What is Bitshares?

 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.   It can move value though time and space as quickly as possible with  minimal loss.  Gold is great at moving value though time, as  demonstrated by the fact that gold mined 1000 years ago is still worth  something today.  Fiat currencies produced by governments have a shelf  life of less than 100 years, during which they slowly lose all of their  value.  Unfortunately, gold and paper money are not very efficient at  moving value through space.  Physically moving boxes of gold or hundred  dollar bills long distances or across borders is very time consuming and  expensive. 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. 

Source: Bytemaster's Blog