Blockchain as Poker: Part 3
This is a follow up to a Blockchain as Poker series (Part 1, Part 2). Part 3 is going to focus on some how the rest of the world is interacting with Blockchain, Fiat Money, Cryptography, and what’s next.
Red Tape
Kurt’s wife Myrtle is yelling at everyone to get out of the basement, and starts collecting money from people when they cash out with the banker. Bill works the ledger and creates the Binder at his office, one day his boss get pissed while catching him doing this, and give him a warning to stop, or he will be fired!”
Suddenly the IRS is collecting taxes on your poker chips, and China has kicked out your poker game. The SEC is getting involved, and is admitting your poker game is a big deal, but is warning people to be careful about which chips they buy and how they buy them. Remember those transaction fees that Bill is collecting? The IRS wants in on that game too, though how that works is not entirely clear.
But it doesn’t matter. You’ve changed the way poker is played. New poker games are getting set up everywhere, and people are looking at this binder system and saying hey, that kind of trust could really help me with something beyond poker.
Fiat money
Fiat money is just a fancy word for money as we know it.
US Dollars, Euros, Yen, Rubles, are all fiat currencies. “The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on the faith and credit of the economy.”(Investopedia). So all of our money is based on us trusting that that money is worth something, and that other people will take it.
One of the common criticisms for cryptocurrency, is that it’s not real money, that those poker chips are only worth money if someone is willing to pay for them. It is the unfortunate reality that there is no real money. All of our fiat bills and coins only have value because we say they do, and agree that they do.
Cryptocurrency is no different, it’s just not controlled by a central entity. It is public knowledge how it is made, the ways it can be created, and how much of it there is. Cryptocurrency is really just decentralized fiat money with a new fancy system to ensure that it’s trustworthy, reliable, and not controlled by a central source that can be hacked or corrupted. It is a new pool of value.
Cryptography
Not everyone wants other people to see their information in that big old binder, now that so many people are a part of it, so those pages are encrypted, put in with a secret code so that they have to be decoded to access, in order to keep everyone’s information safe and anonymous.
In terms of the safety of your data that’s encoded, I wouldn’t worry about anyone cracking it anytime soon. Here’s a nice little article which breaks down why it would take a supercomputer around a billion billion years to break a single 256-bit encryption. I’ve ignored this in the metaphor above to keep things simple…clearly I’ve failed at that.
So What Now?
That’s up to you! Those poker chips will keep going up in value as long as people keep buying them and are willing to trade for them. New cryptocurrencies from new poker games may go up in value, or have none, depending on a number of factors including whether people have faith in those currencies and whether the bankers decide to sell them. But poker chips are just one small part of the importance of decentralized shared ledgers.
New systems that use this technology are coming around, and they are going to change the world. If you leave with one takeaway on blockchain, ignore the poker chips and focus on why decentralization is important.
The way we share and trust information, education, resources, money, the way we run governments and corporations, all these things can be transformed through blockchain. If enough people choose to, we can revoke our investment in some centralized authorities, and instead put our faith in a verified network of global peers.
Blockchain is a new system and network, just like the internet. Bitcoin/cryptocurrency is one thing that this new technology enables, but it is a tiny piece of the bigger puzzle. Just as the world learned about email, and came to see the value of the internet without needing a deep understandings of how HTTP works, the world is learning about blockchain through Bitcoin. Bitcoin is changing the world, as email did, but looking back, the game-changer was not email, it was the internet.
Bitcoin is not the game-changer, blockchain is.
