All Articles
December 9, 2024
These past months the global economy has been drenched in crypto winter: Bitcoin is under 20,000 USD, ETH is under 1,500 USD, and the NFT market has taken a huge tumble. This downfall in Crypto has legitimized many voices that are so-called “calling bullshit” on Crypto, preaching that the sun will soon set on Crypto once and for all.
However, we believe that that kind of perspective is missing out on a much bigger picture: Crypto is not a passing phase but a natural and necessary step towards a new financial system. However, Crypto is a new technology, and many people are still deterred by it. So, to understand why Crypto is s breaking-through technology and how it can change the global economy, today we will break it down once and for all: Why Crypto is so revolutionary and how the future is shaping as we speak.
In retrospect, the birth of Crypto was heavily influenced by a historical event that supposedly has no connection to it whatsoever. In 2008, the world experienced one of the worst financial crises of all time, which is usually referred to as “The Subprime Crisis”.
The sequence of events is complicated, but the bottom line was the solution to the crisis: After the collapse of Lehman Brother, a major investment bank, the chairman of the Federal Reserve, Ben Bernanke, claimed that the government won’t interfere to save AIG insurance from a financial collapse, the entire economy will collapse (He famously said: “If we don’t do this tomorrow, we won’t have an economy on Monday”). Bernanke convinced treasury secretary Hank Paulson to aid the passage of congressional legislation that would transfer hundreds of billions of dollars to different financial institutions in the American economy, all from the taxpayers’ money.
Although this move prevented the economy’s collapse, it wore down almost every bit of trust that the public had in its financial system: The people understood completely that big players play by a different set of rules than the public. This sequence of events was the catalyst to the success of a technology that emerged at the time: Bitcoin.
Bitcoin was a decentralized coin, meaning that any political authority did not control it. Moreover, Bitcoin is hosted on what was then a new technology called blockchain: The blockchain is a digital ledger of transactions that documents any transaction ever made on it. To modify the documentation of a transaction, we need the collective consent of over 50% of the nodes that verify the network. Since there are many anonymous individual validators, this kind of sabotage is realistically impossible, making the blockchain not only super-transparent but also super-safe.
These characteristics can allow people to trust Bitcoin and other cryptocurrencies that are built on a blockchain. Trust is basically everything in business: the modern economy is more successful than other historic economies because of the trust it allows. But Crypto can help us achieve even greater levels of trust. For instance, Ethereum enables us to write smart contracts: Smart contracts are software written on the blockchain that ties together several commands executed automatically in predefined situations. This allows for greater levels of trust since we can conduct our business with codes instead of people.
In conclusion, we see downfalls in the Crypto Markets these past few months. But as a matter of fact, we see downfalls in the stock market as well; Just last week, Stanley Druckenmiller estimated that if this lack of trust in the economy continues, we’ll see a renaissance in Crypto. Since Crypto is the only possibility of an economy free of trust, it is only natural.
Let us know how we can help you!
