What is Bitcoin? What are cryptocurrencies? What on earth is a blockchain? These questions are not easy to answer for the unindoctrinated. Maybe you’ve heard that the Crypto Craze is upon us, driven so far mostly from the younger generation of tech-savvy adult “kids”, with over 40 million of them in the US alone now owning a piece of the digital coins.
Why should you be interested? Well, quite simply because we are on the cusp of a new era and you don’t want to be left behind! Worldwide, there is a total now of over $2 Trillion in crypto accounts, which is more than what all US Credit Unions hold in dollar assets. Some experts believe cryptocurrencies will become an asset class by itself someday soon.
It is human nature to resist change. A certain amount of skepticism is healthy, especially with something so cutting edge as crypto and its underlying technology. Unless you’ve done some research, media headlines aren’t going to give you the whole picture. It is easy to miss the forest for the trees with such a complicated subject.
Even world-renowned Bitcoin expert Andreas Antonopoulos admits that crypto is challenging for new users at the moment, but it won’t be for much longer. Very soon, Bitcoin and blockchain will make “all of the things today that are expensive, slow and difficult…become cheap, fast and easy.” https://youtu.be/l1si5ZWLgy0
Let’s start with some history: it’s January 2009, our entire economy is melting down by the bad behavior of certain leaders in the financial sector, the housing market is in collapse and mistrust of centralized institutions is rising higher than ever, leading to widespread protests.
An anonymously written white paper is quietly released that outlines a plan to prevent such a thing from ever happening again; the blueprint for Bitcoin. This white paper set in motion what the “Occupy Wall Street” movement tried to do in vain — create a secure, open and democratic way to engage with money without relying on centralized, corruptible institutions.
What I know from my experience growing up in Washington, D.C. is this: very often the less the federal government can control, the better for many of us because people in power there are not always in touch with very the realities that the rest of us face, nor are their true interests and influencers aligned with ours as everyday individuals. Lobbyists and other powerful entities that write checks to fund campaigns exert such influence over lawmakers that, it seems to me 9 times out of 10, whatever law is offered as a potential solution to a societal problem has the opposite effect within 5 years.
Some examples of this phenomenon include the War on Drugs in the 70’s, which contributed mightily to our country’s drug problem, and the Crime Bill of the 90’s which led to recurring mass imprisonment of low level law breakers – an expensive proposition for us and our country. It’s also worth noting that whenever the government gains more control, it doesn’t seem to give it back. The federal government should focus on making sure we are able to grow and prosper, and I believe revitalized towns and cities – more localization, is the hope for the future.
Bitcoin is localized to the extreme; it is extremely difficult for governments and traditional banks to control. It is an alternative to fiat money because it has been the currency of traditional central banks worldwide.
Bitcoin takes money out of central decision-makers and puts it in the hands of a collaborative network. Like the internet, Bitcoin, other cryptocurrencies, and the blockchain technology upon which they’re built are decentralized. Bitcoin is “the concept of decentralization applied to the human communication of value.” https://youtu.be/l1si5ZWLgy0
This decentralization is revolutionary. I am not kidding! Compare it to the demise of monarchies and the rise of democracies in the 20th century. When the bankers played fast & loose with their mortgage practices they were in effect saying to us, “Let them eat cake,” as Marie Antoinette said at the start of the French Revolution. We didn’t get the speedy satisfaction of sending our bankers to the guillotine (or even to jail), but thanks to Bitcoin, we will get ours eventually.
But revolution takes time. The owners of the first automobiles couldn’t drive across the country or even across town at first, they had to wait for roads to be built and fuel stations for gasoline. We are in a similar place now with Bitcoin, but because of the internet, we are experiencing an “exponential explosion of innovation,” so don’t hold your breath. https://youtu.be/T2zH-T_hmLs
Antonopoulos believes the next generation will never have a driver’s license (due to the rise of self-driving cars) or a bank account — they will have an app that will not only allow them to do their banking wherever and whenever they like, but it will also give them the power to become their own international banker. https://youtu.be/T2zH-T_hmLs Can you imagine how that might feel, to have total control over your own money without paying any middleman to “hold” it for you?
It’s possible that a kid born today could create a cryptocurrency that will immediately be “global, unforgeable and scalable,” says Antonopoulos. With cryptocurrency, money is no longer the exclusive purview of the elite, which might explain why there is so much resistance to it. https://youtu.be/T2zH-T_hmLs
Some naysayers claim that Bitcoin is a criminals’ playground, but more crime has been committed with dollars than cryptocurrency since Bitcoin launched 12 years ago. In fact, the infamous Silk Road criminals were caught because they used cryptocurrency — the open, permanent, uneditable digital record gave authorities the information they needed to solve the case and recover $1 Billion in assets.
For other naysayers, Bitcoin’s relatively high energy usage “is easy to criticize because it is obvious, whereas the hidden externalities of the traditional financial system are massive,” https://youtu.be/2T0OUIW89II, and a report by Galaxy Digital in May 2021 found that our centralized “banking system consumes more than twice the amount of energy that Bitcoin does.” https://www.nasdaq.com/articles/research%3A-bitcoin-consumes-less-than-half-the-energy-of-the-banking-or-gold-industries
The environmentally conscious may also be interested to know that the amount of energy needed for mining Bitcoin is cut in half every four years, Bitcoin’s energy demand is dropping as time passes, Bitcoin allows for the use of energy that would otherwise be lost and bitcoin miners are capturing excess energy that’s being generated by natural, sustainable systems like wind farms, solar panels and natural gas plants. https://blog.trezor.io/why-bitcoins-energy-use-won-t-destroy-the-planet-b10cd8b0a1fd
The reason Bitcoin is such a big deal is that it’s the first successful implementation of a distributed cryptocurrency based on cryptographic proof that is encrypted. So long as digital assets are held by users properly, it’s secure because of its unique cryptographic design, which is transparent and subject to cross-checking by a large number of computers from all over the world.
You may be wondering, how is Bitcoin affecting you already? On June 9th, El Salvador became the first nation to adopt bitcoin as its legal currency, since “Approximately 70% of El Salvador does not have access to traditional financial services, according to the Bitcoin Law…cryptocurrency is seen as a way to increase financial inclusion.”
For an example closer to home, small business owners can take advantage of the fact that Bitcoin, unlike Visa and Mastercard, eliminates 3rd-party transaction fees and doesn’t allow for charge-backs. Wouldn’t it be nice to keep more of your money?
You may already be unknowingly engaging with a piece of this new technology: the blockchain. Blockchain forms the basis of Bitcoin and other cryptocurrencies and can automate and digitize the rules of an agreement, known as a “smart contract.” Your credit card rewards program is likely stored on a blockchain. Many companies use blockchain for better efficiency, accuracy and myriad other purposes.
A blockchain serves as a digital historical record. More specifically, an open blockchain is a special kind of database, a distributed ledger, whereby its data is collected, time-stamped, verified, and synchronized by multiple sources connected to its network at different locations. This diversity of collaboration gives it a high level of security and a sense of democracy.
The key aspect of this technology is its irreversible timeline of data — each block is essentially set in stone once enough participants on the network have verified it. When a hack is attempted, all participants on the network are notified, but the hacker only has access to a part of the key in the chain, so it’s extremely difficult to hack successfully.
Blockchain technology can be used to record all types of data. By far its most common use has been to record financial transactions, but it has applications for a wide range of industries. The latest development with blockchain is the Lightning Network, which allows for faster, less expensive execution of smaller payments, like buying coffee. The Lightning Network is a separate system that interfaces with a blockchain to boost its efficiency.
The concept that people can now have currency freedom from their government is both a revolutionary idea and a core change in humanity. On the flip side, and this may be frightening, for the first time in history, we have a currency that could be used by artificial intelligence if it ever becomes self-aware.
At the moment, engaging with cryptocurrency may be like driving a Prius through a forest, but now that governments like El Salvador’s are adopting cryptocurrency, it’s only a matter of time before the ripple effect reaches your neck of the woods.
I recommend that all professionals gain at least some working knowledge of Bitcoin, cryptocurrency, and blockchain because either your clients or people in your clients’ networks are already involved, and you’re going to wish you could keep up with the conversation.
I have been teaching an Introductory Course on Bitcoin, Cryptocurrencies, and Blockchain since May 2021. Learn more about our professional training on Bitcoin, Cryptocurrency and NFTs https://martinbrossmanspeaks.com/bitcoin-cryptocurrencies-blockchain-nft-for-professionals/