I’ve thought a lot about how to structure this article, and in the end, I’ve decided to talk about why cryptocurrencies and blockchain fascinate me so much, starting from where it all began for me.
It’s 2008, and the company I was working for as a laborer, an s.p.a., informs us that it’s in trouble. They say the work is there, but they’ve overextended with the banks, and due to the economic crisis resulting from the burst of the American real estate bubble, leading to the Lehman Brothers collapse, the company was first forced to go through the entire redundancy process and then declare bankruptcy.
I saw people having to move and reinvent their lives because of this, and I couldn’t understand how a “healthy” company could meet such a fate due to system loopholes.
Fast forward to 2016 when the movie “The Big Short” is released, which helped me understand in detail what happened in 2008 and the flaws of the economic system we live in. It prompted me to further study and research the topics covered in the film, leading me to learn about the history of money and how we transitioned from the gold standard (where coins and banknotes were tied to the value of gold) that ended in 1971, to a fiat standard (where the value of money is determined by individual state economic policies and central bank decisions). This led me to ask a question: Is there an alternative to all this?
This question led me to discover Bitcoin (which, as theorized in the book “The Bitcoin Standard,” could be a valid alternative to the current economic standard) and cryptocurrencies, which immediately fascinated me with their revolutionary and innovative characteristics:
They operate on the blockchain, which is a distributed public ledger where everyone can see what’s happening, and anyone can support it (all it takes is a PC and an internet connection to download the ledger and help keep the network decentralized). They are open-source, meaning the code they are programmed with is accessible and usable by everyone, thus increasing trust. They operate on peer-to-peer networks, making them resilient and difficult to censor, and they are free to be exchanged anywhere and with anyone, without borders and without needing permission (just download a wallet on a internet-connected cellphone, and you’re ready to transact), all quickly and at very low costs (if you know how to use them).
A question I am often asked is, “Are they real money?“
And a response I often like to use is this analogy:
Television, which essentially does the same thing it has since its invention, transmitting images, has evolved over time from being cathode ray tubes in black and white to color, then came flat screens, and finally smart TVs, the same tool but much more performant and with many more functions, including increasingly present internet connectivity.
Cryptocurrencies are an evolution of money, fundamentally allowing what money was created for, to be exchanged for goods and services. The difference is that they offer much more transparency. An operation done on the blockchain is more verifiable (where you can see the movement of funds, the validation of the transaction, and the costs incurred) than one done on online banking, where essentially only a graphical interface is visible but not the entire mechanism behind the movement of money.
Additionally, they have many more functions; I would say the limit of functions is imagination, being programmable and allowing anyone to actively participate in the system, whether it’s providing liquidity to a trading platform or lending or borrowing money, all through smart contracts that automate everything, in total transparency.
Another interesting function is the governance mechanism. Many platforms/cryptocurrencies are governed by a DAO (Decentralized Autonomous Organization), which allows anyone who owns tokens of it to make proposals (for example, to change some rule) and vote for or against the changes (these platforms usually have funds locked specifically for development).
Another interesting aspect is NFTs, which allow making unique bytes or a digital object, opening up innovative scenarios for services such as:
- Ticketing:
They could make counterfeiting and scalping almost impossible. - Copyrights:
For example, an artist could release a video or a song in the form of a divisible NFT, and anyone who purchases it could participate in the distribution of copyrights, allowing the artist and collaborators to receive a percentage of the sales. - Art:
I often hear people say it doesn’t make sense to pay crazy amounts for a digital photo/painting, but equally crazy amounts have been paid for things like Pokémon cards and bananas attached to the wall (see Cattelan). So, in a world that’s becoming increasingly digitized, I don’t see anything strange about it. - Gaming:
Even before blockchain, the most passionate gamers bought items to enhance their characters within a game; with NFTs, countless possibilities and interoperability are opening up.
These are the characteristics that have made me passionate about this technology, but I’m aware that all of this needs to be regulated. I know that overly restrictive regulation isn’t possible because, operating on peer-to-peer networks and being open-source, they would be limited but would continue to exist, as happened in the case of file-sharing services (e.g., eMule, Torrent, etc.). We need to find a balance and increase privacy, thanks to technologies like zkproof, which, through mathematical proofs, allows, for example, demonstrating that funds don’t come from illicit activities without showing the source of the funds.
I advise anyone who wants to delve into this world to study and research as much as possible and to operate only if they truly understand what they’re doing.
In any case, it’s possible to operate in cryptocurrencies on testnets, networks very similar to the main ones, which allow you to try almost all the functions of the blockchain with fake money, without risking anything.
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