Why is cryptocurrency and blockchain so important?
To some, it is just about money. The goal is to invest some money into it with the goal of selling it again at a higher price. And... well, buying "Lambos" or something. 😉
Surely, there is money to be made. This is a brand new asset class and we're still in the early days of it.
But, it is so much more than just making money. And frankly, when you understand that, then you can truly understand the real potential of this technology and the impact it will have on the world. Also why... I believe its success is inevitable. It simply solves too many problems for society for mass adoption to not happen.
Let me paint the picture for you...
For two parties to communicate in any way, there needs to be a trusted medium. Either that medium is part of nature (like the air transferring sounds of out of our mouths so we can talk to one another)... or is artificial. You also have to trust that that medium isn't altering anything.
Now, with natural mediums, we can all agree on how they work. We know, for instance, that if we're talking to each other that the air isn't altering our voice or our words. The communication works.
But, what happens when the medium is... a third party? Can the third party be trusted? Does it always work?
When it comes to a lot of human transaction, we're reliant on third parties. Examples are:
- When we execute a contract, we often have to hire a lawyer. The lawyer interprets it, looks out for interests, and of course takes a piece of the pie in exchange.
- When we sell a major asset (like a house), there are often multiple middlemen. Something as simple as transferring ownership of a house requires signing multitudes of paperwork and thousands of dollars in closing costs. All to middlemen that really add very little value to the transaction other than facilitation and (hopefully) trust.
- When executing a contract or piece of signed paperwork, often you have to go see a notary. The purpose of that notary is to attest that it was real and can be trusted. That notary is a middleman.
- Simply doing commerce these days is rife with middlemen. Payment companies and banks sit there in the middle, racking in fees for basically doing nothing at all. In fact, it's pretty slow. Want to simply send funds from one bank to another? You got 3-5 business days to wait for it? In a world of email and internet communications, banks are stuck in the stone age (relatively speaking).
- Ever tried sending funds overseas, or making an overseas payment? It can take forever and, in some cases, it is pretty much impossible. Sometimes, you can be forbidden due to fraud concerns or sanctions.
So, not only are middlemen in a lot of the transactions we do (and charging fees for it while, in some cases, adding little to no actual value)... what if they cannot be trusted? Even if not outright dishonesty, what about instances of... just making a mistake?
What if.... you could remove a lot of the middlemen? Radically speed up transactions. Save the fees and remove the leeches that suck value out of the transaction without actually doing anything.
What if all this could be done in a way which guarantees trust. Where you don't have to take anybody's word for it because the terms of the transaction are clearly spelled out and automatically executed by the platform.
What if all this could be done securely, without risk of fraud or mistaken identity? Where it couldn't be altered.
That's the power of blockchain and the code that powers it. Cryptocurrency is just one application for this technology. There are many others.
And it all comes down to creating a whole new "internet of value" based on trust. Where we can send and receive VALUE just as easily as we send an email. Without any third party in the middle.
- Programmable money that is reliable and cannot be removed by an authority and, most relevantly, cannot be inflated away by central banks
- Money which is truly international, thereby enabling worldwide commerce. Areas of the world without access to traditional western finance will be able to participate and compete on the world stage.
- Assets can be tracked and transferred instantly and without risk of fraud. Transferring real estate could be a simple transaction between two parties, executed instantly over the blockchain, without either party needing to know each other or having to trust each other.
- The goods you purchase could be tracked back through the whole supply chain to original source. No longer must you trust where it was made, when and by who. It will all be tracked... transparently and trusted.
- Democracy could actually function since voter fraud would be impossible. A decentralized, blockchain-based voter system would verify identity and record your vote. Your voter ID would, in essence, be a "wallet". Your vote would be anonymous, but you totally control it. You could look it up to ensure you voted correctly. And, results would be known instantly online. No backroom counting or waiting for the media to call it (they're middlemen, you know, and quite unreliable).
- This new trustless "internet of value" would allow value to be moved in all kinds of formats (in various coins). These "coins" would have market value and you have the freedom to exchange between them. So, those coins you earned playing video games could, for example, be transferred (via an exchange) into a coin for an airline and, in essence, you get "flight miles".
The impact of this technology is huge and will change the world.
It will change economies. It will enhance the value in the economy since we wouldn't need so many useless middlemen in the middle sucking fees. It would change citizens' relationship with their government. In fact, I can envision "government as a service"... where they are more accountable to their citizens and have to "compete" for patronage since it'd be really not all that hard for the person to move to a government that better serves them.
OK, maybe I'm getting a little ahead of myself on that one. 😉 But, trust me... the potential is there.
Blockchain and cryptocurrency will change the world. Of that much I'm sure. It solves too many problems. And the genie is out of the bottle now. Adoption is all but guaranteed.
In these early days, we're able to participate (and potentially invest) in a whole new asset class. Like being able to buy internet stocks before the dot-com boom. These "coins" have market value... and each has their own purpose. Some are meant to be a form of money, but most are not. Most coins have a utilitarian purpose on that particular blockchain. Still, it has market value and people trade it.
A lot of the trading is speculation. Many of them will probably eventually fall to a zero value. For that reason, this is definitely a riskier asset class. And there is no substitute for you learning about anything before you invest any money into it.
Being so early, there's no doubt also going to be adjustments and new regulation along the way. My hope is that they don't overdo it and stifle the potential of this technology. Some regulation is welcome to keep out the scammers and provide some trust, but what we don't want is regulation that is merely designed to protect the power structure. I do expect some of that along the way, however.
But.. I hope here that I've given you a better idea why I'm so excited about it. It goes WAY beyond investment returns.
When we know crypto has really made it, the idea of selling it back into US dollars or another fiat currency will just feel... stupid. You won't need or want to anymore.
And those days are coming.