Cryptocurrency: Not A Financial Network Meaning Abundance
Cryptocurrency is looked at as a financial vehicle and this is something that is a mistake. In fact, once we understand what it really is and how it operates, we will see there is an entirely new set of rules associated with it.
The tendency is to see the word "currency" and feel that cryptocurrency is financial in nature. Hence, what is being erected, at its core, is a financial network. This is not valid. Instead, we are dealing with something completely different, which can causes a great deal of misunderstanding.
It is also what is throwing the government and regulators off. Their quest for control is so misguided it is unreal. Once we embark upon the reality of what we are dealing with, we see how fruitless their efforts will be.
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Financial Component Only
Cryptocurrency has a financial component, that cannot be denied. However, it is just a component as opposed to the entirety of it all. This is where most go awry.
For this reason, we can conclude that we are not establishing financial networks. Certainly, there is this aspect to things. Cryptocurrency gives us the ability to transfer value. From here, we can build a host of applications to cater to all kinds of financial needs. However, that does not make it a financial system.
Let us look at Bitcoin as an example. What is Bitcoin when you really think about it? Is it some financial network that was erected to take over the existing system. Aside from a few maximalists, most know this is not the case.
Bitcoin is a network, that much we know. At its core, we see a bunch of nodes strung together via software. This is all the network is. Hence, we are dealing with a computer network.
This is what blockchains are. They are computer networks that are build to transfer, record, and save data. That is all. Of course, some of this data is cryptocurrency, meaning the financial component is built in.
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Communication System
There is a lot of news made about the SWIFT network. Most do not truly understand what this is. When they hear Russia was cut off from this network, the belief is they are cut off from international banking. This is not the case.
The SWIFT network is a messenger service. It is basically a way to send information back and forth. Hence, we can look at it as a communication system. By evicting Russia, the idea is they cannot communicate with other banks. Again, this is a fallacy. The Russian banks that are excluded can use other means of communication.
Here is where we see the Eurodollar system at its essence. Certainly, it built an entire financial network on top of a distributed communication system. Ledger technology is really about communication. It is the transferring of one asset, whatever that might be, from one "wallet" to another. Obviously they do not use that term but that is really what they are doing. They opt to call it balance sheet (off) banking.
Cryptocurrency is really just the digitization of this entire system while providing the ability to anyone. With peer-to-peer communications, we see the ability to send and receive money (data) with anyone we desire. There is no third party involved and the transfer takes place through a communication system. Instead of calling up another entity and instructions of where to send the money, the blockchain handles it.
This means the computers that are tied to that network "talk" to each other, confirming the data. Depending upon the validation process, all update their records to match the new data that is added.
Essentially, this is all that is taking place.
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Abundance
Understanding the basis of all this, now we can see how abundance is being generated.
To start, if we look at communication systems, we know a couple things. First, they get faster as technology improves. This is why Bitcoin is an out-of-date network. While it has qualities that are useful, the network itself is old technology. It was not upgraded.
Second, we know communication systems expand. Over time, more nodes are added, generating more activity. Today, we have global communication available to use anytime of the day. As long as someone is tied to the Internet, we can communicate.
Finally, systems get cheaper to operate. There was a time when individuals and companies received a fairly healthy long-distance bill. Today, we can video conference with anyone around the world basically for free.
Consider what happens when the financial component to this system can move faster, expand, and operate without cost (or minimal). The idea of going viral is taken to an entirely new level.
We also see why the network effect is so important. This originally was a concept developed by looking at communication systems. Many tried to apply it to social media, with mixed results. However, it does apply to cryptocurrency and the networks they are built upon since we are dealing with the interaction of different communication nodes. Now, instead of phones and fax machines, we are dealing with computer nodes.
The expansiveness of this realm means the financial components that are built upon this can keep expanding over time. Here we see where the upper limits is really non-existent. We have a potential of over 7 billion people globally. This is coupled with the fact that automation can put this near the unlimited level.
Money is an emotionally charged subject for most people. When we understand that we are now dealing with a glorified communications system, we can see how abundance is the future. Networks keep expanding on a daily basis across the world. This generates enormous value over time.
We also can see why it is absurd for governments to think this is something they can control. It is not. A global communication system that is established on a peer-to-peer basis is out of their reach. Especially since there are many different networks built within the system.
Unlike the SWIFT network, these cannot have someone thrown off them. That is why they are called permissionless.
All of this is unlocking entirely new capabilities. We are now at the point where things are starting to become evident to everyone.
What are your thoughts? Do you see how this is all shaping up?
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I have always known that part of the issues they have with the blockchain technology and Crypto is understanding what it is and how it works.
I believe they may even know these and are just biased by some shirt sightedness on the future of technology and how it benefits them.
Great post as always.
Thanks.
I disagree with this as Bitcoin still gets hardforks. Also I have read that Lightning network has transaction speed and cost that can compete with PoS chains. I think the real issues are that it's development is just lagging behind a little and of course the negative image of all PoW mining.
There will be way more than 7 billion potential 'users' if you count all smart home toasters. We don't know where the ceiling is but hopefully developers and infrastructure can rise it before it is hit.
Currently all the tech depends on a global TCP/IP network. You can cut countries off the Internet. IPFS may fix this one day at least on addressing level, you also need a physical connection to the global swarm.
Lightning is not Bitcoin. It is a layer 2 network built that is tied to Bitcoin. That is like saying Hive-Engine is Hive.
Yes and they are still forking old technology. Bitcoin had, what, two updates in 10 years. There is little doubt that technology changed a great deal. This is why Bitcoin will never by a major network in terms of the volume of activity. It is secure, safe, and probably the best place to sent large sums of money (like a billion). However, for the rest, the tech just isnt there. To do that, it requires layer 2 which Lightning might or might not become.
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They want to keep L1 small or pretend that's the reason when they don't have visions. Bitcoin is more of a measuring unit and the volume happens with pegs on other chains while L1 tracks peg custodians. I personally don't see a reason for adding new features on L1.
but your post was about blockchains and I'm kind of off topic arguing about the purpose of a token.
I dont disagree about keeping the base layer small. That is what Hive is doing and I agree with it. It could also be a challenge that Ethereum ends up facing since they are adding a lot into the base layer.
But thanks for the comment. Always fun to discuss the different attributes of this industry.
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I don't want to dispute the fact that many really believe in cryptocurrency and the impact it has which they rely on as a means of financial stability, no doubt there's up and down in crypto but that doesn't stop people from investing in crypto and daily we see more users trooping in to be part of the blockchain to also benefit from it as well
That is true. We are seeing a lot of people moving in.
The question is when do they move in for more than just the financial aspect. As Web 3.0 grows, we are going to see different motives. The monetary aspect will still be there but will be rewards instead of the main driver.
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No doubt many are into crypto for the reward because it has create a lot of opportunities to eradicate financial issues in most part of the world which I believe with their contribution in the blockchain they will want it to succeed more than what has been achieved or experienced before
Crypto holds a lot of potential to change the lives of billions.
Realizing that expansion resembles a computer network more than financial was a real eye opener to me. This really helped me to grasp things at a new level.
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The moment people will get into metaverse, get paid in crypto and then run their families and everyday life. I feel that would be one of the usecase of the crypto coming to reality. As of now, I know very few people who built homes with crypto or settled the debt. I guess we have yet to see success stories in that case. Do we have any such with Hive? We should have authors on leofinance post about it, isn't it?
There are plenty on Hive who are utilizing their proceeds from businesses to sustain themselves. Few post about that so I cant know what they bought although there is one person who did post how he bought a car with what he made off Hive. Other bought food and medicine, especially in Venezuela.
So there are some who are having their lives changed already on Hive. It is not as many as we would like to see.
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I was reading an article the other day and the impression I got was that some people see what you are talking about above, but they only see it as half the picture. What I mean is, they see all of the aspects, but they think it has to be a CBDC that inhabits all of those aspects. They can't seem to wrap their heads around the fact that the existing structure of crypto currency can also do all of that. They think they have to reinvent the wheel when the really don't.
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Reinvent the wheel and give more control over to the politicians who are trying to suck the life out of everyone.
There is no need for a CBDC anywhere other than to try to maintain control. That is the only reason why they are looking to implement them.
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Yup!
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Communication!! I love it. The term "Cryptocurrency" used to really turn me off. It's getting more comfortable now, this realm is definately paradigm shifting and exciting!! Go Hive!!
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It is really just data. Instead of buying plans to the Pentagon's new fighter jet, people can buy a token. Still just data.
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Cryptocurrency has benefitted alot of users and no matter what exist in life, there's advantages and disadvantages.
As at now, it has affected a great deal to the world we live in.
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The swift network is used by millions everyday. Recently they have been hacked, infact few times. Software is not updated enough. It's like peer to peer so can easily get intercept !
Crypto is harvesting value better than any other financial instrument and we see innovation like nowhere. This shows that when you free an ecosystem, it can only innovate and improve itself through iteration after iteration. Look at DeFi we had 1.0, now 2.0 and who knows how many other mechanics will evolve from these...
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Yes it is true because if we can understand how it operates there is no need to find it difficult again.
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Many people don't know what Bitcoin is all about. They don't know that Bitcoin was created to make financial markets easy.
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I think it just highlights how clueless Governments really are as they don't understand the fundamentals. Trying to control something that cannot be controlled is crypto and if is can be controlled then it is not decentralised.
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The potential for crypto is huge. The visionaries amongst us see this.
And the financial tyrants amongst us are scared because they too can see that if this technology gets even more traction they have lost!
The decentralization aspect of the technology is what gets my juices flowing. Developing ecosystems online and offline on the back of crypto is what it's all about.
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Everyone will benefit by decentralization. People who seek power may think that they will lose, but they will benefit also. Freedom is good for everybody.
I don't think many people really consider the technology aspect of Defi much and before I got to know more about crypto, I thought it was all financial. Obviously, with games, defi, and other applications, I think differently now
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Web 2.0 got famous because of the social network boom. Connecting the world could open endless opportunities. Decentralized network and open source technologies would connect the world even more - peak of abundance.
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What this brings to mind for me is how people think that they have a problem understanding cryptocurrency and NFTs when it's really at its basis the simplest concept and there's nothing difficult to understand about it. In a lot of ways, I think it's so simple that people have a difficult time wrapping their complicated minds around its simplicity. Sure, the technology can be really complex, and if you dig beyond the base level of what blockchain technology is, it can be extremely intimidating. But the concept and what it does is in no way confusing. I had someone express to me that they just could not wrap their mind around NFTs. As a person who doesn't understand much of the technical parts of the technology, I understand the essence of what it's for and what it is, and it's very easy to explain. I think there needs to be a real understanding of what it really, really is at its heart like you have done here.
Wow, very revealing. This is why I keep calling you out to design a structured cryto-economics course. These parts really opens up my awareness.
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