Synopsis: This post is the first chapter of The Crypto Intro – the new book from bestselling author Nathan Rose. It will give you a taste of what The Crypto Intro contains, as well as some valuable insights into cryptocurrency basics!
Crypto is red-hot right now.
Media outlets are giving crypto unprecedented airtime, while the general public has been captivated by the staggering price rises observed across the board. When measured in US dollar terms, Bitcoin ballooned by nearly 14x in the 2017 calendar year alone.
Beyond the tremendous increases in value, crypto has received so much attention because of the challenging questions it raises about money and the role of central authorities such as banks and governments – roles which, in the past, were taken for granted.
Before the start of the crypto revolution, government-issued banknotes and coins seemed to be the only thing that money could possibly be. We had never known any other way in our lifetimes, nor in the lifetimes of our parents.
One of the cryptocurrency basics is to question this assumption. Fast-forward to today, many members of the crypto community ardently believe that crypto is destined to replace government-issued money, just as the personal computer replaced the typewriter. If this vision is even half-right, the implications are hard to overstate. Even if the reality falls short of this, crypto isn’t going away. Crypto promises to substantially weaken the monopoly power of centralized institutions.
These are still very early days for crypto. And most members of the public finds crypto to be, well, cryptic. Even regulators are scratching their heads. As United States Senator Thomas Carper said: “…Bitcoin [has] captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” Perhaps you can relate.
Truthfully, very few people really understand even the cryptocurrency basics. Many people are highly skeptical. If that sounds like you, then The Crypto Intro was written with you firmly in mind. But we may be getting ahead of ourselves. Before getting into how crypto functions, let’s make sure we understand what we’re talking about
What Is “Crypto”?
Crypto refers to digital assets secured by cryptography. Cryptography is a branch of computer science which deals with privacy and encoding. Within the broader category of crypto, there are many different “coins” or “tokens”. These coins/tokens are the individual assets which make up the space;
Crypto is entirely digital – as in, it exists only as computer code. You can withdraw a $20 bill from your bank account and hold it in your hand, but that is not possible with crypto. Critics have understandably expressed their reservations about an asset they can’t touch. To them, it all seems a bit too much like make-believe.
This concern over whether or not crypto is real must be addressed head-on. It may help to ask yourself: is something “fake” just because it only exists in the digital realm? We send and receive digital messages through SMS, e-mail, and instant messaging all the time, and they are real enough. Because these digital messages get the message across, it works for its intended purpose – it is real.
Crypto has the same basic idea at its core. Just as email has an edge over the postal service, crypto enjoys important advantages over banknotes and coins – as the next chapter will explain.
Besides, I would be surprised if any readers of this book don’t already use digital assets. Chances are very strong that when you bought your copy of The Crypto Intro, you entered your payment details via the Internet to complete the purchase, probably using a credit card. If that was the case, you never handed over physical cash. Operating without “tangible” banknotes or coins is already familiar to anyone who gets their earnings deposited electronically, uses direct debits to pay their utility bills, or shops online.
Therefore, using crypto as an alternative form of value transfer isn’t such a huge leap from the status quo. In fact, in some cases, using crypto feels a lot like using online banking. What distinguishes crypto is more about what happens in the background. Just as petrol cars and electric cars feature a similar driving experience, and it’s only once you look under the hood that it becomes clear that the engines run differently.
One of the main goals of The Crypto Intro is to show readers the crypto engine and explain how it works. That way, the reader can have a lot more confidence about cryptocurrency basics when they come to use it.
So, the fact that crypto is “nothing more than computer code” is no reason to dismiss it. Equally, government-issued money is “nothing more” than printed paper and non-precious metals – or more commonly these days, the numbers on a screen, representing a balance recorded within a bank’s electronic database.
What gives value to crypto is the same as what gives value to government-issued money – the trust that people have invested in it. Whether they realize it or not, people who trust the US dollar are trusting the US government not to debase their currency. But as we will see, there are strong reasons why it is not wise to place too much trust in a system where value can be controlled and manipulated by powerful central institutions.
Another cryptocurrency basics point to understand: Crypto is not government-issued, and nor is it stored in banks. Instead, crypto is decentralized, which means it is not controlled by any single authority. This is critical. Computer code governs everything, including the amount in circulation. This feature renders it immune from interference. The decentralization at the heart of crypto has a clear parallel with the Internet, and throughout this book, the Internet will be referred to as a useful point of familiarity.
Like the Internet, crypto exist as a borderless, networked system of connected computers. The Internet is not a singular place, and nor is crypto. For all intents and purposes, this makes the Internet and crypto impossible to shut down or outlaw. No-one, no matter how powerful, can point to a certain building where crypto resides, march in, and turn it off. Groups who feel threatened by crypto will certainly try – just as monopolies and cartels have always done when they feel their power slipping away – but there are immense practical difficulties confronting those who would like to make crypto go away.
Crypto means that value can be transferred in the same way that the Internet has enabled information to be transferred; instantly, at minimal cost, without the need for third-party approval, and without censorship. As we all know, the Internet has turned out to be quite a big deal – there are few aspects of life that it hasn’t touched. Entire industries have been killed off, and new ones have risen in their place.
The Internet has been particularly bad news for middlemen (travel agents), gatekeepers (book publishing companies), and those that failed to adapt (video stores). On the other hand, the Internet has also removed huge layers of cost, enabled us to communicate far more efficiently, and given us free or near-free access to virtually all the information in the world. Few would wish to go back to the old way – and regardless, there is no way to do so. Technology cannot be put back in a box.
Could crypto have similar world-changing effects? Cryptocurrency basics show that its promise is incredible – to disrupt the antiquated financial services industry and the outlandish fees they charge, by providing instant, near-free transactions to anyone with an Internet connection. And bringing disruption to the financial sector may be just the tip of the iceberg. It’s impossible to say with certainty what the future holds, but a lot of very smart people are betting on crypto: from Silicon Valley, to Wall Street, to legions of volunteer computer coders… to (most importantly) the early adopters who are using crypto every day. Perhaps after reading this book you will join them.
Who This Book Is For
Despite crypto being all over the news, most of the coverage fixates on the day-to-day price movements, rather than the bigger picture. It is impossible to get into the nitty-gritty of even the cryptocurrency basics in a 3-minute segment wedged between the sports news and the weather. To do the subject justice requires going into far greater depth.
There have been other crypto books, but the ones already published have been either accounts of the technology’s history and potential impact, or highly technical treatises written for computer programmers. The literature was clearly missing a high-quality cryptocurrency basics guide, with all the information a newcomer needs to quickly get to grips with crypto and the steps they need to take to get started.
This book has three main goals:
- Explain the need for crypto, along with the problems inherent with the status quo system of centralized authorities such as government-issued currency and financial middlemen.
- Demystify the terminology surrounding cryptocurrency basics – we will get to the bottom of the meaning of “wallet”, “mining” and “ICO”.
- Show readers what to do to try crypto for themselves. Frustratingly, other books gloss over the practical steps – like how to register on an exchange, how to buy their first crypto, and what to do to keep crypto secure. But my experience has been that this sort of detail is essential, and has previously been a huge stumbling block for many crypto newcomers.
The Crypto Intro is designed to be accessible to non-technical readers. It will use analogies (even if slightly imperfect), rather than resort to the more precise, but less-legible computer code. If your eyes glaze over when you hear terms like “elliptical curve digital signature algorithm” and “distributed timestamp server”, then don’t worry – this is the book for you.
Although this book won’t go into overly-onerous detail, it also won’t shy away from taking the time to explain important concepts to do with cryptocurrency basics, even if they are difficult. Albert Einstein once said that everything should be made as simple as possible, but no simpler. The Crypto Intro tries to tread the fine line between making crypto easily understood, but without oversimplifying. I have assumed a reader with no prior knowledge, but one who is ready to roll up their sleeves and get into the inner workings of crypto – including the tricky bits.
No, It Is Not Too Late To Get Started
A common lament is that the best opportunities in crypto have already passed. In its short life, Bitcoin (the first ever crypto) has gone from being valued at well under US$1 per unit, to over US$10,000 by the end of 2017. It is assumed that increases like this could never be repeated. But as we will see, there is far more to crypto than just Bitcoin.
Literally hundreds of other cryptos are currently jostling for position, each with their own uses and communities. As of the time of writing, crypto is less than 10 years old. If we looked at the Internet in, say, 1996, some of the largest companies that dominate today’s web landscape had barely taken their first steps. Amazon was an inconsequential web store that only sold books. Google was nothing more than an academic research project by students at Stanford. Facebook’s founder hadn’t even reached his teenage years. If crypto follows a similar development path as the Internet did, then there are still plenty of fortunes yet to be made. Was it too late to get started on the Internet in 1996? Absolutely not.
Only a tiny fraction of those who are aware of crypto have taken the necessary steps to experience it for themselves. By reading this book, and investing even a small amount to try it out, you will already be ahead of the vast majority.
Additionally, anyone who begins with crypto now has avoided a lot of the problems that beset it in the earliest days. The largest online crypto exchanges of today are (for the most part) well-funded, highly professional outfits with real expertise in making this new technology secure and user-friendly. Further, all these exchanges must compete with one another to provide the best service. The initial teething issues have provided lessons which have made crypto stronger. By starting with crypto now (and not earlier), the reader has avoided many of the pitfalls that beset crypto in the past. There are still things to watch out for, of course – and this book will do its best to point those out – but it is not too late to get started with crypto. Now might just be the very best time to begin.
Be Responsible For Your Own Decisions
For the record – I am not responsible for what you choose to do with this information, nor am I advising you to take a certain course of action. As you are reading, make sure to:
- Question everything.
- Form your own opinions.
- Never risk more than you can afford to lose.
There is also a full legal disclaimer notice at the back of the book. With that out of the way, let us commence our journey. We will start by going deeper into the problems that Bitcoin solves. This will help with understanding why crypto matters, and this cryptocurrency basics information will serve as a foundation for everything else that follows.