What is Crypto, and why should I care?

What is Crypto, and why should I care?

Learning about crypto, it's hard to get (1) reliable, relevant information (2) that you can understand, which also (3) goes into detail. This is getting better every day, with good resources, becoming more plentiful day by day. However, the more you learn, the more questions you'll have. The more answers you know, the more answers you realize you don't. As we go along, any questions that aren't answered in the post, please ask! If you have the question, others do too.

However, to some degree it's best to make peace with the fact that bleeding edge technology engineered by programming hyper geeks, geared towards finance stiffs, with political ideologues regularly spouting ignorantly on, and marketed by internet mobs… is more difficult to decrypt than the things you're good at decrypting. But that's okay, you probably can’t explain the internet or smartphones in great detail, but knowing enough to use them well improves your life drastically.

What is Bitcoin?

Bitcoin is the flagship of the crypto fleet, the oldest, biggest, and most basic. Fundamentally, it's just a spreadsheet, much like our current money system. When you go to Quick Trip and get $20 of gas, numbers move from your column of the spreadsheet to theirs, and since money is constantly being spent, the spreadsheet (in finance terms, the "ledger") is constantly being updated to keep track of how much everyone has. The difference with Bitcoin is that it is in its engineering, being decentralized, permissionless, and peer-to-peer. 

Decentralized means it is not controlled by any single party. There is no president, board of directors, or any group/individual controlling it. There are rules written into code (much like they're written into constitutions) and computers execute those rules, not humans. Of course, humans own the computers, but have drastically less ability to change the rules than in any other system.

The people with the most influence are the "miners" (less commonly, but more accurately referred to as "validators") who run computer equipment specially designed for maintaining the accuracy of the ledger. These computers are referred to as nodes, and are rewarded with the currency of ledger (BTC) added to their balance; their column of the spreadsheet. 

These owners of the computers running the network like to form groups, called mining pools. At present, the largest of mining pools may put in up to 15-20% of the work needed to keep the ledger accurate, or to be more specific, keeping it secure against illicit tampering. The percentage of work put in, known as hash rate, is the amount of say in decisions the pool has regarding governance, such as adding new features, or changing the engineering of existing ones. As far as governance goes, you can think of a pool as a political party. Since the pools are large bodies of people who can freely and easily move to another pool when they desire, or not be in a pool at all, voting with their feet issue by issue is extremely doable. To give you an idea of how little any one person or group controls things, Slush Pool makes up about 5% of the hash rate, and comprises about 15,000 people at the time of writing.

When it comes to making decisions to change the way things work, you more or less need 95%+ consensus, although the history of the fork wars (see citations below) will show that is not necessary if people are willing to sacrifice enough on something they feel strongly about. The reason simple majority isn’t enough and so much consensus is typically required is because of the way changes are implemented- the network forks into 2 versions, the old and new, and the effective worth of each is split, each group taking their purchasing power with them to their respective fork. Think of it like a country that splits in half would do if one half minted a new currency and abandoned the old one. This makes modifying anything for Bitcoin a much slower, more gradual, democratic, and tamper-proof system than, say, the US government's system of checks and balances. 

Another aspect of decentralization pertains to physical failsafe. Because nodes on the network are essentially equal, there is no single point of failure, no piece that will slow down the machine if it breaks, no head to cut off for the rest of the snake to die.

In order to eradicate the bitcoin ledger, you would have to find and simultaneously strike the nodes of thousands of people in almost every country around the globe, shutting down every node at the same time. This sort of attack is infeasible, and it's unlikely to be attempted. There are other attack vectors, better addressed in an article responding to criticisms, so for now let's just say that the Bitcoin network has never been hacked, which is more than can be said of Equifax (143 Million accounts affected), JP Morgan (83 Million accounts affected), a third-party Mastercard partner called Cardsystems Solutions (40 Million accounts affected), or one of the other intermediaries in your payments that you've never heard of, Heartland payment systems (130 million accounts affected).

Now that you have the idea of what decentralization means; how it democratizes and secures tech, in the next segment we’ll explore more of the freedom that comes from removing middlemen, due to Bitcoin being a peer-to-peer network.

Image credit: Jievani Weerasinghe https://unsplash.com/photos/NHRM1u4GD_A





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