Crypto History 101
To understand anything, you have to know it’s origins or how it came into being. There is an old expression, to know your future, you have to understand the past!
On November 1, 2008 Satoshi Nakamoto released Bitcoin to the world.
This is how he described it:
“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
Those words would change the world as we know it.
On that day Crypto was born.
There is much more to the mysterious Satoshi that will be discussed in another class or in our group chats but one thing is certain:
Cryptocurrency would go on to become – the new GLOBAL Currency.
But what exactly is Crypto?
That’s what we are going to discuss today.
Cryptocurrency is, in simple terms: a completely digital form of currency.
There’s no shell, no salt, no wampum, there are no chickens, cows or beans, there is no rock, coin, bullion, gems, chains, notes, or bills involved. It is a completely digital form of currency.
Those were actual physical forms of currency that existed throughout human history. As we entered the Internet age in 1993 – 1995 and everything in our lives moved on to this new digital frontier it was inevitable that the next evolution of currency would be digital.
If you are interested in seeing how currency has changed throughout the ages, take a look at these links:
(I particularly enjoy the “Pay through the nose” concept)
But, as the old saying goes, the more things change – the more they stay the same.
You see, even though Bitcoin and other so called Altcoins are not TANGIBLE, ie you cannot hold them they are quite real and I am going to prove it to you today.
Now first off, for a currency to be widely adopted and accepted it has to have several distinct fundamental traits. Lets focus on 2 of them to start:
1. STORE OF VALUE
A reasonably stable currency is essential to a healthy economy. A nation’s money must be a credible store of value in order for its citizens to engage in labor and trade, save money, and spend it.
A store of value is an asset, commodity, or currency that maintains its value without depreciating
A monetary unit that serves poorly as a store of value destroys all incentive to save or even earn, and reduces the ability to trade.
For years the argument (from institutional lenders, investors, wall street fat cats, economists and other Matrix worshipers) was that Cryptocurrency was NOT a Store of Value.
They said, its just a scam. It’s just some imaginary currency invented by hackers in their basements. It will NEVER be a store of value.
Fast forward to the year 2021. As I write this we are a few days into the Reddit r/wallstreetbets Gamestock attempted overthrow of Wall Street Hedge Funds. This very day, famed investor and billionaire Mark Cuban has written:
The Bank of Singapore has also said:
Crypto is the NEXT Store of Value.
Now to those of us believers who have been HODLing (we will explain that term in a future class) and Promoting Cryptocurrency for the past 10 – 13 years, this is nothing new. We believed firmly in Crypto as a store of value and many of us set out to do everything in our power to live up to the definition
We saved Crypto in wallets, We traded it with others on various exchanges who saw it as a store of value, we watched the prices of Crypto rise and fall with great passion, enthusiasm, and sundry other emotional highs and lows.
Now, the Institutional fat cats are catching on and Crypto is on the cusp of COMPLETE explosion into the mainstream.
That means that finally, Cryptocurrency is being adopted worldwide as a store of value which makes it a VERY REAL currency.
2. MEDIUM OF EXCHANGE
Once again lets turn to investopedia for the definition:
A medium of exchange is an intermediary instrument or system used to facilitate the sale, purchase, or trade of goods between parties.
For a system to function as a medium of exchange, it must represent a standard of value. Further, all parties must accept that standard. In modern economies, the medium of exchange is currency.
Money enables anyone who possesses it to exchange it for something they desire. As long as the party who possesses the item in question values the money and is willing to accept it as a fair exchange, the transaction can continue.
A medium of exchange has been used throughout history so people can trade goods and services. From the days of barter to the currencies listed above, people can acquire STUFF in exchange for money.
So can you use crypto to acquire stuff?
For years the answer was rarely.
Very few people understood the intrinsic value of crypto so they did not accept it as a medium of exchange. Only those who understood it and believed in it accepted it (GLADLY).
As an example, a customer owed me $25,000.00 for some work I did for him and he could not pay the bill.
He offered me 5 BTC as a down payment on what he owed. I – having been aware of and monitoring BTC for some time – gladly accepted.
So he exchanged 5 BTC valued @ roughly $2,500 USD at the time as a partial payment for my work on building an email system for him and his balance was lowered (now I wish I accepted the whole bill in crypto).
Since this time more and more businesses have begun accepting crypto as a medium of exchange. I pay for multiple hosting services online and almost every single one of them accepts Crypto as a payment.
Here is a list of major companies that now accept Crypto as a form of payment:
This is only the beginning. In the next year, you will see this list EXPLODE.
I would say this firmly establishes Bitcoin and Cryptocurrency as a modern medium of exchange.
Have you ever thought about what makes Gold and Silver and lesser known metals such as Platinum and Palladium so valuable?
Its the fact that there is only so much of it available. There is a finite supply which means its RARE and its rarity makes it PRECIOUS.
That;s why Gold and Silver have been accepted Stores of Value and Mediums of Exchange throughout human history.
Did you know that the US Dollar used to be backed by something called the Gold Standard?
The Gold standard meant that each US note (paper money) was backed by Gold. The Gold in Fort Knox to be exact (amongst other lesser known locations as well).
Based on this Gold Standard anyone holding a US “dollar” could actually demand the exchange of said notes for the physical metal equivalent.
This demand actually caused several bank runs throughout history during turbulent times and came close to crashing the economy multiple times.
In 1913, the Federal Reserve was created by an act of US Congress as a private bank (yes the FED is a private institution and has ZERO government oversight) and the Fed actually began to control the monetary policy of the US (and you will find that in every other country on earth…except a few…the central banks established themselves as the lenders of the land)
US President Richard Nixon in 1971 actually took the US dollar off the Gold standard and established the currency that we now know today which are actually Federal Reserve Notes.
This is called FiAT currency. FIAT means “Let it be Done” in Latin (or Because we say so).
So FIAT currency means currency that is not backed by any precious metal but by ones faith in their government. In other words, the US Dollars value comes because the US government says its Valuable.
So now, a private company controls the currency of the land and has the monopoly to print as much of It as needed which as most of us should know lends itself to inflation, hyperinflation, recessions and depressions.
Contrast that with Gold and Silver which only have so much in supply and this scarcity of a resource is what drives it’s value.
It would seem that the best type of new currency is one that had a SCARCITY component and could never be OVER produced.
This is what Satoshi Nakamoto created with Bitcoin (and what so called ALTcoins have followed along with). There is a finite number of Bitcoins created (or mined which we will discuss in a later class).
This scarcity is what makes it valuable. The more scarce a resource, the more valuable it becomes.
This is why cryptocurrency is the TRUE successor to the use of precious metals (or a worthy companion currency).
Unlike FIAT currencies which rely on an unaware citizenry that must blindly trust their government about the value of the national currency, Crypto allows a person to become their own currency provider, their own bank, and trust in something of real value just as our ancestors trusted in valuable currencies of the time.
In our next class we will discuss how Crypto can be used not just for currency but for myriad other uses and also how transactions are managed and recorded on the Blockchain.