Welcome to Crypto
Cryptocurrency is one of the first buzzwords you hear when entering our particular corner of the internet. It’s simultaneously the newest tech invention and the foundation upon which it functions. New companies are built with it and older companies use it. Overstock, Subway, Paypal, and Microsoft have all hopped on the cryptocurrency train, with more to come. But what is it and why is it the new darling of all your tech-conscious friends?
What is Cryptocurrency?
Cryptocurrency is the internet’s response to the traditional banking economy. It’s a digital currency that you can buy, sell, and trade online without a central bank overseeing it all.
In a traditional system, people use banks to get and deposit money that these banks got from a government who printed the money. The influx of money is controlled by the federal government. In the US, the Treasury and the Federal Reserve Bank do most of this job. People trust their banks because these banks track the money they get, both online and in hard cash. This trust convinces people to leave their money in the banks who then use it for lending and investing and occasionally disrupting the global economy.
This new system relies on the internet’s favorite tool, complicated math, to cut out these middlemen and connect buys and sellers together. Other users solve mathematical equations to verify the validity of a transaction and confirm that the coin was not already sold to another person. This online, baton passing game of telephone keeps the system from repeating itself so users know their bitcoin is unique to them and their wallet.
It’s more complicated than that, but the key concept is that it’s decentralized, group-based money management that promises to decrease identity theft and fraud. For crypto-enthusiasts, the sky’s the limit.
The Spread of Cryptocurrency
The first functional cryptocurrency was created in 2009, but it took a few years to garner attention and expand beyond the small group of in-the-know investors. Several years ago, mentions of bitcoin would have been met with blank stares. In our modern world though, even your parents have at least heard of it. But they’ve also probably heard of quinoa and Rihanna so they’re not the best gauge.
At the same time that your odd, only-hear-from-them-at-Christmas relatives are catching crypto-fever, so is pop culture. Marvel comics used crypto instead of the traditional suitcase full of money in Hunt for Wolverine — Adamantium Agenda #1. Crypto rapper CoinDaddy (real name Arya Bahmanyar) sings about the wealth potential in Bitcoin (because this is what we needed in our lives.)
No one was surprised when cryptocurrency reared its head in HBO’s Silicon Valley. If anything, it was like long over-due for a show who’s premise pivots on a group working to decentralize the internet. Cryptocurrencies like Bitcoin thrive in decentralization, and it’s why they were created in the first place.
The Simpsons, Jeopardy, House of Cards, Parks and Recreation, and even Supernatural all mentioned crypto, taking this currency’s format from niche to mainstream. It all started, though, with Bitcoin.
Patient Zero: Bitcoin
Air travel has the Wright brothers. Telephone communication has Alexander Bell. Modern medicine has Alexander Fleming. Cryptocurrency has Bitcoin and it’s mysterious creator, Satoshi Nakamoto.
While others had attempted to create something like it before, Bitcoin proved that decentralized, online currency could work in a reliable and trustworthy form. Bitcoin cuts out banks and governments and instead relies on the blockchain to validate all of its transactions.
Blockchain provides the trust necessary for Bitcoin to survive. Whether they’re online or traditional, financial systems need trust. If people don’t have faith in the system, they won’t be a part of it, and blockchain provides the confidence investors need to participate.
From its inception, Bitcoin revolutionized the way the world views the financial system in the modern age, and all other cryptocurrencies owe their existence to this first installation.
Are All Cryptocurrencies Bitcoin Ripoffs?
Yes and no. Bitcoin enjoyed a relative monopoly in the market from its announcement in 2009 to the rise of competition in 2011. Rivals like Namecoin and Litecoin came in to fill up the new market, and while there are over 1,500 cryptocurrencies in circulation today, none have neared the dominance Bitcoin’s possesses.
Some of these new cryptocurrencies are Bitcoin forks which splinter off from the Bitcoin format in new ways and for new purposes. Bitcoin forks often focus on a particular sector of the market or they hope to promote a social good, like donating to charity or running only on clean energy.
But blockchain may not be the only future of this technology. IOTA, founded by the German nonprofit IOTA Foundation, looks to replace blockchain with a tangle of confirmation from randomly selected IOTA users. Though potentially revolutionary, the tech is in its early stages without a sustainable proof of concept, and Silicon Valley’s reputation for patience isn’t exactly world-renowned.
The Downfall of Traditional Banking
Has been greatly exaggerated. Cryptocurrency is often presented as either the money of the future that saves us all from our evil regulation overlords or a complete bust that will wither away into the darker confines of the internet’s history. The reality is, as usual, somewhere in the middle.
Cryptocurrency still has a long way to go before it can upend the likes of Chase and Wells Fargo. For those outside of the tech space, cryptocurrency remains a tv and internet buzzword beyond their day-to-day lives. Whereas the average person understands credit cards, Bitcoin is far less established. It’s no surprise considering that the first known currency was created way back in 600 BC. Overcoming a nearly three-thousand-year-old institution won’t be easy.
While the Bitcoins volatility could be an indicator of things to come, the future of cryptocurrency and it effects on the global financial system are still up for debate. Governments are forming their own laws and regulations around the medium and casting doubt on the decentralized and unidentifiable goals cryptocurrencies promote.
In all this turmoil, only time will tell if cryptocurrency forever alters our economic world, though your FOMO may get the better of you in the meantime.