This week on Valley Drag, we take a look at Cryptocurrencies.
- Cryptocurrency – just money whose transactions are secured by encryption.
- Blockchain – A distributed ledger of transactions. This is what allows bitcoin and other altcoins to be decentralized (they’re not tied to a government or a bank or any one person distributing the currency). In blockchains, every node in a network has access to the entire global ledger, and anytime a transaction anywhere happens, the global ledger must be updated and the change propagated to all nodes. Given that blockchains are peer-to-peer, modifying the history is extremely difficult, because you would need a majority of the network to agree on the change. Because blockchains are distributed and track every single transaction globally, they’re constantly growing in size.
- Mining – Individuals help maintain the blockchain by “solving” blocks (finding a specific value required to validate a block of transactions) . This is a way of distributing the calculations needed to verify transactions. A miner who successfully generates the solution for a block is awarded with newly generated bitcoin.
- Fiat currency – currency with no intrinsic value. Most currency these days is. US Dollars used to be directly fixed to specific weights of gold (making it Representative currency), but it no longer is. Basically, exchange rates depend on speculation about value, not on actual direct value.
- Big fish, focused on speculation
- Extremely wasteful power consumption https://powercompare.co.uk/bitcoin!
- Totally based on speculation; people are rarely actually using it for anything other than playing exchange markets.
- Mining is really problematic
- favors people who have money to buy or rent high end computers
- it’s totally blown up the GPU market, creating shortages and driving up prices
- Systems are still hard to get in to. You have to pay through exchanges.
- Different approaches
- Ripple / Stellar
- Focus on the ledger and payment protocols, supporting sending near-free transactions representing any type of value, not on the coin specifically. Stellar builds on a decentralized consensus protocol, allowing the network verify transactions much more quickly and cheaply than say bitcoin does. This addresses the concerns over waste. Also not based on mining, so no more shitty techbros.
- Ripple / Stellar
- Cryptocurrencies do not solve that base issue with currencies in 2017 which is that you have to work to get the money and not everyone is in a position of being able to actively participate in the workforce.