An Introduction to Crypto-Currencies

Throughout the ages, humans as a species have gone through multiple evolutionary periods of defining how to exchange value. In the beginning having no money, we decided to barter, exchanging our excess for the surplus of another. This period of bartering showed that commodities such as cattle, salt and certain fabrics were in higher demand than others, creating the first money. Later on man discovered metals, making them become the Standardized form of money due to its utility, beauty and ease of transportation. This development of defining value continued all the way up to present day. Today we have digital currency, a series of ones and zeros stored in a computer, that is linked to our deposits of government issued currency. Due to the ease of using debit/credit cards we are able to transfer value to many desired merchants. So if we already have a system that works, why change it?

Despite the conveniences that we have with government based monetary systems, there are still flaws. When you start to uncover the layers of the Federal Reserve and how modern banking works, you'll be shocked. G. Edward Griffin, an American author, wrote the book "The Creature from Jeykll Island" which uncovers the largest bank robbery known to mankind, causing some of the most tragic times in history. After a series of repeated boom-bust cycles it wasn't until the financial crisis of 2007-2008 that humanity was able to see the next evolutionary step in money.

Then Came Bitcoin.

In the field of computer science a whitepaper was published in a cryptography mailing list titled Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin is the first crypto-currency to be created. It is a digital asset, a network (similar to Visa) and a software application that allows payments to be made around the globe at any time with no third party interference. Under the alias of Satoshi Nakamoto, it was intended to be a secure alternative to the current monetary system. It has a market cap of 21 million and is generated or "mined" through a series of complex mathematical formulas with hardware specific computers*. The software is open source allowing anybody with the technical ability to review the code, as well as reuse it's unique design to invent other tools.

'The Times 03/Jan/2009 Chancellor on brink of second bailout for banks'
- Written on the Genesis block by Satoshi Nakamoto

How Does It Have Value?

Looking into Bitcoin from the standpoint of an outsider, it can be difficult to comprehend how something that isn't physical can be valued so high. Below I will break down how I believe this asset is valued.

Liberty - With our current system we have the choice to pay for goods and services, ONLY if it is allowed. Around the world, some oppressive governments ban simple products such as books from being able to be purchased by their citizens. With the use of Bitcoin that is not an issue. As long as you have the funds, you can easily send the value directly to the merchant.

Technology - Bitcoin is the first system where we have a mathematically secure public ledger that does not show by name who owns what and where you live. With a click of a mouse or tap of a finger, you can immediately start accepting payments for your products or services. Allowing all of the unbanked to be able to participate in the global market.

Faith - As I mentioned above when something has a demand, even if it is data, the value will increase. The fact that it has a solid following, where people are actively creating tools or enhancements will further the value thus creating a stronger belief in the asset.

Applications of the Future

Since it's inception many similar projects have been coming out of the woodwork. According to coinmarketcap.com, a website that shows crypto-currency market capitalizations, there are currently 811 Currencies, 162 Assets and 4506 Markets. Not bad for 8 years right? Later on we will be talking about a few of these alternative currencies (alt. coins) and how to use them. From what is already available and put to use, I would say Steem is very promising. In brief, it's a social blockchain that allows users to earn rewards for the content they create. It's most popular application is called steemit.com, which might be where you are reading this. Intrestingly enough it doesn't end there, many applications and businesses can access this public blockchain as well, not just this website. This idea applies to many of the other existing blockchains. Making those sci-fi novels even more of a physical reality everyday.

In this piece my focus was to shed light on the existing system we currently have and how crypto-currencies prove to be the next step in defining value. As we continue through the understanding the basics of crypto-currency and what I consider to be the more exciting part "How To Use It", feel free to make suggestions so I can make a more worth while experience for others that join at a later time. In the following post I will be defining some of the new terminology that I mentioned here making it easier for you to comprehend this new world.

*In the past, if someone had a laptop they would have had the ability to mine and would have received a fair return. Since Bitcoin has become increasingly popular over the years, many early adopters setup warehouses of mining equipment to outperform the basic hardware qualifications.