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Crypto 101 Chapter #3 - A Reason To Exist

Crypto 101 Chapter #3 - A Reason To Exist
George Samprovalakis 17 September 2018

The reason for the Cryptocurrencies Existence

  • Almost all of the cryptocurrencies are completely open source, decentralized and transparent. Which means that anybody can browse all the transactions that have ever been executed on the network and that anybody can review and check the blockchain data to verify the uniqueness and authenticity of each transaction.
  • A lot of people have been flirting with the idea that cryptocurrencies, especially Bitcoin, are on the path of replacing the national currencies such as the Euro, US Dollar, Japanese Yen, British Pound Sterling etc. And all this because blockchain based digital currencies have started to become very viable alternatives to FIAT money as we know it.
  • Some feel that Cryptocurrencies exist basically to address weaknesses in traditional currencies which are, as we all know, backed by governments and central banks. This exposes the traditional FIAT currencies vulnerable to manipulation and corruption, among a sum of other issues.
  • o Contrary to traditional currencies, there is no central control or governing body that backs cryptocurrencies and Bitcoin which means they are not subjected to somebody’s (or any central organization’s) whims.

BTC runs on complex mathematical algorithms to control and regulate the creation of new digital coins and to secure that will never occur a double spending event on the network (as a reminder, double spending was the Achilles’ heel of all the failed digital currencies before BTC).

The code of Bitcoin is so advanced and secure that it’s impossible to hack the system. So, if anyone thinks that can create any number of bitcoins at will, is doing a great mistake.

It has been shown that one of the weaknesses of traditional currencies is that they aren’t limited in number. Therefore, central banks and governments can print excessive when they see fit.

When more bank notes are printed and enter the national cashflow and economy, it reduces the purchasing power of FIAT money which means one needs to spend more for the same item that could buy cheaper some days before. This phenomenon is called inflation and it can affect any economy.

On the other hand, Bitcoin is a different story by default. It’s Protocol states that only 21 million BTC can ever be created, mined and exist which means that BTC is actually a scarce resource.

Of course, as any national currency, BTCs are divisible. The tiniest BTC unit is a Satoshi, and it is 1:100,000,000 of a BTC. So, like any traditional currency, you can invest a few thousand Satoshis from time to time until you get a whole BTC at the end.

As you understand, if you follow this strategy, it will take some time to get you to your first whole BTC but if the price continues to climb in the long run, then acquiring some Satoshis regularly will pay off in the future.

It is also important to note that one more reason why cryptocurrencies more popular day by day is that a crypto portfolio is highly portable. You can literally bring it with you anywhere you go. Yes, you can do almost the same with gold and printed money but a large amount of cash or gold will lead to a heavy load on your wallet or bag and a truckload of paperwork to declare it. And there will always be the threat to be stolen.

Just imagine of carrying a bag of gold or getting a million (or some) of your currency in a briefcase! It’s certainly not as easy or as light or as safe as it looks in movies.

Cryptocurrencies give you a lot of different wallet choices. And all of them are highly secure, safe and portable, so you can easily pay wherever and whenever you like.

Cryptocurrencies are not subject to government and bank regulations. So you don’t have to pay bank fees which you are obliged in order to send payments to a third party.

Finally, there is no need to wait long hours or even a few days for your transaction to clear or post as cryptocurrency payments are executed almost instantly (usually in 5-50 minutes).

Read the next chapter:  How Cryptocurrencies -and bitcoin- work

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George Samprovalakis

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