How three chocolate bars brought me to FinTech or Why do I believe in the future of cryptocurrencies?..
I remember conversation that I had at late night on January 2013 in a 6-square-meter kitchen in one of Riga’s apartment buildings, as it was yesterday. Anatoly was telling me for the first time about the geeky virtual currency — bitcoin. By then it price had surged to a record $ 20 (compared to the value of $ 20,000 in December of the last year).
Back then I found the bitcoin technology to be interesting and innovative yet lacking any practical application whatsoever. I told to Anatoly: “Great, it’s a very interesting technology, you will be able to study it more and even can get your Doctor degree on it. But I do not see much practical application of it.” 😉
In order to better understand what bitcoin is and why people value it, I first had to find an answer to the question what money is in the modern world. For instance, to abandon false beliefs that dollars are backed with gold and therefore worth something…
The financial crisis of Cyprus served as an impetus for cryptocurrencies.
Looking back historically, Cyprus faced a financial crisis in 2013 when the government not only froze people’s accounts with banks, but also “borrowed” some of the funds kept in them. It was a big push for people to start buying bitcoins as they got the shock of discovering that in fact they do not own money they have kept in bank accounts.
One more example: I have friends doing business in Belarus where government can “borrow” company’s money at almost any moment: they only transfer money just before paying salaries, settle with the employees and keep company’s accounts empty rest of the time.
Then I thought and realized that bitcoin has a real use-case because people are concerned a lot about their personal financial security, then I started to look where I could buy bitcoins. It coincided that one of my friends has had a few of them. “Sell me,” — I asked, “I want to “play” with them a little.” So, it was how I bought my first 0.3 bitcoin for three Ritter Sport chocolate bars. I simply installed the bitcoin mobile wallet and he sent bitcoins to me by scanning a QR code. Today these three chocolates would cost about $2500.
So (I can say) these three chocolate bars have brought me to the world of financial technologies.
The bitcoins are losing value, and I still believe in the future of cryptocurrencies. Why?
Cryptocurrencies are already causing revolutionary changes in the economic, technological and social spheres. For a deeper understanding, a short tour of the modern world of money would be of use.
Nowadays, money is nothing more than a promise of the state to use the money to buy services from the public, to pay its employees and collect taxes from them. Let’s imagine a company that issues its own (crypto)currency and is using it to pay its employees, accepts payments from customers in it exclusively as well as, for instance, collects fees for rental services. This is what countries are basically doing today, and the money issued by them are worth only as much as we believe they are worth. That is to say, depending on the size of the economy of that country-company, stability ensured, amount of the GDP, etc. …
In the past, fiat money used to be backed with gold, but gold is valuable only because historically humanity considered it to be so. It’s just a medium of exchange, just like cigarettes are used in prisons.
Personally, I am not a fan of the current monetary system: for example, since the crisis of 2008, the US has printed twice as many dollars than there used to be and nothing particular happened. Even the exchange rate of the US dollar to euro remained almost the same. This potentially leads to hyperinflation and social unrest. The ones who are in control — the national central banks — are in charge of the monetary system and this is no good, in my opinion.
I think that humanity will gradually return to the perception that nor a lonely state should be in control money.
Once humanity used to pay in gold or silver. However, it was not that convenient (difficult to transport, difficult to settle for cheap goods, etc.). Then the coins were invented, followed by paper. And now, in the world of Internet, there is even no need to print paper money anymore. There are merely balances with central banks …
The modern world needs a different kind of money, which would not be regulated or “printed” by any state. And I believe that bitcoin has come closest to this goal. It has the best qualities of gold and numbers in banks’ databases:
- limited supply;
- difficult to falsify;
- hard to create (mine) more of it;
- easy to store and calculate;
- easy to use for online payments;
- easy to divide into small units.
Bitcoin is the gold of future!
We communicate without borders, we travel without borders — the modern world needs money that could move quickly and without limits. For example, some time ago I had to pay a membership fee to the WonHwaDo Association in South Korea — the bank transfer took more than a week and cost almost half of that membership fee. Next time I’ll probably ask for an option to pay in bitcoin ;)
Blockchain may be a bigger thing than bitcoin itself
Bitcoin was made possible by the new technology known as blockchain — I think it’s a huge technological and philosophical leap the future of which we are still unable to predict.
The bitcoin is related to blockchain in a similar way as email is related to the Internet. In both cases, we see one specific application of a technology, of which there may be many more.
We are witnessing only the first steps in the development of blockchain technology and I’m going to write about its potential applications in this blog in the future.
P. S. Yesterday, my car mechanic asked me if I knew something about cryptocurrencies and whether it was worth ordering hardware from China. The bubble is about to burst — I thought. — On the other hand… maybe it is a symptom or the beginning of mass adoption? 🚀
P.S.S. 2020 edition
After two years of being full time blockchain and cryptocurrency technical consultant, I have changed my mind about “Blockchain may be bigger thing than bitcoin itself” but my belief in Bitcoin is strong as never before.
You may be interested in some my other post:
- Where lies the beauty of bitcoin: https://medium.com/@chompomonim/where-lies-the-beauty-of-bitcoin-c0b11516a7f5
- How not to get hooked by blockchain: https://medium.com/@chompomonim/how-not-to-get-hooked-by-blockchain-2eda6d97eff1
- Decentralised systems of the internet — the broad overview: https://blog.goodaudience.com/decentralised-systems-on-the-internet-the-latest-fashion-trend-4865b813cd29
