I know this might seem optimistic at first, but it makes sense. Open and decentralized cryptocurrencies solve a lot of our current economic struggles.
Do we have a problem with money?
Yes, let me explain why.
Banks and Gold
In the past, every coin had it’s value tied to gold. Gold is considered a scarce resource and this kept from generating more money out of thin air.
In our recent history that’s no longer the case. Central banks have the power to print unlimited currency and the more you have of it, the less valuable it is.
This is called inflation. It isn’t all bad. In times of crisis, the generation of debt is very important to keep economic stability, but it can only go so far.
The amount of debt generated needs to be carefully calculated and governments need to have a clear recovery plan. Unfortunately very few countries have competent and honest leaders.
Also keep in mind that money is the representation of power and power corrupts.
Central Authority and Trust
The internet changed everything. Money is no exception.
Before the digitization era, cash was king. Cash has 2 strong advantages over the current form of digital currency:
You always know how much you have, because cash is physical. You can see it in your hand or at home.
Now, most people keep their currency on a credit / debit card or in an app. You practically own the bank’s promise that you have money.
Have you ever wondered what happens if the bank decides your balance is 0? How can you prove that you have money in that bank?
Of course, you can track inbound transactions, but who says they can’t create a fake outgoing payment equal to your total balance? There is nobody to double check.
You should be able to spend your hard earned money freely and privately. Nobody can write down all your transactions.
I’m not saying you should buy drugs or other illegal things, but who decides what’s what?
Imagine this scenario: what if one day the government bans smartphones. They say that people are sharing illegal information and they organize themselves against the state.
Sounds absurd, right? Anything is possible.
You got the point, now let’s get back to how we solve these issues.
What are CryptoCurrencies?
Simply put, they are unique digital assets protected by high level cryptography and blockchain technology.
Big words! I know.
Cryptography makes your assets impossible to hack. Only people that have the password (also known as the private key) can interact with them. Keep in mind there is no admin or god mode.
Blockchain keeps an immutable transaction history, distributed all around the world and makes sure every token is unique.
You might have connected the dots by now, but let’s continue.
What makes any CryptoCurrency the future?
I’m an optimist and I think we’ll keep evolving as we go through time. Our future needs to solve current world problems. Let’s tackle the economic issues, especially the outdated banking system.
I believe blockchain is a a perfect fit. This doesn’t mean it’s the only solution, but it looks likely from my perspective.
I will go through the advantages of cryptocurrencies one by one. Keep an open mind and be objective about it.
A blockchain (the thing cryptocurrencies use) doesn’t run on a single server. Multiple people use a specific version of software that automatically synchronizes with each other.
Information is distributed around the world to the network participants. The ledger (the transaction history) can be found on each computer that runs the script.
If anyone goes offline or tries to send false information, they are automatically excluded. A transaction needs to be validated by everyone in order to be registered in the system.
This assures that you will always own your cryptocurrency. Nobody can steal them. A hacker literally needs to change the software on all computers around the world, instantly.
To connect with the point I was making earlier, nobody can say your balance is 0 or that you sent money when you haven’t. You don’t need to trust a bank or a middleman.
Everyone else is double checking everything.
You need to trust the script that handles valuable and unique data. How can you know that a developer isn’t ill intended?
That’s solved through open source practices. Every single line of code is public. You can go right now and read or modify an existing piece of it. Your changes are only applied if everyone double checks your work and agrees that’s the way to go forward.
There is no central authority and it can’t be manipulated. Network changes are applied by worldwide consensus.
Fast and Borderless
Let’s say all your money is in a bank. Have you tried sending some to a friend? after office hours? in another country?
This process can take up to 3-5 days. This is because the banks need to manually communicate with each other to complete the transfer.
By using cryptocurrencies you can transfer money almost instantly and you get constant live feedback from the second you hit submit. Is it pending? Did I send to the right person? Has it started validating? I had these questions all the time while using traditional banks.
You have to pay everyone that interacts with your money. Services cost, I get that. But the traditional banks have a lot of expenses. They pay too many people who can be replaced by software. Or maybe they are just greedy. Who knows?
I’m going to take wire transfers as an example. The fees start from $15. That’s insane to me. Especially because that’s a lot of money in my country.
They will probably lower these charges when competition comes.
Thankfully blockchain technology is here. For every transaction you will have to pay the network validators (also called miners) and the fee is decided by the software. It depends on the current value of the token and how many people want to use the system.
There was a transfer by Bitfinex (a crypto exchange) of aproximately 1.1 Billion dollars for a fee of $0.68.
Now that’s what I’m talking about! The future is now. It will only get better as the script gets upgraded and support more transactions each second.
When using cryptocurrency, there is no name tied to your account. It is independent of your email, phone, address or location. All it uses is a public key which you can change at any time.
There are some blockchains that go even deeper. They have dynamic public keys and transactions are obfuscated. Nobody will know the sender, the destination and the amount outside of the participants.
This way you are completely anonymous and nobody can track your purchases. Are you asking why? Revise the part where I talk about cash.
What about fintech apps like Revolut, Transferwise or N26?
If you thought of these, your head is in the right spot. Users can send money instantly to anyone from their system. They have low fees and being in different countries isn’t usually an issue.
But you still have to trust a single company that can’t be verified. These fintech apps are not decentralized, don’t have open source software and your transactions aren’t private.
Don’t get me wrong, it’s a step in the right direction. It’s just not there yet.
There are thousands of cryptocurrencies out there. Every one of them trying to fill a specific niche of the main problem.
It is very important to understand that a good solution needs to have all the features I mentioned. It needs to be decentralized AND open source AND fast AND borderless AND low fees.
There’s no better time to support this segment of technology than today. Owning and using cryptocurrency will indirectly support the developers that make this possible. If you want to buy some coins, go to Binance. It’s pretty straight forward and has a lot of variation.
Keep in mind that exchanges are for small amounts and short term holding. For big money and savings I recommend you buy a hardware wallet.
I’m glad you stuck with me this far. What are your thoughts? Do you think crypto is useful? Do you think it’s the future? Can you think of other viable solutions?
I’d love to know. Leave a comment down below.