The word “cryptocurrency” makes our mind oscillate in a scenario where the doomsday clock has struck midnight and all the humanity is going to succumb, sucked and thwarted into chaos. The chaos in which the land of living has been taken over by machines and has to join the resistance (what a bummer, now we really have to work).
But fear not my comrades!
Don’t be discouraged by the tricky enunciation and the James Cameron Terminator-esque escapade, let me put your minds to rest, my wonderful Connors and sweep you away, introducing the magical world of Digital Currency.
Boom, miracle or chimera, mirage of internet; time alone will be the testament of it.
➢ Epilogue of Power & Greed
The functionality and necessity of cryptocurrency predate centuries and are all old as the time memorabilia of exchanges of currency and assets; the power in hands of people.
During the time of Italian Renaissance (Michelangelo painting the Sistine Chapel ceiling with his master strokes), the Medici family (visionaries) understood the importance of introducing a system of monetary engagement in which the savers and the borrowers are brought in the same playing field and have an inter-mediator a.k.a banks making the exchange possible but with an additional fee charged to it. Now in modern entrepreneurial societies this is also called Network Efficiency.
Fast forward to future, this seeds sown in reality, created a centralized system of money and trust. Money was no longer a physical currency but a systematic way of arranging, amalgamating and distributing the swamps of society’s debts and payments.
Banks became the gatekeepers of the ledgers that kept track of the debts and payments of world around.
But just like any classic westerner; the good, the bad and the ugly came knocking on the doorsteps and the protagonist (banks) became the nemesis, the ultimate antagonist.
"Nearly all men can stand adversity, but if you want to test a men's character, give him power "
said wisely by Mr. Abraham Lincoln.
The power of middle men created more middle men, the insatiable greed created more credit-lending companies and thus giving the rise to the now fallen legends of Wall Street.
The repercussion, the quintessential betray and the coup de grace?
The collapse of financial world order in the summer of 2008 and be rest assured, history does repeat itself.
➢ Cryptocurrency: To Infinity and Beyond
The debacle of 2008 gave rise to the question of power of the appointed Middle Men and how we cannot fully trust the “men in suits”. The answer came in 2009, swiftly with cryptocurrency. The gravitas of this technology lies in the eradication of the middle men and simultaneously keeping the age-old infrastructure of dealing and exchanging with strangers on the internet, intact.
How do you do that?
By disrupting the centralized model completely into a de-centralized model.
This de-centralized model depends on the worldwide peer-to-peer network of autonomous computers. A universal and impregnable ledger, one that is fully visible to the world and which is being incessantly verified by plethora of computers, all independent of the others.
This global network-based ledger is called BLOCKCHAIN.
How does it work?
Before we get to that lets me introduce the fable of Bitcoin and bitcoin
Like Romeo and Juliet these are the inseparable lovers of Blockchain (technology and the currencies). The capital B stands for the technology and the lower-case b stands for the currency.
Now the Blockchain records every bitcoin transaction (no files, just transaction being written down so no counterfeiting) that has ever happened (the ledger as of late 2016 stands at 107 GBs of Data).
Now back to how does it work – As the system is de-centralized, the ledger or the Blockchain is maintained voluntarily by people from all over the world. As a lot of people are keeping the records of transactions the error is minimized and all discrepancies are eliminated.
The people maintaining the chain are called Miners and they have to solve complex mathematical problems (cryptographic hash function – Secure Hash Algorithm 256-bit) to be the block which is being picked first. This selection process counters any lag in the network also termed as “network delay”.
As solving these problems require a lot of investment, the reward for finding the right algorithm and be the first block which is chosen; 12.5 bitcoins (amounting $47,462 as 1 bitcoin stands 3797 USD) are awarded. Important to note that at every 210,000 block, the bitcoins reward value will go down to half i.e. 6 bitcoins (as of current standing). At present the blocks remaining are 149,790 before the mining reward goes half (per day new blocks created 144 projected cut at 2020).
If people across nations are keeping the ledger, how all is kept in sync?
Whenever the transaction is happening the person has to announce the following to the network:
❖ Account Number (Payer)
❖ The account number you’re sending bitcoins to (Payee)
❖ How many bitcoins you want to send
Now the people who’re maintaining the Blockchain will update the same and will reflect in the ledger.
What about the security as there is no central bank keeping the tab?
The cryptocurrency algorithm plays an important part by introducing the keys concept:
Once the account is created called “wallet” and then it’s linked to two keys i.e. Private Key and Public Key. The private key is only accessible to an individual from which he/ she can verify his/ her message of how many bitcoins needs to be send and to whom. Once it’s send across, the other individuals (ledger keepers) can verify the authenticity of it through public key and update the Blockchain.
➢ Counter- Point of view
The cryptocurrency is not without its own flaws. The incentivizing of computer owners to see and be liable of the ledger can lead to the monopoly of computing power. So the debunking of centralization can lead to the capitalist instinct kicking in and corrupting the system as a whole. Other than that the Silk Road Case (an illegal online black market that used bitcoins as its virtual currency for the purchase of their items) and the fear of such cases repeating, can be a major deterrent in the global acceptance of the system.
➢ India Point of view and the Inevitable Future
In the wake of de-monetization, the country in itself is in a period of Financial Renaissance. Reserve Bank of India (known for their acute strictness) has taken their stance against the use of Bitcoin as unsafe due to high risk of money laundering and cyber security risk but due to a gradual and unpreceded change in digital technology and the slowly steadily cryptocurrency awareness can lead to change in their stance.
As Nelson Mandela impeccably puts it
“Education is the most powerful weapon which you can use to change the world”
Educating and understanding the working of cryptocurrency can lead to the desired change in the mindset, as this change seems inevitable and is here to stay.
➢ Why should anyone care?
Simply, because it’s our Money. We care about our well-being, happiness, job, relationships and other aspects of life then what about the sum and substance which sustains it all? The day we start making money we’re handling our hard-earned wealth to banks and financial landlords who’re making profits with every transactions charges, interest rates, bank fees and credit cards charges.
On minuscule level it looks not a thing to be alarmed off and agreeable that “why anyone should be excited about “cryptocurrency” but when seen on a broader level it amounts to a lot. The world economic output runs up to $85+ trillion per year and if we strip and dismantle the middle men, the flag-bearers of debts, the self-proclaimed landlords from their titles and the reins is handed over to the people; the people who’re innovators, thinkers, creators, disruptors, we can witness a tectonic shift of the poverty in the world into sanctuary of wealth and equality.
I know it’s a Utopia but so was making an airplane and so was venturing into the outer-space.