What even is Cryptocurrency and the Blockchain?

Before we cover cryptocurrency, we should first cover what currency itself actually is. Currency isn’t just the American Dollar or the British Pound, etc.

Think of currency as a storage unit for value. It could be pretty shells from the beach, pieces of paper, or digital code. Currency is a unit of value that can be traded for other forms of value, a.k.a., goods and services.

Your time is valuable. It's a scarce resource. When you work, you bring value to a customer or company and they, in turn, give you a number of dollars that represent the equivalent value of your time and work output. You've effectively exchanged your time value for their paper dollar value.

Currency is the word we use to describe these stored units of value.

Cryptocurrency is the digital form of these stored units of value.
In other words, it's a currency (storage unit of value) written in computer code.

The word crypto comes from cryptography which comes from the Greek words kryptós (κρυπτός), meaning "hidden, secret", and "graphein" (γράφειν), meaning to "scratch, write".

What has made traditional currencies work through history is that they are centralized, and backed by huge entities like governments, Kings, Queens, banks, etc., that have created them, and promised on their worth.

That backing is what has historically helped put people's trust behind a piece of paper, or metal, which can be traded for real goods and services.

The downside of traditional currencies is that the governments that back them tend to be the highest authority of the land, making the rest of the population in any given country susceptible to their decisions.

If a country is well managed and respected internationally, it goes a long way towards helping the value of their currency, but if a country is not well managed, or it's a pariah state like North Korea, Cuba, etc., it can make their currency virtually worthless in the international market.

Cryptocurrencies, however, don’t have that centralized control, they are what people call a peer-to-peer network. It's a currency from the people for the people.

Cryptocurrencies were born out of discontentment with traditional (central) banking systems. That's why there is no central institution or authority behind them. How much one Bitcoin or Ethereum is worth is entirely decided by the free market dynamics within the community.

Bitcoin: The First Cryptocurrency.

Bitcoin's origin remains shrouded in mystery. In 2008, a nine-page white paper titled: Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. It's author: Satoshi Nakamoto.

In 2009 Nakamoto implemented the Bitcoin software as an open source code and released it to the world, where it was eagerly adopted by several programmers, who quickly set out to make sure that the Bitcoin system would not be dependent on any one person (or entity).

In 2011 Nakamoto vanished. No one has ever met him in person.

Nakamoto kept to himself 1 million Bitcoins (out of the 21 million Bitcoin limit), making him the largest holder of Bitcoin in the world (approx. 5% of the total).

In spite of Mr. Greenspan's observations, there's 3 billion USD in Bitcoin trades every day (so the trust is there).

But without central order, why do people trust this made up currency of nothingness? One of the reasons is scarcity. For example, the supply of Bitcoins is held artificially scarce by applying a limit to the number of Bitcoins that can ever be mined (21 million Bitcoins).

If we remember from earlier, currency is based on perceived value. Cryptocurrencies have become perceived as carrying high value because they are direct, decentralized and easy to use in peer-to-peer transactions. But ultimately their real (and one would argue only) value is how much one person is willing to pay another for it.

Safer than Real Money?

How can a made up currency created by obscure coders be safer than traditional currencies?

The biggest differentiator for cryptocurrencies over traditional money is something called the blockchain.

The original cryptocurrency, Bitcoin, was built on the revolutionary concept of what is called blockchain. Blockchain not only decentralizes the ledger (a book of financial transactions) it actually distributes a copy of the ledger to every single person in that currency network.

So instead of having the ledger be available only to banks & governments, there is a copy of the ledger on every single transaction on everyone’s computer which synchronizes and updates with the other ledgers every 10 minutes.

So if someone attempted to manipulate, hack or duplicate Bitcoin, when the system updates and synchronizes, it wouldn’t match the information on everyone else’s servers.

For example: If you have 10 Bitcoins, then 10 minutes later magically have 100 Bitcoins, when the server updates, it will notice that your new amount of Bitcoins doesn't match with the data on the rest of the computer networks and would essentially override your change.

The only way to ever manipulate a cryptocurrency would be to have 51% of all computers in the network agree that a certain change happened, but when these networks are open to everyone in the world, it is essentially impossible.

So what does this mean for small businesses and IT Helpdesks?

According to a recent poll from Microsoft, the number one way to impress, retain and prevent customer loss is to be up to date on new technology.

And as an owner of a small business, particularly an IT Helpdesk business, staying on top of the latest developments in cryptocurrency can mean the difference between a profit and a loss.

Conclusion

Cryptocurrencies are new and may seem mysterious, but with their built-in safety, convenience, and decentralization, their growth as a new currency seems inevitable.

As 10% of the world’s GDP is projected to be invested into cryptocurrencies in the next 10 years, the worth of those currencies will rise. Enabling your business to collect these coins now (as forms of payment) could prove to be your best business move yet.