Technology Focus: Cryptocurrency
Bitcoin, the name evokes thoughts of something having to do with currency or an investment, but it is hard to pin down, it seems to be in the realm of those well versed in high tech. As the price of cybercurrencies fluctuate they make the news, usually talking about an isolated case where someone either suddenly lost or gained a huge amount of personal wealth. So, let’s take a minute and establish just what Cryptocurrency is, and isn’t.
There was once a time where countries wealth was tied to the amount of physical gold they had, and coins used to be made of that gold in fact. Eventually the world evolved, and we had paper notes which represented the gold without changing hands. The paper money was directly linked to the gold and silver wealth of a country, in the US just a hundred years ago you could actually exchange your bills for an equal amount of gold in certain situations. Eventually the gold and silver “notes” stopped being honored. Then the physical currency had no value other than the value that it is assigned and supported by those using it. In a strange way our current currency only has value today because we believe it does, there is in fact nothing directly tied to supporting it. This is known as a fiat currency, that is a currency which is not backed up by any commodity. Therefore, if you believe it has value, and your society does then it does in fact have value.
Cryptocurrency is itself a Fiat currency, but it’s not supported by a government it’s supported by those using it. In that aspect it is no less “real” a currency than most major currencies in the world. The first Cryptocurrency was Bitcoin, and that is still by far the big dog in the pack. As of today, Bitcoin has capitalization of over 600 Billion (US Dollars). The roots of Bitcoin, which for years was the only Cryptocurrency, started in 2008 when a white paper was published by an enigmatic figure in Cryptocurrency named Satoshi Nakamoto. Nakamoto may be an individual using a pseudonym or a group of people, we don’t know. The Nakamoto paper however articulated a method to decentralize control of Bitcoin by using an anonymous based process with strongly enforced record keeping.
Cryptocurrencies are decentralized– They differ from other Fiat currency by not having a physical manifestation. But that also means banks and governments cannot control it.
They are anonymous– You can prove you are an entity (person, company, government) with value in cryptocurrency but there is no way to track it back to an individual.
Encryption– this is where the “crypto” part of the name comes from, by using cryptography it is nearly impossible to crack unless someone is careless and does not secure their private key (a long unique series of characters).
Transactional based- Every transaction for Crypto currency is recorded in effectively a ledger, but a digital one, and effectively copied time and time again and any future transaction must check against all those blocks of data (I’m simplifying quite a bit here), but that’s were “block chain” comes from. If you try to inject bogus data all the other blocks of data out there would, when compared to, identify it as false.
Where do they come from? In Cryptocurrency the ‘cryptocoins’ exist in a finite amount, they can only be found by performing exceeding intensive processing which adds more cryptocoins to the amount which can exist. This is called cryptocurrency mining and is similar to precious commodity mining in the sense there is a finite amount of these digital currencies which can be uniquely identified, and it takes quite a bit of work to do it. Many people started working their home computer’s running these calculations and they realized they needed more and more computing power. So eventually people began to use graphic cards to do this, as they are just math processors used to calculate the geometry of which is shown on the screen very fast. If you remember Graphic Processor Units (GPUs) suddenly becoming exceedingly expensive several years ago- that is why. They are excellent at doing calculations extremely fast, but gamers couldn’t play the games they wanted to as all the high end graphics cards were running calculations. There are cloud companies out there who do nothing other than supply processing power to cryptocurrency miners. The reason people mine is they get paid a bounty on new cryptocurrency they find, the more computers running more equations equals a higher pay out. Then as the market fluctuates, they make and loose money without having had to actually buy crypto currency, of course they would have spent quite a huge amount in computing power but that is a tangible asset you can re-task eventually.
So now we have lots and lots of Crypto currencies, as of today a single bitcoin is about $33,600 but there is a great deal of volatility in crypto currencies. While they are being accepted in more and more places, many individuals simply invest in them like a commodity. The volatility can be breathtaking.
In 2017 there was a huge boom in Bitcoin specially reaching a then unprecedented high of nearly $20,000, only to lose nearly 50% in the next few days. Due to a variety of issues the crash continued all the way down to $6000 a Bitcoin in February. But in 2020 and into 2021 we have seen an all-time high of $40000 per Bitcoin a month ago and y backed off from hat high about 20% but as I write this it seems to be leveling at the $33K US level.
I think of cryptocurrency very much akin to precious metals in many ways, they are commodities, and their value will increase or drop dramatically over time. It’s an investment, but you can use cryptocurrency to purchase goods and services in more and more ways daily. I do think it is here to stay.
If you want to try to get into cyber currency in a “safe” way I would recommend using “Coinbase” which is a digital currency exchange, which means you can buy one or many different cryptocurrencies. If you join you will get $10 worth of free currency deposited in your account, you can then grow it or cancel and just take the $10 (or that much in your local currency) by clicking here: https://www.coinbase.com/join/richar_h9v
Please know that it’ll take up to 24 hours for them to actually deposit the money, I tested this myself and it did take a day for it to show up. In these trying times who am I to say “no” to free money, it’s a coffee or so and I never turn down an opportunity for a coffee! It’s not going to make you rich, but as it costs you nothing you can get the feel for it and if you wish, invest in it just like gold or platinum.
Good luck!
Eric C Richardson 