As the world continues to decentralize in work and life, cryptocurrency is going to play an important role. Joseph is a fan of the subject and wants to share his insights and research with you.
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Good to have you here. Today’s episode is going to be about cryptocurrency! This concept positively fascinates me. The one aspect of commerce that I adore is in regards to the many assets we have at our disposal to exchange for other assets. I’ve been a freelancer for seven years, and in that time I’ve worked for money, consumable goods, and in one instance quid pro quo; where I did a free job for a lawyer and in exchange, she used her law powers to retrieve a laptop I had loaned out to someone who refused to give it back after two years. That was some of the most powerful I ever felt and I’m really glad I don’t hold public office.
I’m looking forward to talking about cryptocurrency, but first I’d like you to understand my perception of value. I believe the world runs on three major currencies: time, money, and anxiety. As we always say, our job in Ecommerce is to solve problems and contribute to the net good, therefore we are looking to help people save time, spend money wisely, and alleviate anxiety as best we can. Money is the one we understand, but we’ll be talking about it plenty in this episode.
In fact we should probably do that now. According to Wikipedia, which I promise you I only use sparingly, In the 1970s, the USD, considered to be the world reserve currency, was taken off the gold standard by Richard Nixon. There’s a joke in there about a guy named Rich who did some nixing but I’m not deft enough a hand to craft it. Anyways, the gold standard worked for thousands of years because everyone agreed that gold was valuable. It represented prestige. It still represents that but it’s usefulness has only increased in time. The gold standard was replaced with fiat currency. The technical definition of fiat currency is that it’s a trust based currency whose value is related to the prospective value of the country that issues it. I’m trying to draw a careful connection to cryptocurrency and I’m almost there. The reason why fiat currency retains value is because it functions as a motivator. People are willing to work for a lot of reasons, but money almost always tops the list. In that way, the total productivity of a country measured in money reflects the total amount of energy expended to earn that money. The Fed is also continuing to stimulate the economy by printing additional money, and while this is a controversial subject it’s important I point it out. How they can justify printing the money is the same logic that justifies the value of the money in the first place, it’s a matter of trust. The federal government trusts that it’s people will continue to work, and it takes a loan out on itself by speculating it’s future productivity.
Time is the one we think we understand, but there’s a level of detail that we could all be on the same page about. It’s proven that throughout a human beings lifespan, our perception of time speeds up, so while relativity is another fascinating concept I could go on and on about, let’s stick to something concrete, there are 24 hours in a day. If we look at time the same way we look at a dollar, we can take a clear, pragmatic look at our ability to assess it’s value, each day we give ourselves time, and we spend that time no matter what. So within each moment, we have the option to decide what is the inherent value. Imagine if you took stock of what you did from wakeup to sleep, and assigned a value to each hour; I rate my time from platinum, to gold, silver, bronze, copper and garbage. How I spend each hour is up to me, theoretically, I need to sleep, eat and meet deadlines, but how I perceive each hour is based on what threshold I need to cross in order to assign the best value possible.
Anxiety is the tension we experience in our lives that compels us to negotiate a balance between the other two. For instance, if I have to catch a bus at 9:32 AM, and I’m awake at 8 AM, I could, and in many cases have, spent my time poorly on my phone, resulting in a mad dash for the bus. If I’m lucky and catch the bus, I experience true palpable relief as, essentially, I had it both ways. If I miss the bus, my anxiety shoots through the roof since it’s entirely my fault, and I’m compelled to reconsider my options. Is my engagement important enough to warrant getting an uber? Saving time but losing money? The answer to that question relies entirely on how anxious I am at that moment. One such job, on my first day, I was on time for the bus I intended to catch to be early to the store, but the bus didn’t show up, sending my anxiety to hitherto unprecedented levels, and even though my entire day’s pay was about to go to waste, I called a cab.
Now, since you’re wondering what in blue blazes this has to do with cryptocurrency, I’ll answer that question right now. Cryptocurrency AKA digital currency does many things, among them, they enhance the inherent value of time. I do 95% of my web usage on Brave, the other 5% on Microsoft Edge because certain websites seem to not jive with Brave very well. And through using Brave, I earn Basic Attention Tokens by viewing ads unique to Brave, over 3 months I generated a total of 11 BAT, which was roughly 3 dollars USD. I then had it set to auto contribute to content creators that I viewed regularly. I could keep the BAT to myself, but I found it’s more equitable to let Brave send that money to the people who amuse me so. So while each content creator gets maybe 45 cents US, I’m just one user, multiplied by a variant of thousands and it will start to add up. With this in place, anything I do online is enhanced through the simple act of using Brave over a different browser, and as such, I have increased the overall tangible value of my time, and I didn’t have to do a single thing differently.
I first learned about it around 2014, I had heard about it sporadically, but never looked into it. I eventually encountered an opportunity to learn more about it at a yearly conference I attend called Podcamp. Before you get the wrong idea it’s the only one I do, and even that’s pushing it. One year I slept the entire weekend and didn’t realise it was on until the last hour of the last day. Anyways, one of the sessions was a primer on bitcoin, and so I enthusiastically signed up for it. The way cryptocurrency was explained to me is as follows: A transaction between a customer and a merchant, via credit card, is actually a three way transaction between those two parties, and the credit card company. The company is the one who actually does the buy in that moment, and the consumer then pays the credit card back, the creditor prefers if they delay the payment so that interest is generated. Because there is a network involved in this, it requires energy to transact the purchase. A crypto miner, at the time he was referring specifically to bitcoin, offers to use their energy to complete the transaction so that the credit card company can save money. The minor is not rewarded for this energy expenditure in money, however, they’re rewarded in bitcoin. Now, when I explained that to my family, they asked me to dumb it down for them. Regrettably I informed them, that was the dumbed down version. Now, his analogy about using credit card companies was just that, an analogy. Far as I can see, cryptocurrency is not mined outside it’s own network of transactions. Since I wont get another chance to mention this, I regret that I was one of the many who could be at least 10 grand richer, as the presenter of the session said he’d give some free bitcoin for signing up for an account. He.. never replied to my email. Don’t be afraid to be a squeaky wheel.
Cryptocurrency, as you might imagine, is a relatively new development. There have been discussions about digital currency as far back as the 1980s, as well as a few attempts. The problem was there was no way to track the payments, leading to duplications, thus rendering the value null. Cryptocurrency, the first being Bitcoin, has an origin pointing back to 2008 with a proposal written by one Satoshi Nakamoto, we assume, no ones actually sure if that’s the name of the person. In it he writes “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” He goes on to explain that there are a number of cost related downsides to using financial institutions, ie banks, to complete transactions. If there is a dispute, if there is a need for a refund, if there’s fraud, each of these instances require additional time and labor to resolve, leading to a net loss by the financial institution, as well as for the disputing parties since it also takes time and energy away from them too. Sakamoto proposed a peer-to-peer system where the users, each supplying a part of a network, also provide the ledger, so that the currency’s history can be readily accessed. Every bitcoin in circulation has a ledger attached to it, so every transaction it’s been a part of is accessible on what’s called a blockchain. In order to generate bitcoin, the miners would supply the necessary computing power to complete and verify a transaction, in exchange for their energy expended, a new bitcoin is minted. This gives cryptocurrency a number of advantages over fiat; it’s less expensive to facilitate transactions, it’s easier to trace safely, it’s not bound to any government or financial institution and it can be earned passively though it’s not exactly a lucrative business operation. One downside that’s interesting, albeit unfortunate is that the transaction is traceable, but the transactor can be anonymous. Which means crypto can be used to make illegal purchases.
Investopedia.com pits gold, fiat and crypto in a three way battle to determine how each one fares as currency. I’m going to go through each trait, which also will give you some added insight in to how money is weighted. Each currency is scored in each trait either high, moderate or low. 1. fungibility/interchangeable, all three score high. Non-consumable, as in, is this a commodity that can be eaten, drank, or smoked, all three score high. Gold is a malleable substance, but the volume remains the same. 3. Portability, gold scores moderate, fiat and crypto score high. Gold is heavy. 4.durability, gold and crypto score high, fiat scores moderate, caused by inflation, no doubt. 5. Secure, cannot be counterfeit, crypto scores high, the other two score moderate. 6. Highly divisible, again same score as five. 7. Transactability, gold is low since we don’t all own forges, the other two score high. 8. Scarcity, predictable supply, gold is moderate, we know there’s only so much on planet Earth, crypto is high, since most coins have a predetermined number of coins, fiat scores low because the fed can always print more money. 9. Sovereignty, distributed by government, gold and crypto score low, fiat scores high. 10. Decentralization, crypto scores high, the other two score low. and last, number 11 is programmability, same score, low, low, high. The one area the crypto scored low was in sovereignty, which is by design, as it’s meant to be decentralized. However, countries could consider providing digital currency in the future. Gold had the most low scores, but gold is also a precious resource. Fiat scored low in decentralization and programmability, which honestly to me seems like a misnomer, it’s like if an elephant and a giraffe were compared, and the giraffe scored low in “being an elephant” However the one that is fair game is scarcity. This isn’t my opinion, it’s a known issue. Far be it from me to be the total authority on the subject, I of course recommend further research. My goal is to pique your interest. That said here’s some facts about cryptocurrency:
-Most crypto currencies have a limit to how many are in circulation. BAT for instance as of coingecko.com’s current analysis, circulates 1,485,512,636 of the total projected 1,500,000,000. This allows each currency to increase its inherent value, each individual piece will gain in buying power so long as that which they trade for remains consistent. This gives it a tangible sense of finality like gold, where there is only so much gold on the planet, so too are there only so many crypto coins. This is alleviated by the introduction of new coins. The one exception I could find is called dogecoin, it’s got a picture of the shiba inu dog used in the popular “wow such good” meme line. At one point it had a cap of 100 billion but the creator felt it was better to make them infinite.
-Cryptos are sorted in to a number of functions. Some are proof-of-work, meaning in order to complete the transaction, a computer needs to process the transaction. Bitcoin is a chief example of this. Some are proof of stake, where the next block in the chain is determined by a set of variables determined at random, such as age. You can look up Gridcoin as an example of this. Some are ERC-20, which are based on Ethereum, the second largest platform next to Bitcoin. Ether being the core currency, where other currencies are derived, BAT is a form of ERC-20.
-To acquire bitcoin, you have several methods at your disposal. You can buy them, trade for them, complete online tasks from websites to be rewarded for them, or as we talked about already, you can mine them. It does depend on what coin your mining, but the general gist is that if you have a good enough CPU, you can run software on your pc that lets you participate in the mining process, but at this point serious mining efforts require specific hardware. As transactions enter the peer to peer network, miners are presented with a mathematical problem, the miner that solves the problem is the one to complete the transaction, and earns the bitcoin.
-Crypto currency can be divisible, the same as a dollar can be divisible into cents. Bitcoin, for instance, can be divisible into 8 decimal places. I personally own 0.0010 BTC, which is valued at 10USD. The current value of a single full bitcoin, as of this recording, is 9580.93.
-Cryptocurrency is held in an online wallet, as you can imagine, being an internet based currency, the coins are held digitally as well. If you’re looking for a painless web service to get one, I use coinbase.
-Like with fiat money, and gold, crypto is also attractive to criminal enterprise. According to news.bitcoin.com the largest Ponzi scheme on record is a so called company by the name of Bitcoin Savings and Trust, who gamed their customers for 265,675 BTC. One such story hits closer to home, as I had initially signed up on a site called QuadrigaCX, it was cashed out by it’s owner for roughly 215 million in assets. Had I owned any bitcoin I’d be among those robbed. Silver lining I guess. That may make this whole thing seem rather off putting but highway robbery is a right of passage for any currency.
-According to a story by vanity fair .com, the first public bitcoin trade occurred on May 22, 2010, someone in Florida paid someone in England 10,000 bitcoins to order him two Pizzas. That meant each bitcoin was worth one fourth of a cent. This was later referred to as pizza day.
So to answer the question from the title, does cryptocurrency have a place in this? The answer is yes, clearly. How much of a place it has is a harder question to answer. At the moment, it’s not evident that cryptocurrency is currently ready for full integration into ecommerce platforms, of the 100 or so I’ve looked at between my own shopping, as well as research, I haven’t seen any ecommerce sites that accept bitcoin. The issue for this, according to blockchainland.com, is that the currency is still volatile. There are issues with fiat currency, but they’re known issues, such as inflation. It’s something we can speculate and address. When I was signing up for an investment account, I was advised that my main priority with investing is to outpace the rate of inflation. The second issue is that if a government decides not to allow for cryptocurrency, that cuts off the market from being able to accept that as payment. But we know our society is becoming increasingly intertwined, and as such the idea of a currency by the people, for the people is a promising one. And we’re a lot more conditioned to accept digital currency than one might notice at first glance. Do you play any online games? Any multiplayer game with an ingame economy is technically using cryptocurrency, so much so that in-game currencies can be traded for real world money. The one caveat is that there is technically a middleman in the form of the game server, but it checks most other boxes. Do you subscribe to anyone on Twitch? Chances are you’re earning currency specific to that channel. There’s a well known trading community called Bunz, it’s mainly popular in dense urban settings. As I attempt to declutter, a two step forward, one step back sort of issue, Bunz is a great means to trade stuff I want to get rid of for stuff I can use. Bunz has a cryptocurrency as well, called bitz. Users can earn btz by completing surveys paid for by advertisers, so in that sense btz are valued based on fiat expenditures. This allows for small retailers and boutique stores looking to gain an edge on the competition a new avenue to attract customers. Are you a reddit user? This one’s a stretch but it’s as good an opportunity to point it out as I’ll get, they have a reputation based currency known as Karma. Providing quality content nets you upvotes but if people don’t like what you say or do, you can get downvoted. This allows you to leverage your reputation by saving up karma and sacrificing it when you need to to something controversial. As time goes on I predict with confidence that we’ll be finding new and innovative ways to integrate digital currency, in the hopes that each person can see themselves as something of more value. For sellers, chances are you’ve already considered whether or not you’re going to accept cryptocurrency, so that part I trust you with. But what you may want to think about as well is a means to accept BAT through your supplementary content creation. If you have a presence on Youtube and other media platforms, you can provide users with a low-cost means to support your work without having to pay anything.
The last thing I want to leave you with, and let me make it abundantly clear this is my personal opinion not the official opinion of Ecomomics, a Debutify Podcast, I think all roads lead back to gold. According to https://education.jlab.org/itselemental/ele079.html gold is not only used for jewellery, it’s also a conductor of heat and electricity, and it doesn’t tarnish when exposed to air. Gold is also used on spaceships and skyscrapers as protection from the heat of the sun. So, for one precious metal to be useful in ways that we have only unlocked through rigorous innovation, to represent both a personal human achievement like marriage, and to protect our brave astronauts as they explore the frontier of space, all currency’s value will in one way or another translate back to gold. Who knows what it’s capable of in the future? So if you ever are in need of a safe bet, that’s as safe a bet it gets. Silver is in second… I think.. I might just be thinking of the olympics…