Three reasons to be excited about our decentralized future
In April of 2017, I read an article in the New York Times that sparked my interest in Ethereum. It was a quick, but fascinating read about a global computer network that can support applications that allow people to connect and transact without having to pass through a centralized database. A network that is supported by the users that participate in it and, in return, those users have complete control over their data, information, and money.
It’s an incredible prospect to think that a well-organized mass of users can challenge the small handful of companies and governments that control so much of our lives. This is what has gotten me so interested and invested in the idea that cryptocurrency and decentralized applications are the future of the internet and banking.
I’ve been captivated by the different use cases being tackled with the hundreds of new cryptocurrencies, decentralized applications (dApps), and token offerings. It’s a dizzying space right now and it’s been hard to sit down to write a piece about cryptocurrency. To bring this down to earth for my own thinking and to build a platform to write more about this space, here the three main tenets of cryptocurrency that I find most interesting.
Owned by the users
Immutability is a fancy word that I’ve really only learned while reading about cryptocurrency, but it basically means that it can’t be changed. The oldest trick in the book for white collar crime is cooking the books by changing numbers to make it seem like there is more money where, in reality, there is no money. Think of Bernie Madoff or Enron. For cryptocurrencies, once a transaction is verified, it is put into a block of other transactions and protected with cryptography so that none of the transactions can be forged or changed. In any centralized ledger, there is always a way for an authority to make changes.
Of course, there are plenty of reputable businesses that are third parties to transactions and they are always honest. However, this doesn’t mean your information stored with these third parties are safe. This brings me to the second reason why I think this is exciting; Ownership.
Everyone who holds Bitcoin or Ethereum has a say in how it functions. Everyone who holds it, owns that piece of the system. Everyone is encouraged to understand how the system works, ask questions when they don’t understand, and participate in shaping it for the future. When decisions are actually made to make changes to Bitcoin or Ethereum it the result of a consensus of the users, not the unilateral decision of one person. Think of the World Bank or the Federal Reserve. If a large enough group of people disagree with a decision that was made then that group can take that community with them in a different direction. This is exactly what happened with the creation of Bitcoin Cash or Bitcoin Gold.
All cryptocurrencies are built on technology that uses distributed computing power to function, Proof of Work is the most prominent technology, and these computers are not owned by one central body. Only users that willingly participate in the network support it and they are paid for their efforts in the form of newly minted coins. This allows users anywhere in the world to support the network and be paid in a borderless currency that can be traded with anyone. The nature of a borderless and distributed computer system means that it is resistant to complete government oversight. It cannot be banned, it can only be made more difficult for users to turn their fiat currency (Dollars, Euros, etc.) into cryptocurrency. Additionally, distributed computing through Proof of Work means that if one group or government decides to attempt to physically attack and destroy the system, they would need to destroy all computers across the world supporting the network or gain 51% of the computer power.
Cryptocurrency is a working project and requires skeptics, optimists, revolutionaries, academics, convenience seekers, early adopters, and technophobes alike to participate. Ask questions in the comments and that can help me write more about this in the future!