Thirty million people have decided the banks don’t deserve their trust and are taking back control through cryptocurrency.
You want to get involved immediately? Great. Scroll until you see “Get Involved”.
Bitcoin is just one of many cryptocurrencies that have surfaced over the last few years. You may have heard of bitcoin because it’s the poster-child of cryptocurrencies. It was the pioneer of a new store of value. Bitcoin is analogous to gold in this way.
From shiny nuggets to beautiful code: A transition to a new store of wealth.
Gold (rather than aluminium or bronze) was used first by ancient civilisations because it was easily found in its raw state. Nuggets could be found easily in alluvial soils surrounded by sand and smooth pebbles. When its utility was fully realised, those seemingly abundant chunks of gold were quickly scooped up and treasured leaving only sparse flakes and unrecoverable deposits to remain, that is, until twenty-first century technology enabled profitable extraction. Gold was bartered for food, animals, clothing, houses and so on. However, before it had a function, it was given as much thought as the dirt under the soles of one’s feet.
Gold was prized when it’s functions were realised and understood.
Take that in for a moment. Just as the unmined deposits of uranium, found deep in Australian soils had no value to the original indigenous people of Australia sixty thousand years ago, gold once had no value. You can’t eat it, nor make clothes from it. Essentially is was worthless.
Why is there a need to find another [global] currency or store of wealth?
The short answer is the Global Financial Crisis of 2008. For me, this was the year that the Australian government gave every Australian taxpayer $950 to spend to prevent our economy shifting in the same direction as that of the United States. According to the Australian Labor Party, it was their fiscal decision making that saved Australia – at least temporarily, as our own housing market is crying out for a revaluation [read: bubble pop].
However, it was in the United States, or more specifically, New York City, where the epicentre of this breakdown of faith in the markets occurred. In a vastly simplified explanation, mortgages were given out freely across the country to people that should never have been given loans in the first place. Those mortgages were bought and sold amongst financial institutions hoping to make money from them. People knew there was risk involved, but greed took a hold and the bubble grew to almighty proportions. All the players surely knew the game would end, but all assumed as long as they weren’t holding the bag when the music stopped, they would come out unscathed. This assumption was wrong. The game that was being played by these greedy Wall Street players saw hundreds of billions of dollars wiped off the value of the stock market in days and resulted in the suicide of many executives and brokers across the world.
We can’t trust those in power anymore. We need a trustless financial system free from constrained governance.
When Satoshi Nakamoto first developed bitcoin as a peer-to-peer network, they (we don’t know the identity of this person or group of people) inadvertently sought to find value in pre-existing resources – namely computing hardware and electricity (hopefully generated renewably). This wasn’t the first thing that sprang to mind, that is, how can we generate value from our computers? Clearly, every time someone adds to a message board, creates a video game or a new YouTube video, value is being created through the computing power that is being expended. But the electricity and hardware costs involved in maintaining Nakamoto’s new “electronic cash system” form a rock bottom base price similar to the mining costs of gold. If it’s not profitable to mine, then the machinery stops and everyone goes home.
People began to see value in a network that prevented fraud and corruption by central authorities. This value is commonly expressed in fiat dollar amounts.
When the bitcoin network first surfaced and the genesis block (block zero) was mined on January 3, 2009, very few people knew of it’s existence. Imagine a priceless Egyptian artefact in a low-key auction room filled with eight people who each have less than a thousand dollars in savings to their name. They don’t all have expert knowledge of the artefact and most are sceptical as to its authenticity. In addition, even if they purchased the artefact, it would likely sit in their home or place of business and wouldn’t provide any definite guarantee of value. How much would you have bid on the artefact? What would you be willing to risk?
In these early days, even for the first eighteen months of bitcoin mining, a single bitcoin could be bought on the first bitcoin exchange (BitcoinMarket.com) for less than 10c. Before that, it was substantially lower. This was the value that people placed in this new currency.
Why was it valued so low?
Well, at this point, it was relatively abundant. Think back to the analogy of gold nuggets sitting in the creek bed. Back then, maybe a few people valued gold’s shininess. Maybe its density. Who knows what they were originally thinking. As we know, Nakamoto was the genesis bitcoin miner. They saw value and they hoped that people who read the bitcoin whitepaper would see the same value and want to be a part of the network. When Nakamoto mined his first block of 50 bitcoins, they had no value. Zero. No one wanted them. It was a new and unproven system, so the risk may have looked far too great to part with any sizable portion of one’s wealth.
Say you were willing to get involved. You’d read the whitepaper and decided to commit your computer to start mining bitcoin after Nakamoto’s encouragement.
You and Nakamoto were mining away with equal computing power, finding a block every 10 minutes (bitcoin’s block timing is 10 minutes). Back then, a block was worth 50 bitcoins as a reward. You and Nakamoto each were rewarded 25 bitcoins. Within a day, you’d mined 3600 bitcoins on your PC at a cost of about $2 (the price of electricity to keep your computer turned on). You forgot about the mining program and left it running while you went away for the weekend and returned to find you had mined an additional 1440 coins. You wondered why it was less than expected. Nakamoto explained that he had found eight other people who were interested in the project with similar computer specifications and the rewards were fairly split according to computational power. You decide to mine for a while longer and accumulate over ten thousand bitcoins.
After wondering whether this venture had any real world application, you decided to offer your bitcoins for some pizza. You jump on a message board and propose it to other users. One user accepts and makes the appropriate accommodations for you. After all, it was just the electricity cost that you’d spent, right?
Those bitcoins are now worth $64M USD (28 Oct 2018)
The purchase of the pizza is a true story. It wasn’t a hypothetical situation (the rest was, though). Laszlo Hanyecz was mining bitcoin and completed this transaction on May 22, 2010 because at that time, the value he put in those bitcoins was the US dollar equivalent of two Papa John’s pizzas. With more people involved, the currency became more scarce and increased in value – whether that’s value measured in USD, kilograms of rice, barrels of crude oil or Papa John’s pizzas.
The thing to remember in all this, is that the miners actions are supporting the "trustlessness" of the network. And they’re getting paid to do so.
Over the last decade, bitcoin has proven itself as a way to create a trustless system of value that doesn’t rely on central authorities to keep your funds safe. After ten years of proving itself, you are now in the best position to utilise this system to ensure that those with unearned trust cannot abuse the access they have to your hard earned financial assets.
Is bitcoin the only trustless system available?
No. In fact, the wild value swings that occurred from December 2017 to January 2018 were caused by an enormous influx of “altcoins” luring in speculators looking to make a quick return on their fiat currencies. The result saw the value of bitcoin climb from about USD$1000 in April of 2017 to it’s peak of over USD$19,000 on December 17, 2017. Since then, it appears that bitcoin has found stability at approximately USD$6000 after tumbling back down during the course of 2018.
The imagination of some people has created a “Wild West” of sorts in the cryptocurrency market, many coins of which serve little unique purpose. Buyers were lured in without so much as reading the whitepaper of the project, and exercising due diligence. If you’re interested, the website DeadCoins is a curated list “of cryptocurrencies forgotten by this world….and more”. FYI, there’s 929 of them.
During this Cryptocurrency Winter only those projects with a future will remain. This is a good thing.
I mentioned earlier that we’ve seen a huge rise and fall in the price of the entire cryptocurrency market over just the last twelve months. This is nothing new, it should be expected and it isn’t the last time it will happen. During this period of unrest, a project I am following very closely and have become relatively well-acquainted with the community of, is weathering this storm as though it never happened.
Get Involved.
While the technology behind bitcoin was revolutionary and pioneering at the time, it has become that experimental first flight at Kitty Hawk. It will always hold value and continue to grow. Do not misunderstand me. Some people are expecting bitcoin’s value to grow to upwards of USD$100,000. But that shouldn’t be the reason why you want to be a part of the system. At least not in my opinion.
The Monero community has developed a superior mining algorithm – one that allows ordinary households to mine for cryptocurrency. It allows the collective network of individuals to verify transactions without the need for a central authority or mining specific hardware (called ASIC miners). Monero’s cryptonight_v7 algorithm is utilised by the now operational Safex blockchain.
It’s the Safex project that has my attention.
Your job right now is to head over to the Safex website, but more importantly, READ THE BLUEPAPER. This will be the topic of my next article as we break down the significance of Safex, how it solves problems and of most relevance, how it will provide a means of wealth preservation in times where a trustless system has never been more needed.
All the best,
Nick.
References
Curated 2018, Curated List Of cryptocurrencies forgotten by the world….and more, DeadCoins https://deadcoins.com/
Money Morning News Team 2018, One of the Boldest Bitcoin Price Predictions Shows $100,000 Is in Reach, Money Morning https://moneymorning.com/2018/10/04/one-of-the-boldest-bitcoin-price-predictions-shows-100000-is-in-reach/
Nakamoto 2008, Bitcoin: A Peer-to-Peer Electronic Cash System https://bitcoin.org/bitcoin.pdf
Robinson 2009, Rudd’s Stimulus Package: what will you get? Sydney Morning Herald https://www.smh.com.au/national/rudds-stimulus-package-what-will-you-get-20090204-gdtc9a.html
Sherry 2018, What is the Genesis Block in Bitcoin Terms? Investopedia https://www.investopedia.com/news/what-genesis-block-bitcoin-terms/
Statista 2018, Number of Blockchain wallet users worldwide from 1st quarter 2015 to 3rd quarter 2018, Statista https://www.statista.com/statistics/647374/worldwide-blockchain-wallet-users/
Thomas 2008, Losses Mount, Fears Overwhelm, and a Life-Ending Decision Is Made, The New York Times https://www.nytimes.com/2008/11/07/business/07suicide.html
Wong 2018, Eight years ago today, someone bought two pizzas with bitcoins now worth $82 million, Quartz https://qz.com/1285209/bitcoin-pizza-day-2018-eight-years-ago-someone-bought-two-pizzas-with-bitcoins-now-worth-82-million/
Please UPVOTE this article. Your vote keeps me writing my best content.
All content is original and belongs to @nickmorphew. [28 October 2018]
Disclosure: This article was not a paid promotion and was not self-upvoted. Nor were there any affiliate links.
I’m looking for an artist to cover my work on the fantasy saga, Adventures in Elowyn Glade. Click the link!
You didn’t think you’d leave here without me shamelessly plugging my other work, right?
Our Trip from Adelaide to Melbourne.
Part 1
Part 2
Part 3
Part 4
Part 5
Part 6
Part 7
Restaurant Reviews (and Tesla Showroom)
[100% VEGAN] Shift Eatery Surry Hills
[100% VEGAN] Matcha Mylkbar, St. Kilda
[100% VEGAN] Lentil as Anything, Newtown
Da Orlando Wood Fire Pizzeria, Wollongong
Do you enjoy gory mystery-thrillers?
Two devious, psychopathic minds go head-to-head trying to out-kill one another. Who will die at the hands of the two and how far will it go until the entire state is on the hunt for the duplicitous duo?
Check out The Coroner. Part 1 and Part 2 are linked.
So, you're a Star Wars fan? I almost wasn't.
In a two part micro series, learn of the devious practical joke my uncles played on me as a child. You'll never think of Darth Vader the same way again.