Cryptocurrency is an integral part of our future, but it’s intimidating and confusing for those still unfamiliar with blockchain technology. It has come to our attention at MacguyverTech that there is decidedly an audience for a more basic approach to smart contracts, blockchain, cryptocurrency, the Metaverse, Web 3.0, and related topics.
To that end, we’re writing a “Back to Basics” series that will hopefully be of use to our readers. “Blockchain Explained” was our first, and it can be read here. This article is about the basics of cryptocurrency. Keep in mind that what we’re presenting isn’t unlearnable; it only requires patience. At one point, everyone was a beginner.
What is cryptocurrency, really?
You probably heard someone talking about “crypto” years ago, potentially at a social function, when some guy named “Bradley” (NOT “Brad”) tried to hold court in a discussion about technology by explaining what Bitcoin was. Of course, you had the unpleasant experience of listening to Bradley in the past, and held serious doubts about whether he understood anything more complex than a toaster.
The point is, plenty of people pretend to understand what crypto is, and they don’t. At it’s most basic form, cryptocurrency is just a blockchain-based digital token used for exchange.
So why is everyone so freaked out about it?
Cryptocurrency has an image problem, and we wrote an article about it here. In short, the biggest legitimate concerns people have about cryptocurrency are that it’s decentralized, it’s anonymous, and it’s very volatile.
Wait, so Bitcoin isn’t the work of the devil?
No. Bitcoin wasn’t created by Satan; we’re fairly certain this isn’t a legitimate concern. There have been plenty of conspiracy theories about Bitcoin. Among the rumored creators of Bitcoin are Satan, Vladimir Putin, the NSA, the CIA, China, AI, and aliens.
Unlike previous examples of us using amusing fictional scenarios to make a point, we’re genuinely not making any of these up.
Bitcoin was released in 2009 by a person (or persons) named “Satoshi Nakamoto.” While that name is almost certainly a nom de plume, we’re not buying into the theory that the name’s anagram “Moist Satan Hook” is evidence of devilish intent. Again, we’re not making that up.
In the end, Bitcoin, and nearly all cryptocurrencies are simply composed of data blocks.
Concern #1: What does it mean that cryptocurrency is “decentralized?”
This simply means cryptocurrencies aren’t controlled by any one specific entity. No government has exclusive control over it, and no banks are required as intermediaries for most of them, although some banks are actually creating their own cryptocurrencies.
You might ask, “But if a currency isn’t government controlled, and banks aren’t profiting off its exchange, why aren’t they both freaking out about it?” The answer is: They are. Google “Banks vs. Bitcoin” and “SEC vs. Bitcoin,” and you’ll see pages and pages of results.
One of the drawbacks of a decentralized cryptocurrency is that not everyone values it. While Bitcoin is slowly growing in acceptance, and is even accepted at fiat in El Salvador, it wasn’t an easy road. The first cryptocurrency exchange for value was reportedly 10,000 Bitcoin exchanged for a Papa John’s pizza in 2010. As of this writing, that would equate to $390 million for one pizza. Let’s hope it was tasty.
Concern #2: What does it mean that cryptocurrency is anonymous?
Cryptocurrency accounts and transactions can be completely anonymous, in that there’s very little to connect a person to a transaction or digital wallet. However, most cryptocurrency is also completely transparent as to where it’s been, what it’s been used for, and how long it’s been around.
Why is this an issue? Cryptocurrency has been used for illegal transactions. From drugs to weapons to human trafficking, it’s been linked to activities that benefit from anonymity.
However, there are two points to be considered on this. First, if you truly believe that paper currency is less likely to be used for illegal activities than digital currency, the Ghost of Pablo Escobar would like a word.
Second, remember that cryptocurrency is on a digital platform. As such, it’s becoming increasingly possible to match personal data and purchase history with cryptocurrency and criminal activities. Criminals aren’t as anonymous as they think they are.
Concern #3: How volatile is cryptocurrency?
Cryptocurrency still has a “Wild West” feel to it. People are creating coins and tokens daily. Some will be profitable, some won’t. Some have actual digital products associated with them, like wallets and NFTs. Some are mostly based on “cuteness.” Some creators are dishonest and execute “rug pulls.” At present, there’s very little regulation.
Cryptocurrency can create millionaires overnight. It can also cost you your life savings if you don’t invest responsibly. While some might denounce it for that reason, it’s not entirely unlike Wall Street has behaved for the past 40 years.
As we like to say, what we’re offering isn’t investment advice, it’s commentary. Use your head, don’t invest anything you can’t afford to lose, and be careful out there.
In the end, cryptocurrency is still nothing more than what we said it was. It’s data tokens used as a means of exchange. And much like anything else, it’s worth exactly as someone is willing to exchange for it. But it isn’t going anywhere anytime soon.
And now the next time you catch Bradley rambling incoherently about crypto, you can hand him a toaster and say, “stick with something more your speed.”
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For more information about blockchain, cybersecurity, software solutions and cryptocurrency, visit us at http://MacguyverTech.com.