What is crypto currency? Seems like such a simple question, but answering it is not a simple task. Especially if I am talking to my mother, sorry mom. The most common response I get when asking people about crypto: “You mean that bitcoin thing?”. While bitcoin is inherently a crypto currency, not all crypto currencies are bitcoin. Just like in the physical world, there are multiple forms of currency, from the USD and Peso, to the Yen and Euro. Bitcoin just so happens to be the most well known crypto currency at this time, but there are many others.
If you are confused about the world of crypto currency, you are not alone. Let’s dive into figuring it out.
This could be an entire series in itself, but a very common question: “Is crypto real money?”. To truly understand what money is, we have to accept and understand one major concept: money is an illusion. In today’s society, we have multiple people – mutually agreeing that a piece of paper – with a fancy picture of a president – the numbers “two, zero” on it – in the shape of a rectangle – is worth a tank of gas. It’s not crazy that we do this, but the value behind that piece of paper is a complete illusion.
There are only two things that must be true for something to be used as money. First, two people have to mutually agree it has a value. Second, there has to be something to transfer; like food, paper, or utilities.
In the case of crypto currency, millions of people have mutually agreed it has value, and we transfer ownership to one another as payment. Without this foundation, the idea of digital, cryptographic, monopoly money universe is extremely difficult to comprehend.
I think most people can understand the basic concept of what a currency is, but what is with this word crypto? Seems like some made up word from the Da Vinci Code or Legends of the Lost Temple.
By definition, “Crypto” (short for cryptographic) is anything written in a secret code or cipher. Thanks Webster. When we put these two words together, we can now understand that crypto currency is simply: money hidden behind a layer of code.
So why does there need to be a code? Why can’t we just use credit cards and cash? There are still a lot of unanswered questions here to get a full understanding of crypto and all its glory. In the next lesson, we will answer the question, how does crypto actually work?