AN INTRODUCTION TO CRYPTOCURRENCY & BITCOIN

0
75

At the most fundamental level, a crypto currency is a digital asset that can be used as a medium of exchange by employing cryptographical functions to conduct financial transactions. The transactions between two parties are recorded in a public ledger called a blockchain. Bitcoin, on the other hand, is used interchangeably to describe two things: Bitcoin the currency and Bitcoin the technology on which all crypto currencies run on today. Bitcoin the currency can be visualized as any other currency we are all well aware of (Rand, Pula, Kwacha), a digital asset that can be used in exchange of goods and services. Bitcoin the technology, however, is the algorithm on which computers across the globe communicate and execute the complex functions required to verify the authenticity of transactions and record these in the blockchain, a process commonly referred to as adding new blocks to the blockchain.

Too complex? Not to fret. Most people are skeptical about cryptocurrency and would rather not dabble in it. But this is usually because most of us do not even know how our modern monetary system works, a system that has evolved since the first time it was coined. To understand Cryptocurrency requires an at least rudimental understanding of what money and currency of the modern world are.

Money as we know it is not the physical paper in our hands and wallets, but rather a system of trust between the individual and their government. That paper in your hands is currency, and it is a promise from your reserve bank to return to you in value goods and services equivalent to that figure written on it. This school of thought is called the chartalist school of thought, which regards money as a trust relationship, nothing more and nothing less. Its counterpart, the metallist school of thought, is what most of us subscribe to. If you somehow feel depressed when you part ways with your money upon exchanging it for something, congratulations, you are a senior in the metallist school of thought.

Most of our currency (or money) is lost through small transactions imposed on us by banks. You know them very well, and they compound into large sums of money over the lifetime of an individual and that of a country as a whole. Just imagine this, the total global economic output is 87 trillion US Dollars, and about 2-3% of that money is lost in these “small transactions”.

This is the problem that crypto currency aims to solve. Give the power back to you. There is no central authority watching over your money. There is only you, the owner of the money, the receiver, and a decentralized sea of computers fighting to mediate the transactionS. When you initiate a payment in crypto, the transaction’s authenticity is verified by one of the many powerful computers in the world, after which it is recorded in the aforementioned public ledger: the blockchain (as opposed to the private ledgers which the banks keep, and to which you, the owner of the money, have no access); upon which the receiver’s crypto wallet is credited with those funds, and the computer that verifies this transaction is rewarded in a specified amount of crypto currency (a much broader topic for another day).

In my opinion, cryptocurrency offers a future full of possibilities, especially for Africa. There is a lot to be done in implementing a coin, a lot of hurdles to overcome in making it work, and a lot of resistance from well-meaning and malevolent parties alike, on both sides of the schools of thought discussed above. On the other hand, the economic growth this would spur is mind boggling to just think about. With a unified vision and commitment, what can be achieved in building an African economy around this system is limited only by our imagination. As of writing, there is a coin making waves in Africa called Ubricoin. With time, more will come and you, the individual, shall once again have the power in your hands.

Leave a Reply