—This article is part of a three-part series diving into the world of Cryptocurrency—
Blockchain. Cryptocurrency. NFTs. What do the three of these have in common? Yes, that is right! They are things your distant uncle tried to passionately explain over a holiday dinner. They are buzzwords. Honestly, it can also be true that they may even make your eyes glaze over with how plastered around the internet they are. If you are anything like me about six months ago, these words might as well have been absolute nonsense. I took an interest and did a deep dive into the seemingly endless rabbit hole so you do not have to. But Luke, why should I be interested in this article anyway? While the technological concepts and their application may be difficult at times to grasp, there is one big reason why I think you should care about the movement. And that is because cryptocurrency is going to change the world. More on that later.
Over the course of three articles, my goal is to show you the basics of this evolving digital space. Today, we will look at the core concepts and see where they came from. The first building block in our understanding of this area has to be blockchain. At its simplest, blockchain is a means of safely, simply, and securely storing information. To conceptualize it, think about a massive, interconnected number of Excel documents. Each Excel document (block) links to the previous one, allowing for access by chronological order. The technology has many potential uses, but it has largely been seen as a ledger for transactions. Here, we intersect with cryptocurrency for the first time as Bitcoin uses blockchain in a decentralized way. Similarly, nearly all non-fungible token (NFT) projects run on blockchain in order to swiftly store owner data. Decentralization is a key concept in the digital space with the end goal of moving away from the centralization of the banking system and capital holders in the traditional markets. At its essence, decentralization seizes the power from the wealthy few and distributes it amongst the many. It is very much a reapplication of the bourgeoisie versus proletariat theory; just without Karl Marx in the picture. Decentralization stops a single group from controlling the blockchain; indeed, all users can collectively retain control. At a baseline, that is what blockchain involves.
So then, where did cryptocurrency come from? What does it hope to achieve and how will it do it? Who are the key players? Hey, hey, hey, slow down tiger. We will get there. A cryptocurrency, and there are A LOT of them, is a digital currency that is secured by the concept of cryptography and generally runs on blockchain technology. Cryptocurrencies emerged as a response to growing distrust in government and major banks. The structure of nearly all cryptocurrencies allows them to live outside of the confines of government intervention, acting as an extremely intriguing option for payments around the world moving forward. We can look back about twelve years when Bitcoin emerged and transactions were first verified on the blockchain. In 2010, Bitcoin received its first valuation. Indeed, one owner sold ten thousand Bitcoin for two pizzas. In today’s value of Bitcoin, that’s just shy of $265 million per pizza. Ouch.
Back then, Bitcoin was readily available with very few opportunities to spend it or utilize it in any way. Current skeptics still point to the belief that Bitcoin is largely used for illegal transactions involving drugs and other illicit activities. This was certainly true back in the day when Bitcoin was largely moved around on the “dark web” to purchase services and goods that were not readily available at your nearest Walmart. In 2011, Bitcoin started to see some competition from other large projects like Litecoin and Namecoin. Litecoin still sits in the top twenty-five cryptocurrencies by market capitalization while Namecoin has fallen to the wayside. Eleven years later, it should not shock you to hear that there has been a lot on the go with cryptocurrency. Scams, theft, crashes, huge bull runs, and new serious competitors entering the fray. The space has seen it all and I think the safest prediction for the future is that we will continue to see these highs and lows. In a way, you could say cryptocurrency models the human experience. We all share high highs and low lows. With the fact that cryptocurrency is said to be for the people and by the people, perhaps this comparison is not far off.
The last thing we will cover today is the meteoric rise of NFTs into the public space. I am sure you have seen your favourite influencer promoting one NFT or another. So what even are they? NFTs have seemingly taken the world by storm. Without getting too technical, a simple way of thinking about these is it being a new way of collecting sports trading cards or art. Each NFT is given a unique serial number or identification number. In this way, you get your own item that is unique from all others (even if the content is the same). I am most familiar with the sports sphere so that is what I will stick with. As of now in the North American market, the MLB, NFL, and NBA have their own affiliation with the NFT realm. Prospective collectors can pay to receive a pack that contains highlights, player cards, and more. Some of these can be rarer than others, prompting collectors to sell the NFT on the marketplace to generate a profit. Art is another major usage of the NFT space with artists having more scope to showcase their creations to the world. Transactions largely run on blockchain and can be purchased through traditional currency or a wide variety of cryptocurrencies. Some have likened NFTs to a new-age Beanie Baby fad, questioning who would ever want to buy any of these. Only time will tell if these are a legitimate investment or yet another way for the average Joe to lose money.
And that is a wrap on a brief introduction! This has been part one of my dive into the digital space and why we should all care. In part two, we will further discuss public sentiment, acceptance, and criticisms. If you are as interested in this stuff as me, please feel free to reach out as I am always open to chat. Do not worry, I will try not to shill you on my coins.