# ¿Why crypto? By [Cryp_tino](https://paragraph.com/@cryptino) · 2022-06-02 --- ### I think that is the most relevant question that, as an active part of this ecosystem, first we must ask ourselves and then, when we have a reasonable response, share it with the world. ### I have already done this exercise, so it is my turn to share why I continue to believe that Web3 is the future and is set to revolutionise trust as we know it. ### What a topic to get this profile started, no? Well, that's because I'm always looking for the next challenge. The situation in that we have the "strange" privilege of witnessing has no precedents. We saw an entire crypto-ecosystem, the second one in terms of total value locked, completely disappear within days, not even a week. The now-defunct ecosystem, at its peak, was valued at 60 billons dollars. Therefore, if we decide to keep involved in the crypto ecosystem, we may face the following question "Why are you still there?" or "What do you see that is so valuable that makes you stay there and keep building?". I could fill pages and pages about my arguments because I believe this technology can change the world as we know it, but today I will centre my thesis on just one concept, "crypto-economics". Introduction to crypto-economics -------------------------------- One of the most valuable learnings I took from the fallen of the Terra Ecosystem was that if you have a weak spot, it is just a matter of time until that flawless gets exploited. We cannot forget that crypto is not just about programming, we are creating a new financial ecosystem through blockchain and DeFi, which means that we are programming money. So, every mistake or soft spot means that crypto-users ended up losing their own money. However, not every blockchain has the same benefits, risks and outcomes. We must be extremely clear about the fact that the weak spot that the first version of Terra had is not present on other blockchains like Bitcoin or Ethereum. They have their own risks, no one can deny that, but they have established a standard. After accepting the cruel fact that we lived in a wild world that would take advantage of every flawless that we left on our way to build a decentralized economy, there is one issue which must be addressed: > How did Bitcoin and Ethereum navigate this tempested ocean without being hit by a pirate ship? From my point of view, crypto-economics is the answer. Let us dive into this fancy concept. The purpose of a blockchain --------------------------- To begin to understand the importance of crypto-economics, we need to understand which are the main goals that we can achieve with blockchain technology: * Build a decentralized network * Eliminate trusted third parties * Guarantee data availability * Protect user's anonymity or pseudo-anonymity * Get rid of the single point of failure in terms of data storage Therefore, if we combine those isolated points, we have a decentralized ecosystem where there not be access restrictions by any personal characteristics, which means that everyone would have access to it. And where are people going to have access? To a distributed data storage where they would be able to check what has happened in the past and, thanks to smart contracts, interact with decentralized apps that would respond predictably. If the last paragraph was not clear enough, it means a new decentralized economic system. However, I said that we live in a wild and scary world, then how can we trust in a blockchain if there is no trusted third party taking care of the behaviour of the actors involved in it? Two components let us sleep by night, cryptography and proper economic incentives. The cryptography side --------------------- From my point of view, cryptography is a type of art mixed with maths that leads us to trust that every transaction that we could check in a blockchain explorer has taken place in the past, and, the most important fact, those transactions are valid. Through cryptography, each block in a blockchain is related to the previous one in a way that this connection cannot be modified. That is how we secured the past. Thanks to the fascinating cryptography of public and private addresses, we comprehend that to sign a transaction the user must have his private key. If we are cautious about our security and how we store our seed phrases and passwords, then our funds will be safe. Finally, hashes, a cryptographic function, play a fundamental role in block mining. To mine the next block, miners need to solve a complicated mathematical problem that involves the deployment of enormous energy and time resources. The goal of the problem is to discover a number that, when passed through a hash function, returns the same value that was randomly given to the block. Once the miner solves the problem, they can mine the next block and get their reward. And that leads us to the next section. The importance of economic incentives ------------------------------------- Thus far, everything has been about cryptography and how it helps us build a decentralized ecosystem. However, that fancy cryptography does not encourage the network's participants to behave in a non-malicious way. So, to achieve that is when proper economic incentives make their triumphant entrance. What would stop a participant to commit fraud or act dishonestly? As I said in the last section, miners would get their reward, if they include in a block just valid transactions. So, through economic incentives, miners would be prone to act honestly. Imagine if they included an invalid transaction, they would have spent enormous amounts of time and energy to get nothing in return. In the last paragraph, I just considered proof of work chains. If I take into account proof of stake blockchains and we replace miners with validators, the outcome of behaving dishonestly would be to lose part of their stake. When giga-brains discuss what could be the best way for a blockchain to reach consensus, they are not just deciding about environmental concerns, it is also part of the debate how to align behaviours through economic incentives. The final answer ---------------- I will continue to build on the crypto world because through crypto-economics, we can achieve decentralized ecosystems that provide us with decentralized economies without needing a trusted third party to ensure that actors of those systems behave honestly. If there is another solution that will lead us to achieve that, please let me know so I can dig deeper into it. Thanks for reading. **Cryp\_tino** --- *Originally published on [Cryp_tino](https://paragraph.com/@cryptino/why-crypto)*