Home Columns Bob’s Meanderings on Cryptocurrency: An Introduction

Bob’s Meanderings on Cryptocurrency: An Introduction

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Until recently, it was days or weeks without hearing about cryptocurrency. Now, suddenly it is inescapable.

For years it seemed like a fleeting trend most people could avoid. But its power, both economic and cultural has become too big to ignore. Twenty percent of American adults own cryptocurrency according to a recent poll, even higher among millennials. The crypto market is valued at around $1.75 trillion – roughly the size of Google.

Since its gone mainstream, crypto has inspired two followings; wild-eyed fanatics who think it’s saving the world and skeptics who figure it’s all a fraud organized by grifters.

Understanding crypto is important for a few reasons. It’s wealth and ideology is going to be a formative force in society. As well the crypto boom has generated vast new fortunes at a clip never seen before – the closest being the discovery of oil in the Middle East.

These days crypto usually refers to the entire universe of technologies that involve blockchains, the distributed ledger systems that power digital currencies like Bitcoin (appearing from the ashes of the 2008 fiscal crisis was seen as the cornerstone of a new, incorruptible monetary system) but also as the base technology for things like NFTs, web3 and DeFi trading systems.

Another reason to pay attention to crypto is that understanding it now is the best way to ensure it doesn’t become a destructive force later. With some crypto basics, you might be less perplexed about emerging attitudes involving money and power while feeling more grounded. Maybe a whole new world will open up to you?

Basically blockchains are shared data bases that store or verify information in a cryptographically secure way. Think of blockchains as a Google spreadsheet, not hosted on Google though but supported by a network of computers all over the world. They’re typically a public and open source. Anyone can inspect or see a record of any transaction.

Bitcoin used a blockchain to keep track of transactions. For the first time, it allowed people to send and receive money over the internet without using a central authority like a bank.

The value of cryptocurrencies has grow enormously since the early bitcoin days, despite them not being most people’s daily spending money in financial fields. Outside of the U.S. crypto adaption is growing fastest in countries such as Vietnam, India and Pakistan. Many claim that crypto is most useful for dissident groups living under authoritarian regimes.

Currently, many applications for crypto technology involve people sending cross-border remittances to family members and Wall Street banks using blockchains to settle foreign transactions.

A common question is, “ Will crypto replace the dollar?” No. For cryptocurrency like Bitcoin to replace the dollar, billions of people would have to be convinced to use a currency whose value fluctuates wildly.

“Is crypto bad for the environment?” Most crypto takes place on blockchains that require copious amounts of energy. However newer blockchains are built using consensus mechanisms that require much less energy than proof-of-work. It is felt that decentralization is worth the costs.

To actually start to use crypto means setting up an account with a crypto exchange like Coinbase which can link to your bank account and convert dollars into cryptocurrency.

People have seen friends and relatives dive down the crypto rabbit hole and appear later on with a new obsession, new internet friends and the inability to talk about anything else, believing in it more like evangelists for a new religion than fans of a modern technology.

There is much more to learn such as a DOA (Decentralized Autonomous Organization) running on blockchain which may become your future career. Think of it as a company with no CEO, no supervisors, no board of directors and no boss. The company is managed by computers and any change is voted on by you – the employees.

Then there is NFTs (nonfungible tokens) or a unique digital identifier that can’t be copied and is sort of like cryptocurrencies with unique qualities and not necessarily used as money. For example, tokens can be attached to tangible goods as a certificate of authenticity for an expensive sculpture – but can also stand for intangible goods like access to a chat room.

There is still web3-the metaverse to learn about, also the crypto’s DeFi stock exchange. However enough is enough for now!