By now we’ve all heard of Bitcoin, and you might have heard of Ethereum and its exotic diamond-shaped logo. But in terms of how they work and what they mean for our future, many of us are still in the dark.
With any new tech touted as ‘groundbreaking’ there’s always talk of interactions between each other changing forever, and worries about having to learn a bunch of new technology and systems.
But for cryptocurrencies and blockchain tech you won’t have to, and here’s why.
The buzzword basics
Before we get started, I want to quickly solidify your understanding of a few blockchain buzzwords. Those words are blockchain, decentralisation and cryptocurrency.
A blockchain is a form of distributed ledger technology, or more simply, a continuously growing series of records (blocks) linked to eachother chronologically (the chain). It’s a way to store data differently to what we’re used to, like how banks store our data on centralised servers they control.
Instead, blockchains can be used in a decentralised fashion to store data on several thousand computers ran by people around the world. That data is now decentralised.
Since the same information is stored everywhere, you can’t fraud the system. If you tried, the thousands of computers constantly verifying the network’s transactions would detect any tampering and stop your attempt.
A blockchain can store anything, from a simple list of transactions — like Bitcoin — to something like ownership of property or assets.
Meet Jess. Jess lives in California, and wants to send $200 to her mother in Australia. Modern methods of international money transfer are too expensive for Jess, so she transfers her Mum some cryptocurrency. Their transaction is recorded and verified on the blockchain, and is irreversible and un-fudgeable.
In this example, the cryptocurrency represented the value transferred between Jess and her Mum, which was recorded on the blockchain and traced and verified by a network of decentralised servers. Get the gist of it?
Without getting too technical, the possibilities here are massive, with the potential for multitudes of different kinds of tech to interact with blockchain applications.
Take Bitcoin’s younger cousin Ethereum as an example, which introduced a new functionality to the blockchain space through things called smart contracts. These allow for two parties to agree upon a contract and have it facilitated over the blockchain. This contract has conditions like any other, like how to execute the contract, how to disable the contract, and payments to facilitate the contract, but with no need for a third party body to manage it.
Cryptocurrency can also hold value outside of the blockchain and in other communities. The money Jess sent her Mum can then be used to pay for a haircut, or maybe even buy a burger.
But where does the ‘crypto’ part of cryptocurrency come in, and how do they compare to traditional digital currencies?
How is a cryptocurrency different from a digital currency?
Traditional digital currencies typically lack the ability to serve the user on a larger scale. For example, imagine you have 100 coins of your own custom currency.
If they were traditional digital currency, without any of cryptocurrency’s namesake cryptography, you might be able to make rules that control what the currency can be redeemed for. In Jess’ case, she can trade her digital currency back and forth with her family and friends, but not do something like exchange ownership of goods only after certain conditions are met, since managing these contracts exceed her resources.
This is all fine if she wants to stay small, but if new groups wanted to join the network and exchange Jess’ coin, onboarding them would be difficult. The value of your token would become hard to manage. Do you decide on it’s worth? How can you be sure you distribute it fairly?
The truth is, traditional digital currencies just aren’t really very capable. They are restricted by the prospect of fraudulent behaviour and the required resources to manage complex exchanges between parties.
Look at airline rewards programs. They have a very limited amount of purchasing power and are intentionally designed to keep you spending within their network. This is fine for centralised corporate bodies who put profit before people, but with cryptocurrencies, both people and profit can happily co-exist.
You can have your crypto-cake and eat it too.
Well-designed cryptocurrencies allow for the more complex interactions and exchanges which aren’t normally permitted due to the cost of resources. The focus is on providing value to the people involved — and this is why decentralisation is putting power back in the hands of people.
Through implementing cryptography into a currency, its value and utility is maintained to still benefit the user as the platform scales — which is important, we’re all users.
So, having complex and valuable interactions with each other sounds great, but how do we get there? And what does this all mean for you?
By removing the need for central bodies to manage our relationships, we allow more meaningful interactions between us at a cheaper price.
As systems become more self-maintained, the need for profit is replaced with the need to provide value.
To get there, however, we need to bridge the gap between the wild-west of decentralised cryptocurrencies and our bank-ruled reality. This is where companies like Liven step in, which is creating a cryptocurrency solution for the everyday user via LVN — the first digital currency for food.
Platforms like Liven’s are the start of a new paradigm of technological development we’re shifting towards, allowing us to interact with each other regardless of border, origin, education, ethnicity and other social constructions — which is pretty exciting, don’t you think?
Read more about how The LivenPay project is building a stable cryptocurrency for the real world, and making the capabilities and benefits of blockchain technology accessible for brick and mortar businesses and everyday consumers in this announcement.