What is cryptocurrency?
Cryptocurrency is a digital form of cash.
Money has value because of its scarcity and mutual understanding that others will accept it in exchange for goods and services. Those two aspects are what define money / or a currency.
If our cash notes could be faked and counterfeited, then anyone could make them, leading to a currency which has no value. While cash notes are designed to protect the currency from counterfeiting, this is much harder to accomplish digitally. To do this digitally, the ledger which contains the ‘truth’ of who owns what and how much, is remembered and secured by thousands of computers around the world. These computers form a network that decides on the shared truth—these are called blockchains. In a nutshell, blockchains do not have a single point of failure and for the network to be compromised a majority of the computers will need to be corrupted as well. With a large global network of computing power securing the shared truth, counterfeiting is extremely difficult. Blockchains are an example of a decentralized technology—computer systems that distributed computing aspects in data validation, storage or processing power.
Why is it special and exciting about it?
While blockchains enable the existence of digital scarcity, the true magic is due to the unstoppable resiliency of distributed computing and decentralized technologies. Cryptocurrency, as a result, is unstoppable and cannot be censored.
Currently, our money deposited in bank accounts are monitored, regulated and always within arm’s length of the governments reach. They can track it, freeze it, tax it and manipulate it. The truth is that we have never owned our ‘money’ and instead have always used it under the watchful guide a central authority. With our lives ever more digital, we face a greater danger of governmental oppression and surveillance. Such is the case with China’s internet traffic firewall. Even in first world countries, we face the risk of asset freezing as well as the collapse of banks. This is just the tip of the iceberg.
What does the future look like with cryptocurrency?
Currently, cryptocurrencies such as Bitcoin and Ethereum have gained a willing market who are open to exchange cryptocurrency for goods and services. While you may debate the nature of those markets, the fact of the matter is that, one exists. And with this market, economic activity has and will continue to grow. As this grows, it will become a new kind of beast that we will never have seen before. A truly free digital economy.
Not only do governments have little ability to impose its authority on it, they are unable to regulate and tax it. They will soon be unable to even track, monitor and watch the economy with the implementation of privacy technologies. Overtime governmental governing power will decrease as their ability to control and tax value decreases.
One question you may ask is: So who provides public goods? And with this question is an example of why I am personally in this space.
Do we voluntarily pay tax? Would we? What would make us do? What wouldn’t? If we do, who would we give it to? Would we give it to the existing government? If we had to, who would we give it to? How would such an organization be governed?
All these questions lead back to the rather psychedelic concepts of self-governance, DAOs, social signaling mechanisms and token curated registries.