“Cryptocurrency and spinach. How are they alike? You either love them or you hate them.”
- Peter Robinson
Crypto is a polarizing topic. Some people love it because they’ve made money, others are skeptical about what they don’t know, and a select few hate it knowing absolutely nothing about it. All are welcomed here. However, I’ve observed that much of the hate that crypto gets is unfair and is usually tainted with misinformation or misconceptions. This article is my attempt to present crypto objectively, address the problems it solves, and explain why it’s a revolution for our money.
The most important thing to know about crypto is that it enables the transfer of value between any two people on Earth, without permission, via the internet.
Let’s make this more tangible by playing a game. It’s called “A Dollar Around the World.” The objective of the game is to send 1 single dollar to as many places around the world in the least amount of time possible. You send it to a friend in another country, and then they send that dollar to another friend somewhere else. Pretty easy. So how would you start?
With today’s global financial system, whether you try to wire it, send it via Venmo, or cross it over borders, you’ll need a third party to handle the transaction. This will be the case every time the dollar moves from one person to another. And with each person the dollar reaches, we are required to trust a third party, pay a fee, and wait 3-5 business days for the transaction to settle. Before long, the dollar loses its value and the game is over.
Crypto fixes this. You can send any amount of money, big or small, anywhere in the world almost instantly, for fractions of a cent, all without needing anyone in the middle.
Cryptocurrency in its simplest form is a breakthrough in computer science – built on decades of research in cryptography. It’s a way for one person to transfer a unique piece of digital property to someone else via the internet such that the transfer is guaranteed to be safe and secure.
“Digital property” is relevant to readers with a bank account. Anyone reading this article who can log into their banking app and review their balances would agree that they own the money displayed in that app. You earned it. It’s not cash in your hand, but it is digitally available to you. Therefore, you might say, “We can already send and use our money anywhere with today’s financial services.” And you’d be correct, but there are limitations – try taking $10,000 in cash across the border or sending $601 to your friend in a different country. Those limitations will come to light very quickly.
So asking “what problems does crypto solve?” is like asking “what problems does steel solve over, say, wood?” You can build houses or tools out of either, but steel gave us taller buildings, stronger railways, and more ambitious public works during the Industrial Revolution. With crypto, we can create financial systems that are fairer, more durable, and more resilient than the systems of today. As Erik Voorhees famously stated in his ‘Permissionless’ speech: “Money is fundamental to our human existence. Because of this, we should care about its quality, its character, and who controls it.”
In the following sections, we’ll compare the qualities of traditional fiat to that of crypto. By the end of the article, readers will understand the significance of this technology.
One of my favorite mantras in the crypto industry is “Don’t trust, verify.” This is thanks to a technology that powers crypto known as blockchain. In simple terms, blockchains operate as a record keeper – they keep track of what’s happening on a network. This is important because you, and anyone else in the world with an internet connection, can verify that things (otherwise known as transactions) have indeed occurred.
In our current financial system, we have vested this responsibility of record-keeping and transaction execution to our banks, payment processors, merchants, and the numerous private companies that power the system we use today. Anytime we move money, we depend on these various organizations to be available, honest, and fair.
But what happens if a payment processing service suddenly goes down and isn’t available? How would you access or use your money? The entire Kingdom of The Netherlands was asking themselves these questions when equensWorldline, a payment processing company, suddenly stopped working. About 35% of transactions were affected over the course of 3 hours meaning that more than a third of the country was unable to use their money (Source).
Additionally, how do we measure whether these trusted parties are honest and fair? Using their services means agreeing to their terms of service (ToS). When was the last time you read the ToS all the way through? Probably never. We trust these organizations to not be evil, greedy, or corrupt, but there is no guarantee of such things. And what of those who cannot open a bank account? What should they do? It seems like as long as we qualify, get permission, and follow the rules, only then can we use our money. This is no way to live. And so, I offer you a proposition. Consider crypto.
Blockchain networks, and by extension, cryptocurrencies, turn “Don’t be evil” to “Can’t be evil.” They can make strong commitments about their future behavior. A popular expression in the industry is that “Code is law.” A blockchain guarantees that any code it runs will continue to operate as designed. There are no secrets. You are told upfront how the network works and what behaviors to expect. Users are free to enter and leave the network whenever they’d like. And unlike a corporate or a state network, there is no consolidation of power across entities, so there’s no need to trust or even know members of a blockchain network in order to interact with them. Thus, blockchains are a trustless network. 15 years ago, Bitcoin was a revolutionary invention because it created permissionless money. Then, a few years later, smart contracts on Ethereum were invented, and just like that, we were given all the tools we needed to revolutionize the global financial system.
Next, we’ll discuss some of the immediate benefits of leveraging crypto in domains like personal finance and commerce.
“Your margin is my opportunity.”
- Jeff Bezos
There are fees everywhere these days. You pay fees when you send money to your friends and family. You pay fees to deposit your money from Venmo into your bank. You pay fees when you take money out of an ATM. But it doesn’t stop there! Let’s imagine that you’re trying to send money from anywhere within the United States to, say, Australia. You would need to pay for exchange fees, wire fees, and you are likely waiting for 5-10 business days for the transaction to settle. Because our current financial system is facilitated by numerous entities, we’re forced to pay these facilitators a fee whenever we use money. Businesses and merchants are subjected to even more fees like:
Payment processors.
Keeping the business’s money in a bank.
It’s not uncommon for businesses to “pass the costs'' onto their customers (I’m looking at you, Ticketmaster). Adopting cryptocurrency relieves both parties of these additional costs. It circumvents the need for middleman services and their respective take rates since the business can now handle payments directly with their customers.
This introduces a few benefits like:
Reduced operational costs for the business
Real-time transaction validation for immediate customer assurance
Saving anywhere from 2-5% on their profits
Transparency between customers and businesses increases dramatically
But all of these benefits surely have a catch, right? You may have been told that some hacker can click a button and make 10 billion more bitcoins and tank the value of your money. That “they” are in control of your money… In the next section, we’ll take a look at who controls what, and then you can decide what sounds reasonable to you.
Let us review our current global financial system. The United States Dollar is the world’s global reserve currency and is largely sought after by citizens of other nations for its dominance over their own nation’s currency. This has served the United States well, but its citizens – as well as anyone who holds USD around the world – are subject to the decisions of the single entity that controls the dollar: The Federal Reserve. The Federal Reserve is responsible for controlling the supply of U.S. Dollars. One single entity. Full control of our currency. What could go wrong?
As the US Government’s debt continues to grow, those in power have cleverly realized that they can simply print more money to “pay back” what they owe. This increased supply greatly decreases the purchasing power of the dollars already in circulation, meaning that even if you were saving a million dollars in the bank, your money is guaranteed to lose value because of something you have no control or say in. This is known as inflation, and this sheer abuse of power has directly contributed to reckless government spending, rising debt, and other adverse economic impacts affecting US Citizens. We are literally paying for this.
The fall of great empires across all of human history can be attributed to a small group of people having control over the world reserve currency, losing their financial discipline, and thereby losing world reserve currency status. Yet again, we’ve found ourselves in a similar situation seen all throughout history. The difference is that now, we finally have a way to separate our money from the state which creates a fair, unfuckwithable money for everyone.
This is why crypto is a significant innovation. It is an escape from the unfair playing field we’ve been forced to play on. It breaks the cycle of mistakes humans have always made. It is a revolution. Crypto is freedom.
The most common attacks on crypto are:
It’s only for criminals who launder money and engage in illicit activity.
According to reports from 3 different sources, less than 1% of money that is used for illicit activities or laundering money is done so with crypto. 99.4% of all global corruption, money laundering, and illicit activity is facilitated with traditional fiat (Source). Blockchains keep track of transactions on the network. There’s nowhere to hide, especially not with ZachXBT around.
It’s a pump & dump ponzi scheme filled with anonymous people who control everything.
It’s true that malicious actors have carried out blatant scams, rug pulls, and ponzi schemes using crypto. It's usually orchestrated via smaller tokens (often called shitcoins) where those bad actors set tokenomics that work in their favor. This is usually discernible when reviewing token supply distribution, vesting schedules, and token incentives. I generally chalk this attack up to: “if it’s too good to be true, it probably is.” So yes, practice caution when a random stranger on the internet incessantly nags you to buy a shitcoin called $UPONLY. When you see that one wallet owns over 50% of the supply, it might be worth reconsidering whether that’s a token worth buying. The majors (BTC, ETH, SOL) do not have this problem.
The price is way too volatile.
There have been wild swings in price during the time of crypto. However, this is generally the cycle of technology. A new innovative technology reaches the masses (mobile computing, social media, IoT, gaming, AR/VR, crypto, AI, etc), it becomes the only thing people talk about for a few months, and then the attention dies down. 5 of the 6 largest price swings in stock market history are technology companies. (Source)
Given crypto’s close ties to technology cycles, it’s true that it has caused volatile prices. On a long enough timescale, prices will eventually stabilize. Although I personally don’t view crypto as an investment vehicle, Bitcoin specifically has been the best performing asset in the last 10 years (Source).
It can be hacked/It’s not safe to use/you’re not protected.
One of the most important properties about blockchain is that it is infeasible to manipulate the ledger. This is because every computer (or node) on the network has its own copy of the ledger (or the database of transactions). In order to “hack” the blockchain, an attacker would need to assert a malicious transaction across a supermajority of nodes. Those nodes would then need to accept the malicious transaction as valid, and do so all before the next block (which contains the correct list of valid transactions) settles.
In other words, it’s damn near impossible. Furthermore, the slight possibility that does exist is economically infeasible. It would cost the attacker a lot of money (likely more than they would gain from a successful attack) to attack a network.
However, you can still lose your funds sharing your passkey the same way you can lose your identity if you share your social security number with random people on the street. So, you know, be smart.
Cryptocurrencies aren’t backed by a government or central bank.
Yeah, that’s the point. The Dollar is backed by the United States government and it has provably less value today than it did 110 years ago (Source). The U.S. National Debt is an astonishing $34.68 Trillion dollars (and rising).
It’s bad for the environment.
Bitcoin consumes less than half of the energy required to run the banking or gold industry (Source). All cryptocurrencies combined is between .4%-.9% of annual global electricity usage (Source). So if you really care about the environment, it’s time to become your own bank.
The state of crypto has improved substantially over the past few years and the amount of innovation happening in the industry from crypto-native builders & existing mega-corporations is proof of the adoption of cryptocurrency.
A big example of this adoption is with stablecoins. Fiat-backed stablecoins are tokens issued on blockchain networks that are designed to maintain a stable value and have fiat reserves that are held off chain. Visa, in collaboration with Allium Labs, have produced an onchain analytics dashboard to show how fiat-backed stablecoins move via public blockchains globally. Some key metrics in the last 30 days (as of the time of this writing):
$3.5 TRILLION in Transaction Volume
347.1 Million transactions
Average supply of 146.9 Billion stablecoins in circulation
31.1 Million monthly active users
All of this movement is happening without a single middleman involved. Simple peer-to-peer transactions. Visa is showcasing irrefutable proof of the adoption of stablecoins globally. Stablecoin adoption is generally driven by the need for a stable store of value, efficient cross-border transactions, and hedging against local currency volatility. Learn more here: https://visaonchainanalytics.com/
Another example involves the investment behemoth, BlackRock. They unveiled their first tokenized fund issued on the Ethereum blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). BUIDL provides qualified investors with the opportunity to earn US dollar yields by subscribing to the Fund. While this requires individuals to comply with KYC (Know Your Customer) regulations, the fund, alongside other digital asset investment products from investment firms like Fidelity and Grayscale, are being offered to institutional investors (think of people with retirement funds, pensions, 401k’s and IRAs).
The last example is with Shopify integrating Coinbase Commerce, which enables businesses to accept payments in crypto. Shopify stores immediately increase their profits by 2-5%, improve the transparency of their business with their clients, and can accept payments in any crypto that the client wishes. This is because Coinbase Commerce instantly converts the client’s chosen crypto to USDC (United States Dollar Coin), mitigating the concern of market volatility. Payments are settled near-instantly, meaning the business receives their funds immediately rather than having to endure a wait period.
The best way to “learn” crypto is to get directly involved. Below are 3 apps you can download to join the network:
Coinbase Exchange, an application to swap between USD to almost any cryptocurrency you can think of.
Coinbase Wallet, an application that works as a self-custodial account. This means that you and you alone are in control of your wallet and the assets within it. There’s a famous saying in crypto: “Not your keys, not your crypto.” Essentially, after exchanging your assets on Coinbase Exchange, the next step would be to move your assets off the exchange and into your own wallet.
Farcaster / Warpcast, a social network on blockchain, but you would have never guessed it. You can write posts, engage in topic-specific discussions, collect art, swap tokens, shop for products, play games, and well, literally anything you can imagine. Anyone can build atop of it without permission. It’s a great place to use your crypto.
If you’ve read this all the way to the end and have managed to create a wallet address, DM me a screenshot (@quez.eth on Farcaster, X, or Instagram) and I will personally pay you $5 in $BORED token. And of course, if you have any questions or comments, please don’t hesitate to ask! Take care of yourselves out there. Stay curious.
- Quez
