Are you ready for the Blockchain Revolution
Bitcoin is “dead”. Cryptocurrency and blockchains are next. Even the head of JP Morgan was quoted as saying “if you’re stupid enough to buy it, you’ll pay the price on day”.
But is that the case? Bitcoin, the poster boy of all cryptocurrencies, is still alive and kicking, and the blockchain infrastructure is growing day by day. So much so that someone at JP Morgan has had a total change of heart. But is it surprising? Not if you’ve been keeping up with what’s happening. The tech behind blockchains and distributed Ledgers are legitimate game changers and are here to stay.
But what about this “bubble” everyone seems to be mentioning? While we aren’t exactly headed for a dot-com era bubble, it does seem like we are witnessing something historic in its own right — the legitimacy of cryptocurrency upstaging traditional Fiat currency.
Blockchain VS Current Banking Methods
Humans are creatures of habit — we don’t like to change things if there’s no need to. Most of us still prefer to have physical money. The idea of having stacks of paper stashed in a safe or sitting nicely in a wallet in your pocket gives not only a sense of ownership, but safety as well. But is this really safe? Technically, it’s not. The paper we carry in our wallets and keep in our banks are only worth what a Central Bank deems it to be. Confused? Don’t be!
The Swiss Franc has long been considered a “safe haven” due to Switzerland’s balanced budget and prudent governing, but its precisely this view that caused an influx of buyers to the Franc that led its value to rise. While most would assume it’s a good thing to have, that rise led to Swiss exports costing more, which was not a good thing to have.
With exports being a key component of Switzerland’s economy, the Swiss National Bank (SNB) decided to stop speculation and pegged the exchange rate of the Swiss Franc (CHF) to Euro at CHF$1.20 to €1. The SNB simply printed Swiss Francs and used them to buy Euros. That’s one example of how a Central Bank can operate and how it determines the value of the paper you carry is worth. But it doesn’t end there.
Using the Swiss National Bank as an example once again, back in January 2015, having amassed close to $480 Billion worth of foreign currency, the SNB then decided to remove the CHF1.20 floor rate without notice. You can probably imagine what happened next. It was absolute mayhem! Mass panic struck and the stock market literally tumbled. If you had any loans in Swiss Francs, you were struck with huge increases that you now had to pay back to the bank. And due to the “safe” nature of the Swiss Franc, there were tons of people who took loans in that currency that were now burnt.
The reason for the example above is to highlight the effect that Central Banks can have on people’s lives. So the next time someone tells you that crypto-assets are risky, you can let them know that even “Money”, as you know it, is as well.
How Decentralizing Helps
So what exactly does decentralizing mean and how does it make life better? For starters, what our money is “worth” doesn’t just fall to a couple of old men in suits anymore. Decentralizing would transfer that power back to the masses so its us, the people, who decide how much something is worth, and that no single entity has the power to singlehandedly decide its price for everyone else.
Still, while the theory checks out, its not going to feel the same without having money in your wallet. Whether you are for or against Central Banks interverning and hiking interest rates whenever they feel like it’s the “best” thing to do, one thing is clear — this perceived safety that you’re looking for does exist in cryptocurrencies as well. In fact, if we want to get technical about it, the blockchain eliminates the need for an intermediary (i.e the bank) due to the trustless nature of crypto transactions. The blockchain itself is sort of like a living, self-governing organism that ensures your transaction goes through.
However, there are risks as well, but they’re not what you think. Cryptocurrencies go into a digital wallet. And since they are blockchain based, there’s little to no risk of them being hacked. The one thing that you have to be extremely careful about is not losing your private “key”. This grants access to your wallet and like paper money, if it falls out of your pocket, it’s gone for good.
Unlike traditional money, there are backup options when it comes to crytocurrencies. If you’re the sort that loses things regularly, keeping your private key on a USB stick, offline hard drive etc might not be your best bet, seeing as you might lose those as well. Or, you could use Infinitus (INF), a dApp which is designed to store your private keys on a blockchain, retrievable on a set date to a set person that takes away the idea of losing your things in general!
A New Hope
To be clear, we’re not jumping the gun and calling it for Cryptocurrencies. Blockchain in general still has some scalability issues but that is being worked on. Even the traditional banking systems have hurdles to overcome, the only difference is that they’ve been around much longer. The important thing to take away is that Blockchain is here to stay and will play a much larger role in the future. dApps like Infinitus uses blockchains themselves to ensure you never lose access to your wallet and its contents.
In other words, welcome to decentralization and embrace the change!
