Average Ram’s Guide to Crypto
Crypto, this probably isn’t the first time you’ve heard the term. Perhaps you’re even overwhelmed by the number of times you’ve come across the damn word. A technology now worth billions, a virtual currency owned by no one but everyone. Brought into the world by someone who doesn’t exist physically in our perceptions. As these statements are swarming over your digital screens an obvious question arises; “What the F*** is even crypto”.
Cryptocurrencies started off with the advent of Bitcoin. The year was 2009. A person (or group) by the name of Satoshi Nakamoto put out the digital currency on the web. It was “the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen”-bitcoin.org. The purpose of it was to create “a new electronic cash system” that was “completely decentralized with no server or central authority.” In simple terms,
With crypto all transactions are direct unlike traditional transactions where you have to go through a middleman; the bank.
The technology that underpins Bitcoin, like all cryptos, is Blockchain.
Blockchain, in the case of crypto, is a spread-out network of ledgers. Every time there is a transaction or change of data in the system, it is circulated throughout the network of crypto users. In a nutshell, it’s transparent and has no central authority. But why was the need for such a technology felt?
Long ago, there existed a system of barter where parties would exchange goods that they needed in return for something they were willing to give, of equal value. However, the problem with this system was that it relied on a mutual consensus of want for the other person’s product and it’s valuation.
In an attempt to solve this problem humans, over the years, created many mediums of exchange such as shells and coins. Thousands of years later came paper money backed by gold meaning each unit of money would be equivalent to a certain amount of gold. This system would be known as the gold standard.
However, in 1971 people saw the US and several other countries declaring their disassociation with the gold standard. Now the value of the paper money relied on a fiction that we all ought to believe; that it had value. This money, which wasn’t backed by gold, would be known as fiat money. Consequently, the fiat money brought its counteragents with it who expressed their distrust with the new system. Their argument was that a centralized authority and the obvious freedom could and have resulted in instances of economic inadequacies as it became easier for financial authorities to comfortably print money. And the 2007-08 global financial crisis surely didn’t help falsify the argument. It was under the shadow of this financial crisis that bitcoin first emerged.
In a nutshell, it was the distrust in the central financial authority and non-commodity-backed money that resulted in the birth of crypto.
Today there are more than 4000 cryptos in existence, the total market value of all cryptocurrencies now stands at $2.48 trillion. Its valuation follows the general demand and supply rule of economics. The sheer growth of crypto has been subjected to much debate with countries like Australia, Japan, and Switzerland trying to embrace the technology whereas Indian and even the American legislature are sort of in the middle ground in this whole debate. In Nepal, Nepal Rastra Bank has officially declared Bitcoin and other cryptocurrencies as illegal forms of financial tender with a history of legal prosecution of two individuals involved in crypto mining.
