What is Cryptocurrency?
Cryptocurrency is often abbreviated to Crypto. The dictionary definition according to the Oxford English Dictionary is “a digital currency in which encryption techniques are used to regulate the generation of units of currency and to verify the transfer of funds.”
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I would add, “, recorded on a distributed public ledger called a blockchain and operating independently of a central bank” (at least at the moment).
Some people consider ‘cryptocurrency’ an out-of-date term. It is a throwback to the Cryptopunk era of the 90’s and early 00’s in which some very clever people toyed with the idea of using cryptography and automation software to replace corrupt, greedy and incompetent financial and government organisations. A better term for cryptocurrency today would be Digital Asset.
To many of us, such definitions don’t help us understand crypto very much. John Oliver once defined crypto as ‘Everything you don’t understand about money combined with everything you don’t understand about computers.’ If you are new to crypto, even basic news and information seem to be surrounded by hype, rumour, misinformation and very little fact. It’s difficult to get an accurate understanding of what crypto is and what it will mean to us in the future.
New terms such as Moonboys, DeFi, Metaverse, Hodlers pervade the digital asset media and if, like me, you are a little older than the age groups that these terms seem to be aimed at, you are fighting a seemingly overwhelming feeling of aggravated isolation.
Cryptocurrency is very new in terms of adoption. 99% of people in the world haven’t embraced it and most, even now, are cynical of its viability and use. ‘Why crypto? Normal money does everything it needs to do – the only problem is that we just don’t seem to have enough of it!’ To the average person, crypto is another fad, it has no use-case or worse, it’s a scam!
Even those of us who have bought Cryptocurrency have invested in it rather than use it to buy things. We buy things with Fiat currency (pound, euro or dollar etc.) which is a promissory note backed by the government (Fiat is a Latin word that means ‘let it be done’ but it’s also quoted as meaning ‘backed by force’).
And yet, in the last 15 years the cryptocurrency movement has begun to challenge how we use currency and is practically showing us how money can be used to enhance our freedoms and lifestyle for the future. The benefits to humanity are reassuring to some and frightening to others. This is the most disruptive technology since the internet and as you’ll see, it will change our lives.
Perhaps the best YouTube video explaining blockchain technology is here:
What is the Blockchain?
Cryptocurrency is based on this new technology, blockchain. A/The ‘blockchain’ is immutable (cannot be changed). As mentioned in the video above, a cryptocurrency is normally decentralised, on a disparate, increasingly complex network of computer systems or ‘nodes’.
Perhaps the best video that explains the technology of blockchain and why sop many people are excited about it, is a two-parter from Anders Brownworthy:
The second part goes into even more detail as is particularly good at explaining the importance of public and private keys inblockchains:
A Cryptocurrency blockchain is used to store records of transactions – normally, in the open for all to see. These transaction blocks are duplicated around the world in the process of validating and confirming transactions i.e. to prove that the transactions aren’t fraudulent or double counted. Such activity is automatic and independent.
Information stored in a block can be simple transaction data (e.g. details of the transfer of funds from one person/account to another). However, a blockchain can contain any digital information, graphics, video, sounds – in fact data of any sort. The key thing to remember is that the data in each block is similar in structure to the previous one although the actual data is most certainly different. Once that block is written to the blockchain it can’t be changed (it’s safe, it can’t be edited, deleted or counterfeited – it’s immutable).
This makes most cryptocurrency relatively immune to government and institutional interference or manipulation.
Many believe that blockchain technology heralds a new industrial revolution. This time, It’s seen to be more beneficial to people like you and me as opposed to people in power or leaders of financial/government/corporate organisations. They can benefit too, but it’s more likely to disrupt them than us! This industrial revolution will empower from without!
In other industrial and technological revolutions, new machines and technology automated tasks and jobs on the periphery of an organisation. In essence, major change has protected those at the centre who are empowered to implement change around them. For example, in the first industrial revolution, mill owners installed machinery to increase the productivity of their mills. The owners enjoyed huge profits through productivity gains because machines could work longer and at less cost. Unfortunately, those on the periphery (the workforce) became redundant.
Such innovations made certain people very rich and others poor. One of the latest technological ‘revolutions’ has seen the leaders of ‘Big Tech’ becoming the richest people in the world! Companies like Amazon, Google, and Facebook are certainly more well known from the wealth of their leadership than the benevolence and care they provide to their workforce. Not ironically, one of the more respected Big Tech leaders, Jack Dorsey (the founder of Twitter) recently felt the need to leave the social media platform to pursue loftier ambitions on the blockchain.
Many of us are increasingly disaffected by the corporate ambitions of high tech companies and feel increasingly insecure and exploited each time we use their services. Unfortunately, in many cases there are no options. Google for instance, collects as much information as they can about us and then use this to help advertisers sell things – We may not want them to do this but we don’t seem to have any choice (duckduckgo and Brave browser aren’t good enough to replace Google yet) – the disadvantages are outweighed by the advantages in search accuracy and speed.
Some of us feel that we have lost the right to the information we uploaded to sites like Facebook, Twitter, Instagram etc. and that these websites seem free and able to do what they like with our personal data – usually to their advantage rather than ours.
Blockchain provides a solution. It does this by protecting our ‘profiles’ on the internet, our personal information, our money and our property by utilising innovative programmes and services that automate from the centre and not the periphery! The use of personal data uploaded to the blockchain will be more obvious than it is today and we will have more control of how that data can be used. For example, our cryptocurrency cannot be invested by a bank.
Change from the centre is a fundamental aspect of blockchain technology and the reason why it will change the world. Blockchain products are normally decentralised and therefore difficult to control by a corporate or government entity. As an example, a financial transaction on a decentralised network is handled by a smart contract which completely cuts out the middle man/men. The corporate executives, directors, manipulators and custodians aren’t required! You won’t need to trust the leaders of organisations to do the ‘right thing’ – transaction security is enforced by blockchain smart contracts.
Although in the very early stages of adoption one thing is guaranteed, the sooner we learn what cryptocurrency and blockchain is and how it can be used, the sooner we will benefit from the freedoms (financial or otherwise) that this technology has to offer.
In the next section, we’ll look more closely at Why Cryptocurrency will Succeed.
This article is copyright 2022 by Tony Fawl, CryptoNET.
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