It has been an incredible time for cryptocurrency. Bitcoin value exceeded US$2,000 for the first time on May 20th, 2017, and other cryptocurrencies have seen some serious growth lately as well.
I have been deeply interested in cryptocurrency for many years, but many of my friends, even including techies, don’t know or talk about it that much.
So I want to talk a little bit about what cryptocurrency is, and more importantly, I would like to discuss why I think it is so significant on a fundamental level.
What the heck is cryptocurrency?
It is essential to understand the fundamentals of cryptocurrency in order to understand their advantages over our current forms of popularly accepted currency.
I actually recommend skipping my entire technical explanation, and going straight to this post.
However, if you really don’t want to read another post while you’re already reading one post, I’ll try and explain it a little bit.
Technical(ish) Discussion
Bitcoin, the most widely known and most popularly used cryptocurrency, was created as a passion project with the intention of creating a functional digital currency.
There are essentially two functionalities of Bitcoin that give it such advantageous qualities: decentralization and cryptography. There are also other great (even better possibly) types of cryptocurrencies, not just Bitcoin, but they all seem to have similar principles.
First, let’s talk about decentralization.
The currencies of the world are, and have been for all I know, centralized currencies. What does that even mean?
He we have a few graphs that aim to visualize the concepts of centralization and decentralization.
In terms of currency, that essentially refers to the concept of banks, and furthermore, the Federal Reserve in the United States, or the similar structures of other countries.
When you have $1,000,000 in bank (you are a millionaire ;), you really don’t have $1,000,000 in the bank. You have simply come to an agreement with the bank that they owe you $1,000,000. When you get an account statement saying you have $1,000,000 dollars in the bank, it really just means that they owe you $1,000,000.
This system of mutually agreed upon and accepted debts is the foundation for any sort of currency. And, until recently, centralization was also a fundamental part of that foundation. Paper money would never have had any value unless some centralized authority decided to make it have value.
But now that we have a hyperconnected society that is functioning more and more on the World Wide Web, the option of a decentralization is valid. So how does Bitcoin implement and utilize this functionality?
Vocabulary Word: Blockchain (noun): A record of transactions (also known as ledger), for every single transaction ever on said cryptocurrency, i.e. Bitcoin. Every single user has an encrypted copy of the updated blockchain.
That means that every single Bitcoin user has an encrypted copy of the updated Blockchain. When two or more users engage in a transaction, they must have the same copy. If there is not unanimous agreement, the transaction will not be valid. Once the transaction is confirmed, every single user’s blockchain is updated.
Did this guy just use the same picture twice? Yeah man, it’s important.
With the concept of a blockchain, transactions are essentially being verified by every single user in the world, rather than just one bank.
That is how you have a decentralized system.
Ok.
Let’s talk about cryptography. This part is a little difficult for me to understand, but I’ll try to do my best. Still, I won’t get into it too much.
Cryptography is essentially another word for the study of puzzles. Different types of cryptocurrency (Bitcoin, Ethereum, etc.) employ extremely complex cryptography algorithms and methods to keep themselves secure and valid. These algorithms essentially make it impossible to forge transactions and thus gain monopoly over a cryptocurrency.
Alright. Now, let’s talk about cryptocurrency from a social and societal perspective.
Non-Technical Discussion
If you skipped the linked article, or skipped the Technical Discussion, this is not gonna make complete sense.
Let’s talk about paper money, and the Mongol Empire.
The Mongol Empire was larger than any empire before it, and it connected the world on a larger scale than ever before. Traders would engage on long and dangerous journeys. Rather than carrying banks of gold with them for hundreds and thousands of miles through dangerous lands, they would carry verifiable bank notes.
Many of those who were brave enough to be part of this new world of trade culture were met with profits. And many of those, who just kept doing only what their parents taught them, and nothing else, were met with obsoletion.
Imagine trading with paper money for the first time in history. Better yet, imagine building a business dependent on paper money, for the first time in history. It must have seemed preposterous! Yet, as we know, paper proved to be the leading substrate for currency.
Now, we find ourselves at an analogous point in human progression. Paper currency is well on it’s way out the door, and digital currency is the way to go. From credit cards to your favorite tech company’s payments method, there is no reason to use cash money most of the time.
But just like how paper money had significant advantages over gold coins, digital money has significant advantages over paper money. As a society we are not using many of these advantages, and furthermore, many advantages have yet to even be discovered and understood.
The cryptocurrency community is seeking to discover, understand, and integrate usage of these advantages, and they are getting very hot. I’d like to talk about two examples that have peaked my interest: Ethereum, an example of a cryptocurrency built on the same principles as Bitcoin, but with added features; and Steemit, a cryptocurrency based blogging platform.
Ethereum
Ethereum has fascinated me for the last year or so. Since I initially learned about it in 2016, Ethereum has traveled from a mere $12 per coin, to reaching and all time high of a little bit above $200. If I had trusted my gut a little more and invested some money in Ethereum, I could have made some decent money.
What makes Ethereum so incredible, especially in comparison to BitCoin? Furthermore, how do businesses utilize Ethereum?
BitCoin was revolutionary for the reason that it was the first time in history that a digital currency was implemented in way that it actually worked. Etehreum takes that a huge step further with the concept of smart contracts.
What is a smart contract? A contract that is smart, duh.
Smart contracts implemented on the Ethereum platform use the principles of decentralization and cryptography used in BitCoin to ensure that a contract will be executed. No ifs ands or buts.
Currently, I owe my room mate some money. I am going to pay him, but I am having a technical delay, and I have not been able to pay him yet. That has probably been stressing him out, and it’s been stressing me out that it is stressing him out. With smart contracts, this would not at all be an issue.
Imagine the significance this has for a business. It takes all the worry out of a debt! All Ethereum users will be connected on the Ethereum blockchain, and based on these smart contracts and their values, no one will be able to make a claim to pay for something unless they can verify, based on their existing smart contracts, that they are able to make the payment. This unprecedented level of debt security would be invaluable to any business!
Steemit
I don’t yet know much about how Steemit works but I do know that you get paid, in cryptocurrency, to blog, and even to read blogs. I just think that’s absolutely incredible.
Why not just make your own Wordpress blog and throw on some advertisements to get paid to blog? I really don’t know the advantages and disadvantages in comparison, but I think it’s worth checking out.
Concluding Thoughts
Cryptocurrency is very much on the rise. This is without a doubt. It has many existing as well as untapped advantages. I believe that mainstream society will definitely come to accept cryptocurrency, unless there is some sort of massive catastrophe taking humanity backwards.
The only question is when, and in what form.
Crypto is very much still in a beta stage, and the only way to learn how to use newly emerging technology is to play around with it.
To those who have had the patience to get to this point of the post, I implore you to learn more about cryptocurrency, read all about it, and most importantly, figure out how to play with it.
Welcome to the club.
If you liked this article, feel free to hit that green heart! Or share it!
:)
