via Eddie López
Whether from headlines, commercials, or otherwise, I’m sure many of you are now familiar with the topic of cryptocurrency. It’s been everywhere.
That being said, I think there is a difference between hearing a topic all the time and actually understanding what the topic is, and until recently, I belonged in the former group. Moreover, that really bugged me.
As a means of trying to understand more about crypto in general, I tried to take a quick dive into the world that is crypto. Hopefully, this proves useful to you, as the reader, as I share some quick notes on the process I took, what I discovered, as well as some of the steps I hope to maybe take in the future.
Setting the framework:
According to Oxford Language dictionary, currency is “the money in general use in a particular country.” Resultingly, currencies generally need to have attributes such as being widely accepted, having a certain amount of liquidity, and having stability.
The interesting thing about cryptocurrency is that it has really begun to stretch the connotation of some of these rules. Example? Our starting definition highlights that currency works within a certain country’s borders; classically, this means that the currency is controlled and/or produced by the given nation state. However, in the case of cryptocurrency, this is not necessarily the case (i.e. Bitcoin has no national producer).
Thus, with all these nuances being added to our classical definition of currency, I began to dig into the question of “what makes cryptocurrency valuable?” With Bitcoin being the current, leading, world cryptocurrency, I decided to use it as my test case when answering this question. This is what I found:
- Scarcity: Bitcoin has a predefined limit of how many Bitcoin can exist (22 million). Factoring this in with the increasing difficulty it takes to reach said limit (due to Proof of Work… a concept we will touch on later), this also provides a certain stability in the amount of Bitcoin on the market.
- Security: Bitcoin uses a technology called blockchain—a digital ledger technology that records transactions via hashes. Moreover, because of how Bitcoin utilizes the blockchain, Bitcoin is very hard to corrupt or “steal” per say. This is because Bitcoin has every device on the network help its crypto security by constantly checking to see if the coding values line up. This also contributes to a stability of sorts.
Going for it:
With that general framework in mind, the next step I wanted to see was how, on a fundamental coding level, does crypto function. To do so, I simply found some online, python source code for creating my own cryptocurrency, and then proceeded to process and comment on each step of the code. If you’re into that sort of thing, a link to the tutorial can be found here, and it will walk you through step by step in how to create a basic, general cryptocurrency. My annotated version, which I called TNLcoin, can be found on the TNL GitHub. I found it a super helpful exercise for understanding a lot of the technical concepts behind crypto. If this is not your kind of thing, the main summary of my lessons from the code, as well as how all that ties into the context described above, is nicely summarized in the above flowchart.
Thoughts and way forward?
Ok… so this may sound really dumb, but if you end up computing the code like I did, what you end up finding is at the end, the result is simply a line a of hexadecimal hash. In plainer English, its just coding line of some letters and numbers.
At least for me, I found this all to be very… anticlimactic? Granted, this is a simpler code, and it doesn’t contain all the intricacies of smart contracts (i.e. the contracts that allow you to buy and sell crypto between users on the larger open market) and a few other things. However, it does contain the basics… and I guess I find it a tad weird that all this news, all this hype, all these highs and lows in the stock market are coming from a line of letters and numbers. What a weird thing.
Furthermore, I think that is also why there is so much fluctuation. The future of its role in the world and /or its intrinsic value is uncertain.
All that being said… so what next?
There are a couple areas I think would be super cool to go. If I stick within crypto, I think it would be super cool to see other ways we could assign value to crypto currency (i.e. other paths to explore in Proof of Work or Proof of Stake). Maybe study trends and do some gaming to see if crypto, if at all, will ever stabilize? If so, when? If not, when does it fall off the deep end?
The other route which would be super neat to explore is blockchain in general.
As the wise Jon Wellburn once told me, blockchain is more of a solution looking for a problem, instead of a problem looking for a solution. Consequently, the areas in which blockchain could be applied are numerous… and I think one of the most applicable / helpful ways would be seeing how to use blockchain for voter security, especially with all the worries of legitimacy in this last U.S. election.
All this to say is that there is a lot of work to do… and whether by me in another portfolio project or otherwise, it should be neat to see how it all unfolds.
Until next time TNL. Excited to share more updates as I build on this, or move to other areas of interest.