Note to Mr. Whittle: If you’re reading my humble post and it doesn’t quite interest you, please at least jump to the bottom for a special message if you read nothing else.
Though… I did put a lot of effort into this to help with the MBtA movement… :p
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When Bill Whittle first started the MBtA series, I decided to poke around with cryptocurrency. My foray was (almost) completely novel, driven by two things: a love for all things digital, and a fear of all plans budgeted by Dems. I stuck my toes in, felt the water, then took a few more steps in, and am now diving headlong into cryptocurrency as a legitimate alternative, if in no other form than a hedge fund against the impending rule of Dictator Biden.
I have compiled what I learned on my layman’s adventure. Unfortunately, I have a tendency to write essays, so I have endeavored to make it, uh, easier to read. With bold headers and stuff. And the occasional question for comment fodder. I hope you enjoy my humble contribution to our quest to rediscover America.
Here is what I learned:
Blockchain Technology
Decentralized Data Redundancy
In layman’s terms, blockchain is the equivalent of a spreadsheet or database that is stored on every single “node” in the network. Each node periodically checks with other nodes in the network, grabbing any new transactions to update their spreadsheet. The verified transactions are saved as a “block” that is baked into the history of that “chain” (or spreadsheet/database).
Every Transaction Saved Everywhere
This essentially means that every transaction is on every node. Now, the details of the transaction are restricted to the amount, the address of the sender, and the address of the receiver. The addresses are randomly generated strings that your wallet uses for the duration of the transaction. Then you get a new address for the next transaction, essentially erasing any possible way to track your wallet even if someone somehow figured out that your wallet was briefly linked to a particular string of random letters and numbers. Only your wallet remembers.
Totally, Completely, Perfectly Private and Trustless
This means that everyone in the network knows that you transacted, yet no one can ever trace who transacted. Which means humans, in our ever-amazing ingenuity, have discovered a way to have our cakes and eat them: freedom and security. Near-perfect privacy and verification, no trust needed (i.e. no bank or government saying yeah, this person’s legitimate).
Question: Does this clarify blockchain for you? Do you have a different understanding of blockchain technology?
Crypto Wallet – Nodes
Your wallet stores your crypto. The traditional way to do so is to download a node onto your computer, usually through a cryptocurrency’s individual software (such as Bitcoin Core).
This is impractical, however: you’d have to download the entire history of transactions, and keep the node running. This costs time, space on your hard drive (bitcoin’s history is now at about 350gb), AND bandwidth, and leave your money vulnerable to anyone hacking your personal computer.
The upshot would be that your currency would be hosted by you, and you wouldn’t have to share any identifying information with anyone to transact.
(Check out mining below for a better alternative if this interests you)
Crypto Wallet – Coinbase
The Exchange for Cryptocurrency
Coinbase (and other cryptocurrency exchanges) can host your wallets for you. Using an exchange means you don’t have to download the entire history of bitcoin. Or any other crypto, for that matter. Plus, they allow for instant trading (provided it stays on Coinbase, and I’d assume the same for other exchanges), which means you aren’t lagging minutes behind the value of the crypto.
The Middleman Returns!
Yup. You reintroduced the middleman. Instead of a bank, your money’s on an exchange. Coinbase keeps track of your wallet and knows all its transactions, even if it rotates its address. And as recently as last week, FinCEN has been pushing for Know-Your-Customer (KYC) legislation that would require exchanges to not only report information about the accounts on their systems, but as much identifying info about the people they’re sending to, as well.
Bonus Points!
Coinbase has a rewards program that gives new crypto a chance to get some attention from users, while also getting users into crypto. You can watch little promotional videos about the more obscure cryptocurrencies in exchange for $1-3 worth of that crypto per video. Then you can keep it there or dump it all into bitcoin or some other giant. Or pull it out. Or whatever. It’s not much all told (like maybe $30-$45?) but it’s free! As long as you sign up. And give them a photo ID. And your bank info.
So… Why Give Up Perfect Anonymity?
The main point of this would be the trading factor. Kind of like PayPal or a credit card. A way to pay for things quickly and efficiently, and funded occasionally by a private wallet stored somewhere else.
Question: Is anyone else on Coinbase? Or some other exchange? Which do you prefer?
Crypto Wallet – Hardware/Cold Storage
The most secure place to store your crypto would be in a physical wallet. Physical wallets are devices specifically designed for storing crypto, and many come in the form of thumb-drive-like devices. They have a specialized OS designed to prevent your computer (or any other for that matter) from tampering with your funds.
Off-the-Grid, Cold Hard Permanent Storage
The advantage is that you can unplug them, taking them off the grid instantly. Meaning your wallet can’t even be accessed without the physical device. In the case of Trezor Ones (the model I purchased), they don’t even require power; everything is stored in persistent memory. From my limited hardware knowledge, I can guarantee that the persistent memory will work no matter how long it’s been unplugged.
Recovery Seeds
What if the worst happens, and your wallet gets damaged? Well, for every crypto wallet (not just the physical ones), you have a recovery seed. This is a set of 12-24 randomly generated words. If you’ve ever used one of those security keys that gives you a random set of numbers for something, that’s the same philosophy here. In fact, that’s how your addresses are generated. Using this recovery seed allows you to traverse the blockchain and pick up every instance where your wallet transacted, based on what the generator would have generated for that point in time. Voila! Your money is back. Just don’t share that recovery seed with anyone. Ever. Ever ever. EVER. NEVER. Don’t digitize it. Write it down. Memorize it. NEVER LET THE MACHINE GET- ok you get the point.
Cash in Your Pocket? …Not Quite. Not Yet, Anyway…
Downsides are that these aren’t quite consumer-friendly just yet. Purchasing crypto is tougher than on an exchange, and my particular model has the obvious detriment of needing to be plugged into a computer to work. There are more expensive models that may be capable of independent use, but they’ll inevitably need power sources and networking, exposing your crypto to the internet. I expect we’ll find a way around that, but not until there’s more market adoption.
Ultimate Freeze-Proof!
But the major upside is that these can’t be frozen. Ever. Your wallet rotates addresses; even if a particular computer is frozen or tracked, you can just plug into a new computer. Your wallet can’t be tracked. And it can be taken offline completely – truly off-grid. Like having actual cash again.
Currency – Bitcoin/Bitcoin Mining
The One that Started It All
Bitcoin is the one that started it all. And despite the best efforts of “altcoins” (cryptocurrencies other than bitcoin), it remains at the top in terms of value and adoption. It’s robust and lucrative, private and secure, and best of all, it can’t be printed. There is a limited amount of it. Once the miners have mined all the bitcoin, there won’t be any bitcoin left to mine. You can’t add any more bitcoin to the network. That’s it.
Inflation-Proof – the Roof of Bitcoin
Bitcoin is created through a process called “mining.” Computers attempt to break complex encrypted puzzles, and the first one to do so gets the bitcoin. The amount gained halves every so often as the bitcoin chain grows. Estimates say that the last of the bitcoin will be mined in 2140. So yeah, it’s a ways off. But they can’t mine it as quickly as they used to, and things will continue to slow.
The Mining Process
Because you’re competing against other computers in the network, it behooves you to have the best hardware and software capable of mining. Groups have even “pooled” their resources together, with each participant earning a share of any bitcoin mined – reducing the amount one could earn, but increasing the chance of earning some. This competition has gotten so fierce that regular computers no longer have a prayer. There is actual hardware dedicated to cracking the crypto-puzzles.
What Else Are Miners Good For?
The other way that miners earn bitcoin is by verifying transactions. Every transaction that you send through the network has a fee attached to it. The higher the fee you offer for miners to move your bitcoin, the more quickly miners will get to your transaction. This fee is calculated for you automatically by Coinbase and other exchanges, and most places that allow you to buy bitcoin will do the same. Some will allow you to set a custom fee, but they warn you that if it’s too low, your transaction may get stuck – never be processed, in other words. For small transactions, it comes out to about $1. So kinda pricey.
Currency – Ethereum
Digital Gas
The competitor for bitcoin. Where bitcoin is called digital gold, ethereum is called digital gas. The ethereum environment makes it easy to create your own blockchain for whatever purpose you envision. In this way, it aspires to be the fuel that powers the internet in a way we’ve never seen before (thus, gas).
Redundant, Decentralized Internet
Take the nodes I mentioned earlier. Instead of financial transactions, you could store separate copies of a website in completely separate locations. One might go down, but if you have seven other redundant copies all making sure they always stay up to date, you don’t have any downtime. One might be seized by a government, but the other copies stay live. One might be attacked via DDOS, but if you have enough nodes, you essentially can’t kill every single instance without taking on the entire internet.
Goodbye downtime, goodbye third-party interference, goodbye censorship.
Ethereum’s True Purpose
The currency is almost an afterthought for ethereum, honestly. Its main purpose is to put blockchain technology into the hands of every ambitious developer, and the explosion of uses speak for themselves if you do any digging. Blockchain technology means that everything is transparent, and anyone can go look up any action that takes place, while yet retaining the privacy and security of the individual by rendering them anonymous.
Did a house title transfer?
Yes. It was a valid transaction. Anything else?
Who transferred it to who?
Does it matter?
Yes, I’m the government!
I don’t care. And I don’t know, anyway. It was a valid transaction, and that’s really all YOU need to know.
This is a simplified example, but not far at all from how blockchain technology is being used already.
Currency – Altcoins
Bitcoin too mainstream for you? On Coinbase alone there are already dozens of alternative coins that actually have value relative to the US dollar. Ethereum too volatile? “Stablecoins” are a thing! Check out Dai, which aims to be identical in price to the US dollar without being backed by the US dollar. Had a secret urge to one day own an honest-to-God unicorn token? Check out Uniswap – they’re $6.37 right now. No joke. There are actually people who trade coins with unicorns on them. And those coins are, in fact, worth more than our sad little bucks.
Question: Which cryptocurrencies are you aware of? Any that you’re particularly fond of?
And Lastly, a Message to Bill Whittle
A Brave New World
The Brave browser is an alternative to Google Chrome, and works from a direction of privacy first. All trackers and ads are disabled by default. Brave is funded by a cryptocurrency called the Basic Attention Token (BAT), where people can choose to view ads in exchange for a tiny fraction of a BAT (which itself is worth about 25c right now).
Want Tips?
People can transfer BAT tokens to their own accounts, or they can tip sites that they like with BAT tokens. Your site says it is a Brave Verified Creator, but that you haven’t set it up to receive tips yet.
BATTY Support
I’m barely hanging on by my fingernails right now in terms of funds. I’m honestly not sure where my next paycheck is coming from at the moment. Obviously I’m a member, and I’m trying my darndest to make sure it stays that way. But all of this is to say I’d watch ads for you. I’d watch hundreds of ads for you. I’d probably only earn enough to tip you like $5 in BAT tokens here and there, but if it helps… if it can help…
Just a thought. I know you need all hands on deck. Maybe this can help.
2 replies on “Crypto: A Layman’s Trial Run in Review”
A very useful and straightforward intro. Thanks!
I have a Coinbase account, though its balance is zero right now. To get my feet wet, I bought $10 worth of Bitcoin when it was around $6000. It soon doubled and I knew all I wanted to know at the time so I cashed out. (A mistake, I know, but that’s hindsight.)
I didn’t know that Ethereum was uses for more than currency! I want to look into it for MB2A use! Start with file storage, maybe, though I’m sure we’ll find a good use for it, whatever it turns out out to be. We already have anonymous, end-to-end encrypted communications – blockchain fits right in with our secrecy policy.
Send me a PM and I’ll hook you up with the comms. Were going to have a funding department and you’d fit into that nicely. Or any other way you would like to help, if you do.
P.S. Excellent intro to crypto.