Intro to Cryptocurrency & Blockchain
Updated: Sep 10, 2021
Welcome to Castle Cardano! We are an educational staking pool with the mission of making it easy to learn the new, exciting and complicated world of Cryptocurrency & Blockchain. This site is organized by different Quests - each a different learning focus on your journey to confidence and self empowerment to navigate the crypto space. You are at the beginning of Quest 1 which will give you the foundational knowledge needed to start. At the end of each article there are suggestions of what to read next to build off of what you have just learned. Let's get started with an important distinction between two common words:
Cryptocurrency (crypto) - Cryptocurrency is a very general term that references digital tokens (or assets). There are many, many different cryptos. Because they are digital, there are many advantages over traditional cash such as speed, security, flexibility, and financial freedom. (You can see a list of all the cryptos sorted by market cap here)
Blockchain - A blockchain is a peer-to-peer network and ecosystem where crypto currencies live. You cannot have a cryptocurrency without a blockchain. Just like cryptocurrencies, there are many, many blockchains that are made to do different things. For example, the blockchain Stellar has a focus of being able to quickly and cheaply send money across borders whereas VeChain is focused on solving the problems with supply chain management.
The above image is to help demonstrate the relationship between a blockchain and cryptocurrency. It is an example of the first and most known crypto Bitcoin which is slightly unique in that the name of the blockchain and the name of the cryptocurrency are both Bitcoin (This isn't always the case, ex: Cardano is a blockchain with the cryptocurrency ADA). The Bitcoin currency (BTC) is exchanged between different parties through transactions that run on the Bitcoin blockchain. These transactions become part of an immutable ledger that contains a history of every transaction that ever occurred.
It is also possible to have multiple cryptocurrencies on the same blockchain. A good example of this is the Ethereum blockchain. The native cryptocurrency on the Ethereum blockchain is Ether (ETH) but there are many others such as Dogecoin (DOGE). Dogecoin does not have its own blockchain and is dependent on the Ethereum network as shown below:
A Brief History
Bitcoin was the first cryptocurrency & blockchain created in 2009 that has led to the growing crypto economy we have today. It was founded with the philosophy that individuals should be in charge of their financial freedom and they should not be controlled by singular organizations of power.
However, not all projects have followed in the same footsteps yielding an extremely diverse ecosystem of different cryptocurrency and blockchain projects. For example, the blockchain Ripple is much more centralized and focuses on making transaction settlements in the traditional banking system much faster.
Is Cryptocurrency a Substitute for Money?
Economists define money as having three things:
A medium of exchange
A unit of account
A store of value
Cryptocurrencies are quickly tradable over the internet (a medium of exchange), one BTC has the same value as another BTC (it's fungible - a unit of account), and are cryptographically secured on a blockchain (a store of value).
Cryptocurrencies have many advantages over traditional fiat money such as the US dollar. As different cryptocurrencies have different properties lets take Bitcoin as an example:
Instantly transferrable to anyone in the world for an extremely small fee (borderless)
Has a limited supply (non-inflationary)
Bitcoin blockchain is decentralized meaning it is not controlled by anyone (incorruptible & secure)
Individuals are custodians of their crypto and don't have to rely on 3rd parties (such as banks) with their personal information and money (financial freedom)
These advantages may seem simple but they have massive implications. The 1.7 billion people who do not have access to banking can now buy and hold assets, the almost $600 billion sent in yearly remittance payments across borders are now instant and have low fees. Anyone in the world can get an over collateralized crypto backed loan with no credit check offering banking to the unbanked. Lastly, and possibly the most important is you are now able to become your own bank without putting your trust in institutions and governments - many of which are corrupt throughout the world.
So yes, cryptocurrencies are money. The question is will they replace our existing currencies. The quick answer is that cryptocurrencies will be a huge part of our world in the future. Whether they replace fiat money is debatable but there are many factors that suggest this will be unlikely. Governments will most likely transition their fiat currency into a government issued digital asset (which will still be controlled by the government) to compete with the rise of cryptocurrencies thereby leading to a fully, global digital economy in the future. The federal reserve in the US is already starting to build this.
Why Should I Care About Crypto?
"I came for the gains and stayed for the vision" - Saying amongst cryptocurrency adopters
The majority of people who enter the crypto space do so in search of life changing investment profits (there is nothing wrong with that). Cryptocurrencies offer everyone, regardless of your circumstance or situation, financial freedom. However, there are many other reasons to care about crypto besides making money. As stated different blockchains are often made for different purposes. In general though, blockchains and cryptocurrencies together will:
Give investment opportunities to anyone (not just the wealthy)
Bring a new, global financial system through Decentralized Finance (DeFi)
Digitize the world around us making it faster and more connected
Cut out the middle man making traditional services cheaper and more reliable
Unite a global society by removing trust barriers
With a global market cap of around $2 Trillion USD at the time of this writing (4% of the US stock market), the era of cryptocurrencies is still incredibly young. The only comparable time in history would be the early 1990's at the beginning of the internet and that is, well, very exciting...
Recommended Reading to Continue your Crypto Journey
Investing in Crypto (Coming Soon)
What is a Blockchain (Coming Soon)