Dummies guide to abstract crytpothinking
For the past 3-4 months I’ve spent a substantial amount of effort trying to understand the world of cryptocurrency. The most well known cryptocurrency is, of course, Bitcoin, and the underlying technology that powers Bitcoin is known as blockchain. I’m sure for 90% of readers, this is not new information…nor is it probably news that there are newer cryptocurrencies that are being built that leverage blockchain technology, but that have different properties than Bitcoin. You’ve probably even heard of Etherium, and maybe you know that Etherium has acheived a $1B market cap on the promise of making the Blockchain accessable to programmers who wish to build decentralized applications on top of the blockchain without the hassle of bootsrapping a secure blockchain from the ground up. You might know that Bitcoin can be mined in an exchange of computing power for currency…and maybe not know that all cryptocurrencies are not mined, and that mining is just one form of distribution when a new coin or currency is birthed into the world. Mining is a job that creates value for the network, and coin is the reward for those willing to do it. that work let’s those not wishing to work, enjoy the value of the network (in Bitcoin’s case, money transfer), and holder’s of Bitcoin pay for that work, effectively through the acceptance of inflation on their holdings as new coin is issued to miners as they work. Maybe, you have heard of Steem, which created it’s own blockchain and crptocurency that rewards behavior and participation within a Reddit like media application (which is sometimes refferred to as a protocol vs application, although it feels more like an application than a protocol to me). You probably have not heard of Monero, Dash, Maidsafecoin, Lisk, NEM, Emercoin…or any of the other 20 coins that have a marketcaps north of $20M. And you definitely haven’t heard of the next 20 coins that are currently being designed, white papered, tested, and that will ostensibly be issued over the next 12-18 months. I use the terms “coin” and “cryptocurrency” interchangably here…coin is just shorter and simpler to write. There is something happening in this world…and through fits and starts…and mistakes…and hundreds of millions lost and hundreds of millions gained…I do believe we are getting closer to the potential of cryptocurrencies…and i use the plural because it’s not gonna be one to rule them all…i don’t think…but rather many with distinct uses and applications that will likely be transferrable with each other and traditional FIAT currencies to varying degrees of liquidity determined by the protocols that govern them. The state of this ecosystem is still such that white papers and complex, overengineered economic and technical systems must be digested in order to desire participation, but that complexity is slowly being abstracted away into more approachable and visible real world value…and it will continue to do so until coins begin to sneak into mainstream life and the systems that both govern and enable it.
Since Bitcoin captured the attention of the world a few years ago, with skyrocketing appreciation…most folks have scratched there head to bridge the gap from the theoretical promise of the coin, to the actual real world applications it might achieve. With Bitcoin, like most coins on this list, you kind of have trouble answering basic questions like “why is this better than US $?” “Why should I hold it?” “Why should I accept it?”, etc…for a while, when you really boiled it down…you got to ideological arguments around decentralization (which simply means a redistribution of power and control away from centralized intermediaries and incumbents, to “the people” effectively…or the users of a given service or currency). There’s this notion of trust…and the most paranoid of us, who champion decentralization…are circumspect of authorities whom the vast majority of mainstream population choose to trust in exchange for ease of experience. Banking with Bank of America is easy…but ya gotta trust bank of america…paying with US $ is easy, but ya gotta trust the US Government…paying with Bitcoin is a pain in the fucking ass…but you don’t have to trust anyone…and that feels good for a small minority of decentrally minded folks…
I believe that for a coin, or protocol or decentralized application to succeed against it’s centralized and well established counterpart, the mere ideology of decentralization is not enough to overcome the incumbent. Recently, however, I believe we are starting to see glimpses of coins and contemplated applications atop those coins, that don’t simply replace a centralized system with a decentralized alternative, but rather that contemplate a new societal or consumer oriented system that has no centralized counterpart, because it is something that could only exist from the bottom up, but that has not yet materialized, because there was no good way to transfer value between bottom up nodes around a public or shared service until a blockchain based coin enabled that transfer in the absence of trust, but reflective of the incentive structure necessary to harness bottom up work or value contribution around a mainstream life need.
I realize this is quite abstract, but the marriage of value transfer and distributed but well coordinated work or asset contribution by human beings, or in many instances machines owned and paid for by human beings, represents an efficiency in system design on par with the emergence, say, of parallel computing. We will simply be able to do and sustain systems and services via cryptocurrencies that were not possible on existing financial and societal rails.