On my last article, I mentioned the epic bloodbath currently going on among cryptocurrency markets. No coin is currently safe. I don’t think there has been such an aggressive pull-back since 2013.
Looks familiar right?
People are complaining about the negativity and the recent fud, although some analysis shows the ties may be turning. Nevertheless, all these “problems” about regulation are irrelevant. I only care about the long term. Everyone (myself included) loves to show that graph of the hype mentality and especially the one of the internet bubble. Instead, look at the big picture:
The Nasdaq composite: 1995-2015
I know, if you have patience, there’s a certainly an interesting probability of succeeding. I will try to address some key pillars that give m the confidence to believe cryptocurrencies might suffer a different fate. But please be weary: despite my optimism, one thing remains certain, that is, if we do not learn from our past mistakes, we will not achieve a different outcome.
Two questions must be asked to understand why I see cryptocurrency, in general, a safer investment than traditional stock.
The Network of Information
The internet was one of the most key inventions of the past century, as you all know it. It brought people and businesses together and allowed for instant communication to be sent from anywhere in the world. It was an untamed beast.
It did evolve and today is a completely different thing. I think it’s a poorly understood ecosystem of corporations living off users. Uber, Facebook, Airbnb are “disruptive” companies. Because they solved a problem! They gave users back the power through total freedom of speech and total freedom of choice. Now, anyone can grab a car and get money from driving people around. Oh man, what about renting your room to strangers for money? You even get to meet new people. It felt freeing to be able to choose people over big hotel chains or taxi companies. Was that truly disruption?
The only thing those platforms did was being an intermediary between two parties who need to reach consensus. In Uber’s case, the consensus is agreeing on a price to travel a certain distance. Airbnb’s case is agreeing on a fee and conditions for a person to stay at another person’s house. Simple, right?
The most disruptive technologies around the internet, besides communication platforms, are the most essential that you do not see. Like the ability to send information without the need of a third party. You don’t need the post office to send a letter for you. What I mean is that the best part of the internet is the protocol. The possibility of converting most types of data into bytes, encoding that string and sending it across the network to another peer that will receive the package, decipher the message at his end and be able to unlock its content.
Does it sound familiar?
The Internet of Money
Cryptocurrencies are peer-to-peer digital money. You have a sending address who sends X coins to another address. Those coins are sent in a hash that is cyphered by a hashing algorithm. Nodes then compete to solve the hash and decipher the message. The node that solves the final piece of the puzzle gets the reward, all to itself, pirate style.
If cryptocurrencies are just nothing more than messages stored in a database, which is a ledger by the way, then they are protocols. Not all of them, sure, but the ones that are a currency (and not an asset). For example, if bitcoin is a protocol, then it’s simply a message, much like the internet protocol IPv6. A package of data sent across the network (blockchain) which nodes simply validate hence creating transactions and generating blocks. They secure the ledger which is immutable.
The whole point of this concept is the elimination intermediaries. People stop needing a third party institution to validate transactions and to store value, as all those features are part of the blockchain. The true power of distributed ledgers is the ability to achieve consensus between two parties where the third party is represented by nodes who secure the ledger. And anyone can setup a node and run the blockchain.
Most cryptocurrencies solve problems no internet company has ever dreamed of. And don’t forget, any new technology suffers from hypes.
There are other exciting things being developed in many different tech fields. But all of them, with no exception, depend on one thing: money. That is why happenings like the end of internet neutrality are a thing, you see, because money always speaks louder than reason. If you do not fight back against organizations being able to manipulate internet traffic, you’re doomed to a failed network.
Being the internet of money and due to the fact bitcoin won’t lose all its value as long as there is at least one node running.
Cryptocurrency will most likely be the technology with the most impact during the next few decades (I hope!). If you really think about how deep this change of mentality can go, consider this:
Why would you ever use a network that does not reward you for sharing your data?
Companies do not own it. You do.
–This article is not financial advisement. It represents my opinion and personal views only. Do not invest what you cannot afford to lose–
Last modified: March 4, 2021 5:04 PM