Money vs Crypto

Note:
My original idea was that I will write about how to get to some coins, or provide some description and my ideas about new or promising coins. I have to admit I failed, I do not have much spare time, I would say as everyone, so it end it up as you cans see. Not many posts, not much useful info. So, lets make it as usual blog. I will write something from time to time and we will see.

Source: http://fintechnews.sg/15815/blockchain/you-got-it-wrong-there-is-no-currency-battle-crypto-versus-fiat/

Now and in recent past we saw huge price dip in crypto currency world. I think it was expectable, but not maybe in this scale. With the correction, scams, hacks, aptempts for price manipulation and of course even lot of FUDs crypto world got big slap. Crypto world is very volatile, in price and even in the meaning of people who try to join this train. I observed it at even on my friends. Honestly, not many people who joined in last 8 months knows anything much about crypto, about how it really works and unfortunately even what it can provide, lot of them joined because of hope of getting rich very fast. But what does it mean fast? Week? Month? Year? That's what they are not able to respond, and when they see red numbers on stock, they panic and sell with loss. Of course every one will do, what he consider as the best option at the moment. But these people with no knowledge and no experience with crypto, at least in my opinion do big mistake. Do they? Why? Who am I to judge them? I do not, I do not judge anyone and even do not want to give you advices, but lets have a closer look on fiat currency and crypto currency.

Fiat currency

Well, if you do not have any idea what money are... maybe try to have a look on some videos as American dream or Zeitgeist. You do not need to believe that, but try to think about what you would see there. Unfortunately nowadays not many people has any idea how it works. So, lets have a brief summary (I am not economist, so, I will try to do it in simple way, if I would not avoid any mistakes, please leave your opinion in comment). Money should be backed by something valuable as gold is. So you can create something like paper vouchers (your currency), and assign them some value, this value should correspond to certain amount of gold. At the end you should not emit more vouchers than the real value is (which is the value of the amount of gold you) or you should find some extra amount of it. At least that is what was introduced to me. But is it like that? How is it possible that every country has huge debts? And are we able to pay this debts?

No, we are not, and why? Because what was said on the start is not valid anymore. Now we live in the are of loans, debts and virtual money, that means, that bank do not have what they claim to have (OK it is very simplified, but in the end it is true). Now, national banks can manipulate the real value, because they can print new money into to the circulation. And that mean, that the real value of our money is decreased, that is called inflation. How can they do that and why? How is it possible that no one will stop them? Because it is the country or more exact the government, who ask for the money for their budget. And they are in most cases independent on the government, or they even owned by private people as in the USA (and that's really scary).

Providing loans is not the only way how they can manipulate the price. Imagine when bank want to control the exchange rate if the country is doing well in comparison with others. If you have stronger currency, it is good for import, but export would be more expensive. So, the national bank can decide to buy currency of other countries (now you can imagine it as buying their bond papers, but in this case you need to print more money for buying the others which lead to the another devaluation). It may be viewed as good option but even bad, it depends on point of view. But it shows that the value of money might be manipulated quite well.

Loans, what is interesting about it? It is the interest. It means that you need to pay more than you will get. It sounds fair in the meaning that they provide some service, right? But wait... these money are backed by paper, which claims that you will pay the money which you do not have. Wow. What more, try to imagine you would like to pay the debt of the country. OK, since the start, the money had some real value, but then, every year was made some "loan" to cover budget for the country. It happens every year and every year there is the interest. After some time it will end in the point that if you would like to pay for the debt, you would not have even enough money in circulation for it, because of the interest. So, you would need to include money from another country, which means, some will have to end in bankrupt. OK, that's my simplified view on that situation after watching videos mentioned in the first paragraph. Of course, I am not expert, but what was introduced there make sense, and that's scary. Even the fact how much value US dollar lost in last 100 years ( inflation calculator).

Source: https://twitter.com/CryptoManiac01/status/947211456994353152

Crypto currency

What is this shit? It is not backed by anything, it is only speculation, I would not invest into it. Are you crazy? You created value from nothing, there is no real work behind it, it is useless. These sentences I listened during one evening from a few people (graduated from economy) in last June (2017). Well, I would say it is not truth. Lets forget what I wrote about If you think about it and have a look on alt coins which are here, some of them can really offer some service to you. Lets start with Bitcoin. OK, it is quite boring, there is some blockchain, which keeps transaction, and you can send some value across the countries, continents, blah blah...

But! Imagine that you have trustful decentralized secured network which can assure you that the value you want to transfer will not be stolen or exploited. Why is it secured? There would be need huge computational power to break it, in the meaning to hijack it and create non valid transactions. If you tried to put there some malicious transaction, the rest of the network will reject it. Nowadays, it is impossible to hijack the network, at least for most of strongest coins (it can happen for new coins, when it is badly managed). What does it mean it is decentralized? Transaction history is stored on every single node, which means server, which means every single device which runs Bitcoin client. If someone would like to destroy the whole network, he have to destroy every single device with runs it. And trustful? Yes, we were able to get rid of middleman who would approve these transactions, because it is managed by the network itself.

That's sound nice, is it prepared for larger scale? Somewhere were mentioned high fees? How many transaction can it handle? Why I need to wait so long for the transaction, it is useless... Well, it took some time, but SegWit (in short it reduced size of description of transaction in block) is now quite wide spread and nightmare as was 300 USD fees are not here anymore (depends on the services, but most of them have current version, where SegWit is there by default). If we assume something like one block might be processed in 10 minutes, and we can put there around 4000 transactions it is something like 8 transactions per second. It is way worse than Debit or Credit cards. So what we should do about it? 3 days ago was announced that beta of lighting network was started for Bitcoin main net.

What is it? It is upper layer above the blockchain, you can do there transaction between nodes which run this network in real time. It works on system of channels, where you can use already created channels for free, so, for the first time if you need to send some amount, you will pay small fee for creation of that channel to your node and than you can transfer the value to anyone who is on the network for free (if he/she has any channel in this network to his/her node, other way there will be included fee for the channel creation). OK, so what.. well, it means transfers in real time and scaled for the need of paying for anything. This network will ensure that every transaction is valid and the final result (what happened on this layer) will be stored into the blockchain. And now it start to be interesting.

So, with crypto, you have a chance to pay for anything in real time. And no annoying fees. So, there is network which can provide reliable payment system without any need of middle men, high fees for transactions and losses while they convert money. It is not unusual, if you want to send money from your local bank to your friend/family member in abroad. They will take the amount you need to send, use their exchange rate and charge you the fee, into this fee. This fee is used by your bank and then usually some bigger bank which handles these transaction to abroad, so the fee is becoming bigger, what more there may be another conversion for money which is used for the international transfer. And at the end then will be fee the endpoint by processing the transaction by bank which will send it to the local bank. And it takes more than with crypto, usually days. Yes, there is still problem with volatility of value in crypto now, so, it would be risky to call it as currency, but for fast transfer of value it is good enough. My opinion is that there is good chance it will become more stable with the bigger adoption, but there is still a long way in front of us.

Other coins

So, we can invest, speculate and transfer value quite fast with low costs. I would not say it has nothing to offer. What more, there are another coins which offer even decentralized services, in short, there are:
Ethereum - lets see it as international computer where you can deploy your programs (called smart contracts),
SONM - which gives you option to rent or buy computational power for calculations, renderings complex scenes, etc.,
Sia - decentralized cloud storage service,
Metaverse - digital indentities and tokenization of real world services and goods,
Obsidian - decentralized encrypted messenger,
Espers - promissed webpages on blockchain,
SmartMesh - shared internet connection,
Basic Attention Token - monetization of internet content,
and many others. Should you buy them? I do not know. I only wanted to show, that crypto do somthing and is backed by some work, or services.

Invest or not?

Of course there might be question. Do we need blockchain or token for everything? Surely not, there are lot of scams, vaporware projects and you should be careful, if you decide to jump in. But if you do, the most important part is to stay calm, do not panic, do not act influenced by emotions. Think about what you do, when you are sure you want to do it,
do it, trust yourself and to your research you made. Do not blindly follow others, do not blindly believe to roadmaps and whitepapers, think about what is there and if it make sense, your decision is the important one. Of course there is probability it will fail as everything can. But if you do not believe it, you should not even start, or you will lose your money.

Note: If you will find any mistakes, feel free to leave a message in comments, thank you, it will help to improve next posts.