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Crypto Basics

This FAQ is the result of a Facebook conversation with Aloysius Louis Aloys Njuguna, who kindly gave his permission to publish it here.

So making a few billionaires is part of crypto’s grand plan to change the world?

Vision and reality are different things. And there is no grand plan because there’s no centralisation or movement or company or organisation or whatever. Bitcoin is one person’s (or group’s) attempt to change things (or rather to present a solution for online trust issues, as applied to currency), usurped by everyone who’s involved. Satoshi Nakamoto hasn’t even said anything for several years and the 20 million (or whatever) BTC in his/her/their wallet hasn’t moved.

It was going nicely until the marketers got involved and turned it into The Next Big Thing. And everyone jumped on the bandwagon because money is more important to them than making a better world.

Frankly, humanity isn’t ready for big visions. We’re still arguing about nationalities, borders, race, gender and other stupid crap that makes no sense. Bitcoin is flawed and is a long way from the original vision because humans are stupid, greedy, selfish and short-sighted. But it’s a step in the right direction.

I remember you hyping crypto when Bitcoin was at the height of its powers and breaking crazy records. Now that that’s gone, doesn’t that undermine it’s credibility?

Bitcoin is irrelevant in the end: blockchain is the big deal. I’d love BTC to do what it’s supposed to do. I’d love to see it break down barriers and pave the way for a global currency that’s accessible, fast and cheap. I’m still hoping one of the newer (better) cryptos takes off and does what BTC wanted to do, but is too broken to achieve.

Regardless, blockchain is here to stay and promises some great things – that’s the big deal, not Bitcoin itself. There are some amazing things happening right now that could change the world for the better (and plenty that are just attempts at making lots of cash).

And like anyone else, I’m sometimes short-sighted and happy to take the money when something goes nuts. That’s why I’ll never change the world: I’m not a visionary. I’m sometimes easy to distract. I’m human, too. 🙂

So maybe a new better option riding on blockchain, minus the get-rich-quick scheming might do the trick?

That’s the idea. In a way BTC is crypto-gold. The replacement will be crypto-fiat (not literally, but you get it). Gold’s too expensive, but it paved the way for currency systems and we ended up with something quicker, easier… and lighter to carry. 😉

And the skyrocketing prices until some time back, what was that going to do for access to cryptos?

Bitcoin isn’t inaccessible even now. 1 cent (USD) is 140 satoshis. 100,000,000 satoshis to 1 BTC. A *whole* bitcoin, yeah… way too much. It’s just a bit crap with transaction fees and times (surprisingly, BCH is closer to the original vision, as such).

How different is Bitcoin Cash?

BCH is faster and cheaper but it’s nowhere near the fastest or cheapest.

It’s also down more than $700. How does one reconcile that kind of volatility for an asset that wants to become an alternative currency? Imagine seeing a 50% swing in the dollar valuation; that would cause markets to tumble.

The volatility problem is teething trouble. As you say, people see crypto as an asset, not currency. In part, it’s because they mix crypto assets and tokens with crypto currencies. They’re not the same thing. Plus this is all part of the crazy rush to get in on “crypto” (i.e. blockchain) while it’s hot and while people know nothing about it.

I was just thinking today how stupid it is: I did the faucets for 4-5 YEARS before Bitcoin went crazy, but now everyone seems to think they deserve a 10,000% increase in value in days. Completely demented, fuelled by the marketing BS, shitty reporting (seriously, crypto reporting is appalling, even by Fox News standards) and a bunch of scammers advertising nonsensical crap.

Give it a year or two to settle down and for one coin to come out ahead with almost-instant confirmations (cf. credit cards), a stable price and a solid decentralised network. THEN we’ll see how the vision pans out. That’ll be great to watch.

Though it may not be that long: there are already “stablecoins” that aim for much lower volatility and tech tends to move faster than anyone can imagine.

People hate the decision by the banks to no longer support credit transactions for crypto purchases but anyone would probably do the same. You give someone 100 dollars and a month later they can’t come up with 40.

I suspect they’re happy to buy plenty for themselves… but this makes sense. No one should ever invest on credit, especially in volatile assets.

What about security concerns. How are you going to get people to trust in something that was previously thought to be impregnable but has seen several high profile attacks?

No blockchain has been compromised. Bitcoin’s been around the longest: nine years without fail. That’s how it works.

You’re thinking of exchanges. Those are central points in a decentralised network – attack points. That’s one of the reasons for a truly decentralised network: there are NO attack points.

This is one of the reasons I dislike the move towards “master nodes” in many new currencies. Yes, you get faster transactions from the structure but you also create centralisation and, therefore, vulnerability.

How about that as another concern – the long clearing times? But then imagine if the transactions were real time previously… where would the prices have headed?

Long BTC transaction times are because of block size, which limits the system to a certain number of transactions per second. Transfers in other currencies are quick: even something daft like Stronghands can move 10,000,000 coins in a few minutes (seriously: I bought that much for a laugh and it arrived before I could launch the wallet and sync).

Also, can cryptos do without the miners?

Yes, there are better methods than BTC-style mining (Proof of Work). It’s a horrible method – favours big players, energy intensive, ASIC-dominated, etc. There are better algorithms and other approaches – Proof of Stake, for example, rewards people who have coins and leave their wallet open (thus extending the network), as does Proof of Importance

Got more questions? Ask them in the Cryptonoodles group!