares is a Country
Countries are what communities become when they become large enough and powerful enough. Countries are sovereign and issue their own currency. Countries are run by elected governments, usually with some kind of senate or parliament like BitShares' delegates. While we have a long way to go, it is my vision to grow BitShares to the point where the ecosystem is able to make governments irrelevant to our daily lives. This means all dispute resolution and law enforcement will be managed by the BitShares community in an entirely non-violent manner by leveraging smart contracts, bonds, insurance, and other systems on the BitShares ledger.
BitShares is an Idea…
…whose time has come. The specific software, network, and ledger that BitShares is today has very real limitations. But the idea behind BitShares, BitAssets, and non-violent self governance is so powerful that all the forces in the world cannot stop it. The idea will live on in one form or another. The entire concept of numbers on a ledger having value exists entirely in the collective mind of the BitShares community. It doesn't matter what form that ledger takes, what matters is that we all share a common idea regarding who owns what. We no longer rely on governments to be the arbiter of property rights. BitShares, the software, is just a tool that enables our community to reach unambiguous consensus on property rights. In many ways, it is no different than Rai stones which are large immovable stones used as money which were valued because of community consensus.
BitShares is a small town on global scale.
Our community is open to all who wish to create a free society where our children can be secure in life, liberty, and property.
