“Did you see the price of Bitcoin/Etherum?”
This is probably the question I’ve received the most in the last two weeks. Followed closely by “Didn’t I tell you that was a huge scam?”.
I have been working in blockchain, the tech behind cryptocurrencies, for over two years now.
During this time I have explained how the tech works to many friends & family. At the same time, cryptocurrencies prices have been going up & up (also known as ‘bull market’), so many people got into them.
Fast forward to today where prices are constantly going down, people turn to me almost asking me what did I do to bring the price down.
That’s why I would like to spare a little time to explain why I’m fully into this tech regardless of any price shift.
So yes, the crypto currency markets are down and it seems it will last for a while (also known as ‘bear market’). But what does it mean? And most important, what is behind Bitcoin, Etherum or any crypto, that is to say, what are its fundamentals?
Before you go into finance and prices, you must understand the tech: blockchain.
Disclaimer: when you talk about Blockchain, things can get technical way too fast. I won’t go there. I’m not a full tech person. We have amazing tech folks in Extrimian who will get deep into it if you’re interested. Check out our blog posts!
The value of Blockchain tech is all about taking trust to a whole new level. This is a gamechanger in the digital world we live in.
It is a method of creating and storing data evidence that ensures 100% that the data (so far) cannot be changed and is accessible to anyone at any time.
But, why is this important?
Think about your life. How do you feel when you trust someone or something? Things flow better, right?
When we trust we relax, we open up and we allow ourselves to grow and do more. Our society works in the same way, the more we trust as a whole, the more we can achieve anything.
As our societies grew more complex than just villages, we started placing trust in ‘middle men’ or a group of organized middle men (e.i. institutions) that would act as intermediaries between two strangers, expanding trust and expanding the capacity of the whole society to grow.
That generated all kinds of institutions such as marketplaces, banks, universities, governments, etc. They are all intermediaries that we trust for different reasons.
So trust is key to grow and evolve as a society.
On the other hand, our lives are more digital than ever:
As systems and equipment evolved, our lives have shifted significantly to the digital space for almost everything.
But the way our current digital world works is based on the same trust principles: We place our trust in the intermediaries in order to expand our capacity to do something. For instance, if I want to handle my finances,
I need to create an account with a bank and access their Home Banking server to operate, much like I used to go to the bank in person 30 years ago. The bank keeps control of everything and makes all the decisions.
Everytime we create an account with a company (and quickly hit ‘Next’ on the small print we never read), we’re trusting that they will use our information as best as possible to give us the service or product we are looking for. That also implies we trust them they will keep their tech infrastructure secured, etc.
This client-server model is coming under increasing pressure as our society becomes more and more dependent on digital services.
Institutions need to scale their systems to handle bigger sets of data, with higher costs and risks.
We can see it in the obvious issues we encounter daily like servers that are down killing services for a while, ransomware attacks, fake news that affect people or businesses, etc.
We even have less obvious issues like manipulation of our attention to alter our behavior impacting our consumption habits.
So, as our life is directly connected and affected by the digital world: How can we know we are trusting the right digital services? How do we know that they are using our data as they promised? And if they are not, how can I break that link?
Blockchain allows us to think about things in a different way.
Suposse that you are not dependent on a person at your bank to approve your credit status or the financial products you are eligible for, but that this is determined by your credit history available online.
Imagine that all your most important personal information is stored in your digital wallet and that you can share it with anyone you want, and that no one can delete or restrict your account.
Or just picture that the profile you created on a marketplace belongs to you and that you don’t have to sign up every time you want to use a new app.
By cryptographically proving information stored on a network that is always available and unchanged, and whose source has been verified, the blockchain is a tool that shifts trust from the people who run the institutions to the technology used by the institutions themselves.
The new paradigm: The decentralization
No-one can cheat this system (at least for now). It’s a whole new paradigm where the institutions don’t have to be actively the middle men vouching for us, but they are the creators of protocols that once they are placed on the network they will allow us to interact directly with each other over smarter digital platforms.
Now I access my finances with my own password, (NOT managed by the central server of any institution) and I send money directly to you, no one can stop me or block my account.
I can provide you with my work profile, and you can contact me directly using the government infrastructure, but not depending on logins or servers that have to run, or applications that have to be approved by a clerk somewhere.
I know it still feels complex, but it’s because we are just barely starting and it’s still in a purely technical state but crappy User Experience.
If you are 40 or more, you probably remember the early stages of the internet.
What it was to dial a phone number to connect to the internet and take ages to accomplish anything, or how to install maps with lots of floppy disks.
Nowadays, we take the extremely fast Internet for granted, and we locate things on maps in seconds with our wristwatches!
So when I think about the implications of how blockchain is going to help us redefine our world, I truly feel like David Bowie did about the internet in 1999.
David Bowie predicted in 1999 the impact of the Internet in BBC
So, blockchain is more than just currencies and finance applications. Blockchain is a way in which the technology will help us to engage in direct peer-to-peer online transactions for anything.
I see daily how a huge community of builders are re-imagining everything and improving things using these principles.
Government, identity, digital signatures, health records, intellectual property, crowdfunding, you name it and there is a builder working on it. It’s unstoppable. That’s the foundation of the blockchain.
Once you see and understand that, you realise that the price of Bitcoin or Etherum today is irrelevant in the long run.
If we continue in this trend, it is inevitable that at least those two blockchains will be around for a long long time.
There is more to dive in that I purposely left out. We will be going deeper into those factors as we keep building and growing. Stick around for that! 😉
If you are still interested in some financial tips for investing in cryptocurrencies, I will write about it in a following post. Stay tuned!