What is Cryptocurrency?
Among many other things, cryptocurrency is cryptographically-secure digital money that can also act as a smart and programmable, trusted 3rd party store and transfer-of-value. The adoption of cryptocurrency is rapidly growing around the world as more individuals begin to realize the benefits this form of value transfer has over traditional fiat currency.
The genesis of cryptocurrency began with the Bitcoin blockchain back in 2009. Since then cryptocurrency has faced much criticism and has been the main driving force behind the many revolutionary breakthroughs the industry has witnessed. Below we outline the benefits and drawbacks of different types of value ownership; Cryptocurrency vs. Fiat (USD or other government issued notes).
Cryptocurrency vs Fiat Trait Comparison Table
|Traits of Currency||Cryptocurrency||Fiat (USD)|
|Scarce (predictable supply)||High||Low|
|Sovereign (government issued)||Low||High|
Money is an abstract concept that exists to facilitate two primary functions – to act as store-of-value and transfer-of-value. The chemical makeup of traditional government printed notes is not what makes any one particular note “money”, rather, it’s the observer relative trust placed in the note that allows us to call it money. Today for the most part, this trust lies with centralized powers; think governments, banks, accountants, notaries and other powerful institutions and organizations that use money as their choice of value transfer. Humans used to transfer value with livestock, bags of heavy coins and land.
Today we use credit cards, wire transfers and multisignature escrow services. Although seemingly more efficient, trusted third parties create a myriad of additional obstacles that counter free-trade, things like high fees, high levels of inaccessibility, among many others. Cryptocurrency seeks to solve these inefficiencies by sanctioning the trust in value in cryptographically secure math, rather than any one central power of control that is often times motivated by things like greed and malice.
The Importance of Cryptocurrency
Cryptocurrency isn’t so much a revolution as it is an evolution in the way humans transfer and store their valued assets. John McAfee, Founder of McAfee Security and the foremost expert on cyber-security says:
“You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust.”John McAfee
Governments and institutions around the world will be forced to change the way they conduct business and people will have greater empowerment thanks to the cross-border, decentralized properties that make cryptocurrencies a powerful force that is not to be reckoned with. Additionally, cryptocurrencies posses many other attributes that are deemed more favorable when compared to traditional fiat.
Below we outline their most notable properties:
- Global accessibility – because cryptocurrencies operate on a distributed ledger network known as the blockchain, one’s geographical location is made irrelevant. Cryptos do not see borders, races, genders, religions, age, or any other traditional features that are traditionally poised to be influenced or discriminated against. As long as you have access to an internet connection, the cost and speed of transacting cryptocurrency is the same for someone with a fiber optic connection in the United States as it is for someone with a mobile connection in Ghana.
- Immutability – cryptographic algorithms control this eco-system. Each transaction in the blockchain ledger is individually verified, logged and recorded with a cryptographic key that cannot be in anyway changed, reversed, hacked or otherwise broken into.
- Security – the non-decentralized assets such as fiat currencies, bonds, securities, and title deeds are all vulnerable to tampering. Each node in the protocol network acts as a sort of notary. Any attempted transactions that are unauthorized simply won’t pass encryption and will be void. The only way security can be compromised with cryptocurrencies is if a major power was able to seize 51% of the network’s computational power. This is a hypothetical situation and is not actually possible given the amount of computational power already distributed across Earth.
- Speed and price – traditional bank transfers often take 3-5 business days and offer poor currency exchange rates. Cryptocurrency transaction times range anywhere from instantaneously and up to an hour, depending on network congestion at time of transfer. Transaction costs are free to very minimal, depending on the cryptocurrency and wallet being used. This applies to anyone with an internet connection, anywhere in the world.
- Transparency – Nearly all cryptocurrencies are open-source. This means that anyone can contribute to the source code by “forking” there own project on Github. Furthermore, all public key transactions are recorded in explorers that house a record of each transaction that transpired since the inception of most cryptocurrencies.
The State of Cryptocurrency Today
Today we have several thousand different cryptocurrencies, also known as coins or tokens for short, with each seeking to provide or fill a fundamental utility, problem/flaw in the current system, or void within the new decentralized economy.
Many of these coins bring something unique and prudent to the table – being backed by a battle-hardened and sophisticated core team of developers. In contrast, others are nothing short of high-hopes, and therefore investors must be educated and strategic. This is nothing new when considering a disruptive technology with such widespread global application as blockchain and cryptocurrency have.