Why is Crypto For You?

CRYPTO CRYPTO CRYPTO!
Over the last few years, you have probably heard about cryptocurrency in the news or from a friend, but what exactly is it, and why should you care? This post will give you a basic understanding of cryptocurrency, how it works, and why it’s important. When I say “important”, I mean like “knowing how to tie your shoes” important – base knowledge that is needed to get you through life without falling. While crypto is still very much in its infancy, one day the technology will be an integral part of daily life so it is best to begin learning about it now.

If you are old enough to remember when the internet was first publicly introduced then you likely remember how few people understood how it worked or what it even did. If you aren’t that old, here is the gist of what people said: “That won’t work. New form of communication, why do we need that? We have perfectly good phones and postal letters!”

And yet, look at the role of the internet in the world today and you can tell that those people were *clearly wrong*. This same type of world changing transition will happen with crypto technology. Seems like a bold thing to say, but the world doesn’t change without daring to be a little bold.

What is Crypto?

Cryptocurrency is a digital or virtual asset that uses cryptography for security. Bitcoin, the first and most well-known cryptocurrency, was created in 2009 but the concept of cryptocurrency was first conceived in 1983 by cryptographer David Chaum. Chaum’s company DigiCash went on to create the first cryptocurrency called eCash in 1990, which was influential in the creation of Bitcoin. One motivation of cryptocurrency technology is to create a monetary system that is fairer for all participants.

“But we already have money. Why do we need cryptocurrency?”

Cryptocurrencies are important because they provide an alternative to traditional fiat currency. Fiat currency is money that a government has declared to be legal tender, but it isn’t backed by a physical commodity. For instance, the United States Dollar was backed by gold until 1971 when Richard Nixon removed the gold standard backing. The value of fiat currency is based on faith in the government that issues the currency. This is fine if the issuing entity can be trusted to operate responsibly, but recent years have shown that governments across the globe have been engaging in extremely irresponsible monetary policy. (Think 8% inflation is bad? Lebanon’s banking crisis has resulted in a 178% inflation rate so far) Corruption is rampant with winners and losers being chosen by the entities in control, and the proverbial “little guy” often loses out – what else is new?

Crypto, enter stage right.

How is crypto different? Cryptocurrency is decentralized, meaning it isn’t subject to government or financial institution control and the value is based on supply and demand.

“Okay, that sounds great, but why should I want that kind of money?”

Because it promotes the most valuable component of money – trust. Without trust in a monetary system, the monetary system will not work.

How does crypto promote trust?

Crypto promotes trust because anybody can independently verify a transaction took place without the need for a centralized authority.

“Crypto” comes from the Greek word “kryptós” and when used as a prefix it means “secret” or “hidden.” Cryptocurrency is named so because it is secured by cryptographic techniques and encryption algorithms that safeguard transactions (sounds complicated, but we will get to that later).

Cryptocurrency transactions are recorded on a blockchain (uhhh…what is a blockchain?) and are verified by networks of thousands of computers primarily through Proof of Work (PoW) or Proof of Stake (PoS) consensus mechanisms. (link to piece on PoW and PoS) These types of consensus mechanisms promote trust and encourage the decentralization of cryptocurrencies.

Why does decentralization matter?

Decentralization matters because it reduces the risk of a centralized authority abusing the system for personal or unfair gain at the expense of others – most often, the “little guy.” (AGAIN, WHAT ELSE IS NEW?)

Because of the strength behind cryptography and blockchain network(s), cryptocurrencies can circulate without the need for a central monetary authority. This makes it possible to engage in online transactions safely and securely anywhere on the globe without the need for an intermediary bank, payment processor, or government.

This means that you can send your money to whomever you want, wherever you want, and whenever you want and nobody can tell you “no.”

 YOU have control of YOUR money.

No more waiting days for payments to be sent or received. In the time it takes to make a cup of coffee, you can send any amount of money anywhere, anytime.

Cryptocurrency is a digital asset that uses cryptography for security and is decentralized, meaning it isn’t subject to the control of governments or financial institutions. Cryptocurrency transactions are verified on a blockchain that is open for anybody to view and confirm a transaction, promoting transparency and trust. With crypto, you no longer need to trust that a centralized authority is being honest because you can verify the honesty of the network yourself.

In a world where trust seems to be an increasingly rare commodity, a system that promotes trust without the need for a centralized authority is not only welcome but needed. Cryptocurrency technology is the foundation of this new type of system where trust does not come from a centralized authority but is instead enforced through code that is viewable by anybody at any time.

How much more transparent can you get? Learn more about why crypto is for you.