What is Crypto?
Overview
Over the years the use of physical cash has become less and less common as more people opt for the convenience provided by debit and credit cards. Whenever a debit or credit card is used, no physical money trades hands; rather an entry is made into an accounting system that banks use to demonstrate that one account has been credited, and another account has been debited. In fact, a lot of the money being accounted for everyday doesn’t exist in a physical form.
Much of the population has already chosen to use their currencies of choice digitally rather than physically. When people transition from physical cash to online banking products they may not realize that they are actually trading self-sovereignty for convenience. One of the best things about physical cash is that it can easily be exchanged between two parties without the need for a centralized intermediary (like a bank or a payment service provider). When people choose to do their banking activities digitally, banks have the ability to block transactions and freeze the funds of users without warning. This means that banks and/or the government that oversee the banks have control over how people spend their “own” money.
Crypto is an entirely new asset class native to the internet that is designed to fix this problem among many others. While there are many different types of crypto, all crypto generally acts as a digital representation of something else (e.g. a dollar, a vote, a ticket).
Crypto assets can be thought of as digital units of account that utilize blockchain technology, a revolutionary system used to maintain virtual records, to document transaction data in a decentralized manner.
Advantages of Crypto
Crypto is Decentralized
Crypto, unlike traditional currencies, commodities, or securities, usually isn’t issued by centralized institutions. This means that no individual authority has the built-in ability to alter the total supply or other parameters associated with a crypto asset.
The level of decentralization associated with a crypto asset depends on the issuer and blockchain which the crypto exists on. Generally the native cryptocurrencies of the largest blockchains (e.g. Ethereum) are the most decentralized.
Crypto is Secure
Crypto is secure thanks to the self-sovereignty provided by blockchains. On Cosmos-based Proof of Stake blockchains like Umee, an attacker needs to control ⅔ of the entire network in order to seize the funds of another user. Typically, the cost associated with attacking a network makes such attempts financially unpractical.
When crypto is “stolen” it is usually due to a centralized exchange being hacked or a user error. This is why it’s important for crypto users to familiarize themselves with basic safety measures and withdraw their crypto from centralized exchanges.
Crypto is Accessible
While traditional digital banking services have extravagant sign up processes in which users must complete a “KYC” and hand over large amounts of personal information in order to gain approval, crypto is fully permissionless. Anyone with an internet connection is able to create a crypto wallet and use it to transact with others or access web3 applications, regardless of their location or financial status.
Crypto is Censorship-resistant
Crypto users have full sovereignty over their funds and are able to use them without interference from a third party. Once a transaction has been entered onto the blockchain it cannot be reversed or altered. Censorship resistance is a large part of the reason why crypto has become popular amongst those in search of financial freedom, particularly in nations with oppressive governments.
There are more cases where crypto and blockchain projects work with the regulators on sanctioned lists of wallet addresses. As crypto is an emerging industry, there will be an ongoing effort for the industry to address compliance while balancing off a decentralized market.
Crypto is Transparent
One of the most common misconceptions about crypto is that it allows criminals to transact in private. In reality, crypto is incredibly transparent since all transactions are broadcast on a public blockchain. Crypto transactions are significantly easier to audit than transactions in the traditional system because the blockchain records are permanent.
Crypto was popular amongst criminals in its early days due to its ease of use and permissionless, censorship-resistant nature. If privacy is what criminals are seeking, physical cash remains their best option.
Crypto is Convenient
Crypto is the fastest and easiest way for friends or strangers to transact with each other and handle their financial activities. Unlike many traditional banking services, crypto can be exchanged or used 24 hours a day, every day of the year. Crypto transactions on blockchains like Umee typically occur in ~5 seconds, and cost users just a fraction of a penny.
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