Why do we need cryptocurrency?

Published in

Coinmonks

6 min readApr 20, 2022

What is the main purpose of cryptocurrency? Why was it created in the first place? Let’s make a short introduction to how it all started.

Money and currency

At first, let’s discuss what the heck the money is. And what is currency? And how we distinguish these two. We can find multiple definitions and key properties. Let’s make some sum up.

What is money? Why did we come up with it? It is believed that our ancestors used barter-like methods, debts, or gift economy in ancient times. Some cultures evolved into using commodity money.

It was convenient to use some universal medium of exchange. Something that people would agree to accept as payment. Something that could keep stable value in the long term. Thus it should not be easy to counterfeit and have a limited supply (not necessarily fixed). Something that would be easy to use and transfer. And something easy to determine its value.

People tried to use multiple assets such as stones, salt, shells, or precious metals and coins. Everyone has its pros and cons.

Money should help us preserve our wealth in time. We evolved into the state when we cut some of the money properties and mostly replaced money with currency. The main drawback is we lost the store of value with it.

The value of currency declines in time. [Source]

We all know this picture. The declining value of the dollar. Price is going down in 100 years. Who cares? We should care because it is the strongest world currency. And the result is terrible.

It does not mean anything. Right? I do not care what will happen in the next decades! Wrong. It is not a question of decades anymore. In extreme cases, we can see it in months. Especially nowadays.

Losing value of currency is not question of decades anymore. [Source]

Everyone noticed these numbers are gamed. The reality is even worse. Salaries do not rise fast enough and people get in trouble. Thus, we should do our best to find a way how to protect our wealth.

Another drawback is trusting people in charge. We have to trust they have good intentions. And that’s where we could witness the failure. Many times.

The reason why

Our financial system, in which we all believed, tricked us. Rich people set the environment ready for making filthy money. The housing market entered into an incredible bubble, and the subprime mortgages, unregulated derivatives market, and cheating ranking agencies caused one of the biggest heists in history.

Rich and greedy people drove the world economy into recession while making incredible money. It slowly led us to the collapse of Bear Sterns in March of 2008 and then further to the famous bankruptcy of Lehman Brothers in September 2008.

Frontpage of The Wall Street Journal in 2008. Source

The crisis led many people to poverty. Some businesses closed, and some people lost their homes. We all lost a significant part of our wealth. People responsible for this shit had their bonuses and millions, already. To prevent a worse economic fuck up, governments came up with bailouts. It means we all were forced to pay for it.

The famous title of The Times was printed into the Bitcoin’s Genesis block. Source

Yes, it was paid from the state money. State money is collected from our taxes. When you get a salary, you pay tax. When you buy food, you pay tax. If the merchant generates profit on it, there is a tax. If the merchant pays salary to his employee, you know what happens. We live in the loop of taxes.

We pay taxes to the state in exchange for services and protection. But this time, it failed. It let certain people get rich more than they deserve and let us pay for it. No one was punished, no one was responsible for it. We got outplayed. I can recommend the Inside Job documentary or The Big Short movie if you want to watch it in entertaining mode.

Inside Job official trailer about the 2008 financial crisis.

There were obvious holes in the current system. It was the last drop. Bitcoin whitepaper was introduced on 28th October 2008. A Peer-to-Peer Electronic Cash System. The genesis block was mined on 3rd January 2009. And it had a message inside: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”.

Bitcoin. The new financial system. No greedy middlemen, no single point of failure. The system based on cryptography and algorithms. The system with fixed rules and no way to cheat (until you will highjack the majority of mining power). We should not forget, unfortunately, many have already.

Key properties

I hate these overviews with keywords. It recalls school days when you had to memorize bold words and repeat them to get a good grade. But here we are. What properties should cryptocurrency have? What it should be?

Decentralized

We like claiming crypto is decentralized. But we have to admit it is not the truth, not totally. I would like to focus on it more in the next article. But to wrap it: miners or validators centralization, the single core team in most cases, broken governance, DeFi restrictions, lack of community involvement and monitoring.

Immutable

The payment is irreversible once it is processed. If the network is protected from double-spends or is decentralized enough to prevent reorganization of blocks via 51% attacks.

Pseudonymous

You can use crypto pseudonymously by default. Transactions are public and thus traceable. We can achieve anonymity with some advanced techniques, but there are still metadata that can break it.

Trustless

An autonomous network ruled by algorithms. No middle man, no point of failure. Until there is a bug — the security hole.

Permissionless

You can access your assets 24/7. No one has to permit you. You can transact it any time, anywhere to anyone. You are in charge. If the network is up and you did not lose your private keys. Contrary to banks closing your account or freezing assets of the whole country.

Borderless

Crypto gives you the option to take your assets anywhere, access them from anywhere, or send them to any destination without any restrictions.

Doesn’t it sound better than the current bank system? The system where you need to beg your bank to use your money and pay ridiculous fees. Cryptocurrency brought alternative. And as a side effect, we got the store of value with it (in some cases).

The dark side

In a time when most people are driven by greed, there was someone who stood up and said: NO. Made a change. We got the opportunity. Opportunity to participate in something big.

What did we do with this chance? And where are we heading? There are still people who believe in a better future and try to build it. With the growing success, we face an inflow of scammers, criminals, and frauds.

We dropped the decentralization and built cults around new messiahs. We talk about overrated decentralization. We promote scams to pump our bags, get rich, and enjoy the fame.

The conclusion

We should not forget what triggered the birth of cryptocurrency. We should not forget these events. We should not close our eyes to the behavior of financial institutions.

We can see how crypto can help people in countries with high inflation. People who escape the war. People who suffer under the government’s decision.

Crypto might not replace the current financial system. It can be a complement to it. It can bring some balance and fairness. It can also fail, crash and never recover. It depends on our decisions and it is our responsibility what will follow.

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