Crash Course on Cryptocurrency – Pt. 1

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This entry is part 1 of 2 in the Lighthouse's Crash Course on Cryptocurrency

With Bitcoin rising to over 70,000 USD recently, cryptocurrency is once again in the news. For many this technology seems pointless or too complicated to understand. I will endeavor to give you a quick crash course in cryptocurrency. Some basic facts about it, and a few places for you to start to acquire some should you desire to do that. I think cryptocurrency is important because it is a decentralized medium of exchange.

Decentralization is very powerful and can shape the way entire industries operate. An example of this is what internet “piracy” did for the music industry. If you were around in the early 2000’s you probably remember LimeWire. LimeWire is a peer-to-peer file sharing program that enables users to host files and share them between each other using the internet in a decentralized manner. Anyone on any computer can select a file to host and then using links other users can then download a copy of this file. This revolutionized the way people acquired media that they normally would have otherwise had to pay for. At first the music industry groaned and worked with various news agencies, law enforcement, and etc. to try to stop internet “piracy”. Surely you remember the ads that said “You wouldn’t steal a car would you? Downloading movies is stealing.”

The government’s of various countries would also work together to find websites that hosted lists of magnet links (links that you enter into a program that allows you to download a file hosted on another person’s computer). Government agencies raided the location of these servers and arrested people in connection with websites such as Pirate Bay. However due to the nature of programs that enable peer-to-peer file sharing and software like VPN‘s being used to hide a person’s internet traffic from Internet Service Providers, it became increasingly difficult to catch people who downloaded music illegally. Also it turned into a never ending game of whack-a-mole, when one website or user was taken down many more were ready to take it’s place.

As this progressed for over a decade media companies had to find a different way to incentivize users to actually pay for their content. They had to evolve and adapt to function within an entirely new situation that the internet had put them in. Their solution to this was streaming services that we all know of and probably use to some degree today. Think of Spotify for music, or Netflix for films/tv shows. Now companies not only offer the product itself, but a huge part of their business model is offering convenience. To this day tech literate people still can easily acquire most media for free, especially media that is very popular and/or highly rated. However since it takes time to find the file, download the file, and to make sure it is safe. Even many tech literate people would rather just pay the 10 dollars a month to have access to the ability to stream all of the media they desire instantly. This is an example of how decentralization powered by technology can completely revolutionize entire industries on a global scale.

Now let’s discuss cryptocurrency as a decentralized medium of exchange. A medium of exchange is a portable instrument that is used as an intermediary to facilitate the sale and purchase of goods between parties aka “Money”. Money is best explained in this way, bear with me here. Peter has some eggs and Paul has some milk. Peter would like some milk but Paul does not need eggs. So what Peter needs to do is exchange his eggs to someone else who does want them, for money. Then using this money he can acquire the milk that Paul has, because Paul can then use that money to purchase something else he wants. Without money the exchange between Paul would have taken more time, been more difficult, and perhaps even impossible. Peter would have had to have found someone else who wants eggs that has an item that Paul wants, for Peter to acquire the eggs. This is why money makes complex societies far more efficient and why some kind of money will always be needed.

What cryptocurrency does is use the internet to create a decentralized peer-to-peer medium of exchange. This money can exist on many different computers all around the world and transactions between users can be added to a network that is entirely separate from any government’s issuance or oversight. How this will change the way governments manage currencies remains to be fully seen. Many of the people in government are also older and less tech literate. To them some DOGE coins don’t seem to be anything more than a stupid internet gimmick using some kind of Japanese dog as their mascot. However if Paul and Peter both value DOGE as a medium of exchange for whatever reason, they can still acquire things from each other using this currency whether people like it or not.

Cryptocurrency as a technology will also continue to improve as existing cryptocurrencies add new features or entirely new cryptocurrencies are created that do something unique relative to the other cryptocurrencies. Due to the implications of cryptocurrency, governments have been using news agencies and other media agencies to demonize it in the eye of the public. The same way that they did with internet “piracy”. They say that this technology is used by criminals, racists, and anything else that they can possibly say to dissuade an NPC from looking into it.

My advice to people regarding cryptocurrency is to think more about the implications and possibility of the existence of a decentralized peer-to-peer method of exchange. In addition I advise people to get to know how it works, how to use it, and to get involved in various communities in the cryptocurrency space. Lots of people within the cryptocurrency community are happy to help a new person. I personally would not advise someone to invest a massive portion of their current net worth into a cryptocurrency for ethical reasons. If someone begins to understand cryptocurrency and decides to use it as an investment that is their prerogative. I am more interested in the technology, how it works, and it’s implications for actual use as a decentralized peer-to-peer method of exchange. I think the knowledge of how to use cryptocurrency will be a valuable skill for a variety of reasons in multiple different possible scenarios.

This concludes part 1 of this discussion. In part 2 I will dive deeper into how to use cryptocurrencies. I will provide links to various software and I will include screenshots where needed of buttons to push on.

Series NavigationCrash Course on Cryptocurrency – Pt. 2 >>

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