Cryptocurrencies hold the promise of making it easier to transfer funds directly between two parties, without the need for a trusted third party like a bank or credit card company. These transfers are instead secured by the use of public keys and private keys and different forms of incentive systems, like Proof of Work or Proof of Stake.6 INVESTOPEDIA
Because his loyal readers depend on the Clown to explain the often unexplainable (i.e., hip hop, the content of black holes, QAnon “patriots”, derivatives, cisgender, etc.), he has determined to demystify the little-understood phenomena known as cryptocurrency.
Unlike traditional currency, which has been around for approximately 6,000 years, give or take 4,000, cryptocurrency isn’t made with metal, paper, beads, grain or livestock as tradition dictates. While most of the world uses script, a fancy name for folding paper currency and coins, there are yet some societies that use commodities such as barley or goats to pay for goods, services and the occasional bride. Also, and perhaps importantly but the Clown doesn’t really know, traditional currency doesn’t require private keys, public keys, proof of work or proof of stake.
Somewhat confusingly, cryptocurrency isn’t the same as the electronic transfer of funds, which, in reality, is electronic bookkeeping backed up with actual currency which is located world-wide in something called ATMs. To date, it isn’t possible to extract cryptocurrency from ATMs but things do change. Maybe if one had a proof of stake card, who knows?
The term “cryptocurrency” comes from the fact that it is created in abandoned crypts in unknown locations throughout the world. The largest concentrations of these manufacturing sites seem to be in Belarus, the Bahamas, parts of the Chinese mainland, Belize and Brooklyn. The signature indication that cryptocurrency is being manufactured nearby is the enormous amount of electricity required to run the computers that store and process the currency. This process uses something called blockchain technology, a series of chains that form blocks of chains that are then chained together in long, ponderous chain of blocks and blocks with chains attached. Simple really.
Blockchain technology has also spawned the NFT or non-fungible token which his waaaaaay different than a subway token. These NFT’s have sold to art collectors for as much as $69.3 million. That’s a bunch of rides on the A train. However, today’s post will not try to explain NFTs to insure that the Clown doesn’t slide into a grand mal seizure.
The identities of the cryptocurrency creators are opaque and are also difficult to determine. However, it is known that these mysterious financial wizards stumbled on the abandoned crypts and the idea of the new currency while taking part in something called the “Dungeons and Dragons” version of Pokemon Go. (see the Clown’s Pokemon Go post of July 22, 2016). Once the idea was fleshed out, word spread on the “dark web” that cryptocurrency had all the best features of a pyramid marketing scam–that’s scheme– except a cryptocurrency manufacturer doesn’t need to hold sales rallies or irritate friends, family and neighbors like Nu Skin or Herbalife “partners”.
The granddaddy of cryptocurrency is Bitcoin. The alleged creator of Bitcoin is someone called Satoshi Nakamoto, a name that is thought to be an alias because it roughly translates in English to the phrase “I have a gun, open the till”.
According to the website Investopedia, there are 21 billion Bitcoins in existence, although the term “existence” is thrown around quite loosely in the world of cryptocurrency given that they don’t actually exist except as a series of “1”s and “0”s in one of those lumbering, energy- sucking blockchains of electricity. They further note that there are 18.8 million Bitcoins in circulation with a total market value of $858.9 billion. Let’s see 858.9 divided by .0188….carry the two….means that every Bitcoin in circulation is worth $45,686.17. Not bad for a “coin” that can’t be put in a vending machine. One hint that the value of cryptocurrency could be an electronic mirage is reflected in some of the Bitcoin’s competitors’ names such as Ethereum and Litecoin.
The really special thing about cryptocurrency is that it eliminates the middle men like banks, brokerages, credit card companies or other regulated market makers. What could possibly go wrong? As any smart investor knows that by being the manufacturer, controlling distribution, making the rules, enforcing the rules and avoiding oversight, one can make oodles of lucre. The pluses are enormous: money laundering, tax avoidance and fraudulent bilking of greedy and dumb investors to name but three.
There are 2.2 million Bitcoins left to be “mined” (found) by cryptocurrency miners. Unlike miners in days of yore who first had all their teeth removed and then equipped themselves with a pack mule named “Bess”, a pick ax, a shovel, some filthy clothing, a sorry-looking sweat-stained felt hat with the front brim turned up and some Civil War surplus boots, crypto miners equip themselves with several high-end computers, a sorry-looking, sweat-stained baseball cap worn backwards, the guidebook “Algorithms for Dummies”, cargo shorts, a pizza-stained “Kiss” t-shirt and a pair of yellow crocs. They usually keep their teeth. Thus outfitted, these miner are tasked with solving complex algorithm mysteries, which is a mystery in itself. Should the miner solve these complex problems, he or she is rewarded with bits and pieces of cryptocurrency, very similar to an old-time miner panning for 1/64 ounce of gold, which in cryptocurrency would be worth $734. While the Clown is a whiz at solving algorithm problems, adding additional computers to his life would be a mental health dumpster fire.
Perhaps the Clown should have his teeth yanked out, buy a mule and head for Belarus.
Observoid of the Day: Having sympathy for the qualified but unvaccinated who are currently sick, hospitalized or dying, is a heavy lift.