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Still not sure what crypto is? Join the club

by admin

New York
CNN business

Over the past few years, the world of crypto has ballooned from a niche experiment to a vast multitrillion-dollar financial sector with its own heroes, villains, and warring tribes.

You Know It’s Loud – Matt Damon and Tom Brady promoted it Between super ball.And you know it’s controversial Don’t live under rocks. (See also: train wreck That’s FTX)

But when the conversation turns to Sam Bankman-Fried’s crumbling empire, or the merits of Proof of Stake and Proof of Work, you might find yourself nodding at the party. The good news is your party isn’t ruled by intolerable geeks, is it?)

In any case, it’s 2022 and many people still can’t wrap their heads around cryptocurrencies. If you are one of them, stick around. We break down what this industry is and why it matters. It doesn’t matter if you have no intention of investing.

tl;dr version: Cryptocurrency is a form of digital asset secured by a decentralized network of computers.

Unlike traditional “fiat currencies” such as the Euro or US Dollar, cryptocurrencies reject the idea of ​​being controlled by a central bank or government. The original cryptocurrency, Bitcoin, emerged in 2009 from the ashes of the worst financial crisis in modern history.

A pioneer in the world of digital currency basically said that we need our own currency that cannot be manipulated by any entity because it is under government control. (What makes some of the cryptocurrencies rather loyal is their anti-establishment origins. concentration when they get a chance to talk about it. )

The term “crypto” evokes the way networks are secured using cryptographic systems (think highly sophisticated cryptography) that make counterfeiting of tokens virtually impossible. When we talk about “crypto,” we may be talking about the virtual token itself, or the entire ecosystem of digital assets.

Another important factor to be familiar with is blockchain. To save time, we’re oversimplifying here. Blockchain is a digital public ledger that records transactions. This is the record-keeping system on which most cryptos are built.

“Think of blockchain as a Google spreadsheet,” said Gareth Rose, former deputy commissioner of the New York State Department of Financial Services and now managing director of research and advisory firm Pacific Street.

“If Gareth gave Allison $10, and Allison gave the same $10 to someone else, how would you know that Allison was gifting the same $10 she received from Gareth to a friend? I need some way to make sure that every entry in a Google Sheet follows the entry that preceded it.”

Basically there is a huge community of auditors out there investing in the project (more on that later).

Once a transaction is validated by the network, it is permanently stored in an immutable “block”.

Conclusion: Blockchain is the underlying technology of the crypto world. it’s a bone And if you ask any cryptocurrency evangelist, you will hear that it is the most important technological innovation of our time.

And indeed, people are starting to adopt blockchain systems outside of the crypto world and they look promising. Medical records need to be highly secure, but have traditionally been cumbersome and inefficient to transfer.global food supply Blockchain is another area where it will be easier for large food producers and distributors like Walmart to track products from farm to table and respond more quickly if contaminated goods are mixed in. is.

But to be honest, the hype around blockchain feels out of proportion to the use cases presented by its proponents so far.

If you want to dig deeper, the technology news site the Verge has a great article on blockchain. here.

Cryptocurrencies may seem like they were invented out of nowhere. To some extent, it is true.

The Bitcoin network went public in 2009 and was created by an anonymous developer (or group of developers). Under the name Satoshi Nakamoto.

After several booms and busts to this day, that community now has a large scale of very expensive and very powerful computers whose only function is to run algorithms that solve mathematical problems in a process called mining. has become a global network.

Mining is a tricky concept, no headlamps or pickaxes. Rhodes suggests thinking of it as an “audit.”

“Mining is basically just the process of verifying those transactions on a blockchain/Google Sheets by people invested in securing and verifying the network,” he said.

All computers in a network are essentially racing towards: The first computer to spit out a “target hash” (also known as a very long numeric sequence) and the correct sequence matching the target creates a new block and is rewarded with bitcoins.

it’s basically a game Two functions: transaction validation and new bitcoin circulation. Another way to think of it is playing Powerball. This means you have to match a series of numbers to win, and the more tickets you buy, or in the case of crypto, the more hashes your computer can spit out, the more likely you are to win. .

This computer contest is always on and the winner creates a new block in the chain approximately every 10 minutes, 24 hours a day, 7 days a week.

That is why we hear people say that Bitcoin is an environmental disaster, as the whole process consumes an enormous amount of computing power.it could be something This is an exaggeration, and proponents quickly realize that traditional finance is not strictly a green business, but mining requires a huge amount of electricity, much of it derived from fossil fuels. Absolutely true.

This is one of the main arguments made by followers of Ether, the second largest crypto that uses a different protocol to validate transactions. Much less energy intensive.

lol, not much. As of this writing, the number of things you can actually buy with cryptocurrency has increased, but is still very small. Some retailers and shopping platforms accept Bitcoin, including Home Depot, Overstock, and Shopify.

However, the majority of retailers will not accept it. This undermines the entire “currency” part of the cryptocurrency promise.

Most people who own cryptocurrencies treat it like an investment (albeit speculative).

The combination of FOMO and a bored mass stuck at home due to the pandemic has pushed demand for Bitcoin and other tokens to a peak in late 2021. Prices have plummeted since then. Bitcoin has lost about 75% of its value since its November 2021 high. The same is true for Ether.

If you are thinking of investing, be prepared for unpredictable price movements. A cipher not for the faint of heart.

That’s right! And US regulators charged with overseeing stock markets agree.

Gary Gensler Chairman of the Securities and Exchange Commission, early this year The agency announced it was nearly doubling the size of its cryptocurrency division and warned that unregistered cryptocurrency exchanges could be operating “outrageously.” We pledge to work with Congress to create rule for the industry.

It doesn’t happen overnight.Cryptocurrency is the Wild West, creating rules for an industry founded on doing its own thing outside government oversight Ha… it’s complicated.like bloomberg Matt Levine said: “If you try to write all the rules from scratch at once, it won’t work, and people will relentlessly take advantage of what you did wrong.”

Oh good question. The answer is yes. No.

Is there fraud within crypto? 100%. there is also lots of scams Within traditional finance (or TradFi in crypto terms). In addition to the typically high-risk bets and dubious companies with snappy names, there are real cryptocurrency Ponzi schemes in play.

but, all Is crypto a scam? Probably not. There is still much debate about the usefulness of assets such as Bitcoin and Ethereum, and whether their grandiose vision for the future is something we all want to get on board with.

The U.S. has a very sophisticated financial system, so the potential utility of cryptocurrencies can be a difficult concept for Americans to grasp, Rhodes said. “We can put our money in the bank and not worry about it.”

But things aren’t always so reliable of other parts of the world. “Outside the United States, there are all scenarios where government control over the financial system gives authoritarian regimes enormous power over their citizens and mismanages the economies of these countries.”

Being decentralized theoretically puts power in the hands of the people.

Sure, the technology isn’t there — not yet. With inflation running amok by the dictator running the economy, anyone who wants to stash their money in bitcoin can do so and trade it within the crypto ecosystem. In order to use it to buy anything, you will most likely need to revert to legal tender, also known as good old fiat currency, issued by the government.

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