WTF Is Cryptocurrency?
There’s a revolution unfolding before our very eyes, and I’m not talking about geopolitics. I’m talking about currencies — cryptocurrencies, that is.
This revolution, currently in its infancy, will eventually upend how governments, businesses, and consumers exchange money in our ever-present and expanding digital world.
But for the time being, most people really don’t understand cryptocurrencies, how they work, or how they can be so transformative. When people hear the term “cryptocurrency,” the most immediate reaction is usually to say that it’s either a highly speculative investment or just another way for drug dealers to use the power and dark parts of the internet to avoid law enforcement.
Just keep this in mind: Virtual currency is the future, paper is not.
So WTF Is Cryptocurrency, Anyway?
It’s pretty simple — it’s all about mathematical theory melding with computer science. The most talked about cryptocurrencies of today — like bitcoin, Ethereum, and Litecoin — are digital monies, or tokens. This technology, which is decentralized and outside the authority of any governments, lets users make secure payments and store money without the need to go through a bank. In many cases, these transactions can be anonymous. Today, there are more than 900 cryptocurrencies available on the internet.
How Cryptocurrency Works
Cryptocurrencies run on blockchain technology. It’s the heart and soul of this new virtual world.
The blockchain is essentially a secure, constantly updated ledger that records all transactions. It’s transparency on steroids.
To understand how cryptocurrency works, think about video games — a virtual world where you earn points that you can redeem for cool things like a weapon or vehicle. Well, in the cryptocurrency world, those rewards become tokens — units of value that can buy real goods and services.
The first cryptocurrency was bitcoin. It came out in 2009, invented by some mysterious dude in Japan named Satoshi Nakamoto.
Today, bitcoin has a market value of $45 billion and remains the most popular cryptocurrency on the market. In fact, many businesses around the world are willing to accept bitcoin. But for now, it remains a mainly speculative tool for investors, some of whom have gotten filthy rich.
The second most popular cryptocurrency is called Ethereum, which is profoundly superior to bitcoin in that it allows users to create new businesses, products, and services through the exchange of ether tokens. (Ether is the actual name of the digital currency.)
Many in the artificial intelligence (AI) community are turning to ether tokens to help flesh out and develop AI innovations. In this brave new digital world, networks — also called ecosystems — are created that allow computer scientists, software developers, and other computer geeks to tag, model, process, and store data in exchange for ether tokens. Those tokens can then be either converted into cash or spent on actual goods and services within the network.
Why Cryptocurrency Is a Game Changer
At the heart of the promise of cryptocurrency is the simple fact that it is decentralized. Nobody — no business, no government, no individual — controls it. The people own it and can at least ensure its functionality and viability. “Screw the government and the big banks” is the new mantra. Can you think of anything more democratic in its mission?
But for many governments and Wall Street elites, a thriving new economy based not on U.S. dollars or euros, but on a digital currency that’s free of governmental control is pretty unsettling. Governments and banks want total control over every one of us. Bitcoin and ether represent a gigantic middle finger to the corrupt and inept government and banking elites. And it’s so ironic that the secretive Chinese government has now banned trading in cryptocurrencies, while JP Morgan Chase’s CEO Jamie Dimon denounced bitcoin as a fraud. (Though he has since backpedaled slightly.) Talk about calling the kettle black!
Bitcoin, ether, and other cryptocurrencies are here to stay. They’ll eventually become a normal part of our everyday lives, just like Google, Facebook, and smartphones. Now’s the time to embrace the future!