How cryptographic currencies brought about the collapse of centralized
banking, government controlled finance, and leveled global income wealth
disparity. In the next decade you will be wondering why you ever used a
centralized currency.
I’m sure that the subheading seems fairly grandiose!
However, I can assure you, every word of will become true, and will come true
sooner than you think. I have been privliged to interview people vastly more
intelligent than I, there are plenty of them.
Programmers, investment bankers, and even people who use cryptography in
their home countries as a primary currency…..they all concur.
The currency of the future will be person to person (P2P),
meaning there is no intermediary like a bank or government. It will be digital, although if you really
wanted to you could print off the bitcoin cryptography and reenter it
later. It will be 100% transparent, made
from an open source code. It will be
based on block chain technology. And oh
yes, one more thing………it will be here before the next decade is over.
For those of you who are busy running on the treadmill of
modern day survival, and I say this with absolutely no disrespect intended. You
are probably too busy to read, research, or ask experts about cryptographic
currencies like bitcoin. You probably
have seen it on “the news” or even the Facebook news feed. There are some very powerful people putting
out lots of misinformation on cryptography, and for very good reason. It could obliterate their industry, way of
life, and their wealth. In the first
part of this multi part series I will explain what Bitcoin, and other cryptographics
are, and are NOT!
Cryptographics (bitcoin) are NOT an investment tool, they
are not a stock or bond, they are not a fad, they are not the exclusive
currency for criminal activity, they are not owned by any governmental body or
bank or corporation, they are not tangible, they are not a scam, and they are
not owned by a Japanese guy named Satoshi Nakamoto……they are also not a sock,
fish, or coffee cup.
Imagine you have a $10,000 bill, yes they exist and Salmon P.
Chase is on the front, and you want to use it to buy a car. You want to make sure that you have a valid
bill of sale. Of course you want it to be difficult to forge, and impossible to
destroy. Now imagine that you could
write the contract on that $10,000 bill, and then transfer it to the
seller. With cryptographics, like
Bitcoin, the contract will be enshrined in the block chain. The block chain is the digital ledger that tracks
every single Bitcoin transaction ever completed, for as long as there are
computers the Bitcoin block chain will exist.
Both you and the seller will have access to this ledger, in your digital
wallets. It can never be altered. The
same could be done for any contract entered in to: land, business purchases,
legal agreements etc.
This aspect alone, gives bitcoin an intrinsic value. Gold is not intrinsically valuable. It is heavy and is not used in industrial
production. Currencies have value, and
have throughout history, because they are a contractual obligation between two
parties. A promise. More than that, as the value of a currency is
recognized by an entire group or society of people the value increases. The contract, or promise of value is fundamental
to the value of any fiat monetary system.
This could not have been better exemplified than during the monetary crisis
that occurred in Venezuela over recent years. Although there are many examples
of currency devaluing to almost nothing in modern times, Venezuela is
noteworthy. Why? Because it is a large scale case study in trust, and it
happened at a time when cryptographics had proven themselves as a globally
recognized store of value.
While the Venezuelan people have had most of their savings wiped
out, some have managed to purchase crypto currencies, bitcoin and the
like. Their government money, a
promissory store of value just like any other fiat currency, is no longer
trusted. It is not trusted by them, or
anyone else in the global market. The
trust and promise of value is gone, and so the money is worth as much as the
paper it is printed on. Possibly even less in some cases, since toilet paper is
scarce in the collapsing nation. It is
worth noting that at one point, less than 20 years ago, Venezuela was one of
the wealthiest south American nations!
People there have turned to cryptographics precisely because of the promissory
value that they hold.
If you wanted to take the time to read the source code for
Bitcoin, or another crypto currency, you could find out exactly how many units
of currency will be created, and when the minting of the cyber currency will
stop. For bitcoin that number will be $21 million. Take a moment to think about what that
means. The U.S. Government has a policy
of increasing the monetary supply by 2% yearly. This means your money is worth
$2 less for every hundred you save each year. Most 401K plans have a limit of $18,500, this
means that if you max out your retirement fund it is worth $370 less by years
end! This is not a political, but economic observation. In the case of
Venezuela the government, printing of currency resulted in mass inflation,
devaluation, and destruction of almost all savings. With a cryptographic
currency, this is impossible.
What if people forge Bitcoin? After all, it’s just made up. I would like to point out that the major
backing of fiat currency, the USD for instance, is men with guns. All currencies are “made up” and poses no
actual value. Forging a cryptographic
currency would be both cost prohibitive, as well as difficult. Since the
computer network that manages the ledger, the block chain, for bitcoin now
contains more computing power than all of googles resources combined it is very
unlikely that it could be hacked. In
addition the creation of false cryptocurrency would result in an imbalance in
the ledger which would be easily and quickly detectable. After all, how could a dollar bill exist in
two places at once, with the same serial number? Every transaction increases the overall level
of encryption. With every use
cryptographics become ever more difficult to falsify.
Where do Bitcoins, and other cryptographic currencies come from?
When a mommy and daddy bitcoin get married and they love each other very much,
they make a baby bitcoin……Actually bitcoin, and most cryptographic currencies
rely on a global computer network. This network
is made up of independently organized operators who use an open source computer
program, a program that anyone can access for free, which solves equations
creating layers of encryption for the block chain further securing the digital
ledger which comprises the basis of security and openness for the digital
currency. For the use of their computing power these people, referred to as
bitcoin miners, are awarded bitcoins by the cryptographic algorhythem. Imagine
you mint currency for the US government.
For every ten coins you produce, the govt gives you two. Bitcoin is similar
to this. However, unlike a physical arrangement the block chain base code, and
other miners prohibit forgery. A forged unit of bitcoin would not match the ‘serial
number’ sequence that the source code provides for the distribution of bitcoins
awarded for mining.
Who regulates/owns Bitcoin and other cryptographics? Simply put,
no one and everyone. Decentralization of ownership is part of the founding
argument for cryptographics. The entire world will agree on a value,
competition for computing power will forge the way for securitization of
transactions, and as the network becomes ever more secure and evermore
expansive, the value of whatever cryptographic emerges increases. Unlike a fiat
currency, if someone decides they do not like a certain cryptographic they can
decide not to use it. They can use a different one, or even use their local
government fiat currency. The value of decentralized ownership provides a
network, global in scale, of individuals who both monitor and maintain the
digital currency supply. Everyone, at least everyone using the currency, has a
dog in the fight when it comes to maintaining security of the digital monetary
supply.
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