Cryptocurrency: The march of cryptos was predicted in the Old Moore’s Almanac of 2022. Despite the crypto market not doing so well right now, the march of crypto usage in everyday life continues. Here are the basics. By Nicole Buckler
You may have heard the term Web3. This is currently what the world is switching to, whether you realise it or not.
Web1 was a time when the internet was young. We read things on it, but didn’t really interact. Then came Web2. This is when we actually interacted with others. And, we could create things ourselves for Web2. Facebook, YouTube, Instagram… these are all products of Web2.
But there is a problem with Web2. It is centralised. This means that a small number of “Big Tech” companies own it. They include Facebook, Amazon (who owns the storage that everyone uses) Apple and Google. These companies all make money from harvesting our information so their advertisers can use it to market to us.
Censorship
These companies have huge power to decide what we see and don’t see. They can and have skewed elections, and they have the power to throw people off the internet altogether. This happened with Parler, a conservative social media outlet, loved by Donald Trump supporters. While you might not like Donald Trump or conservatives, you might agree that if we believe in free speech, Parler must have a right to stay online, as long as they aren’t doing anything illegal.
In fact, Parler wasn’t doing anything illegal, and Amazon threw them off the internet by not letting use their storage services. If you believe in free speech, then this is wrong in anybody’s book. While a lot of people disagree with conservative politics, those same people would not think it is right that an unelected company gets the right to silence people they don’t agree with, on behalf of everyone else.
So there is the problem with Web2. We, the people, don’t run it. Not even governments run it. A small number of very rich companies own it. That’s why things need to change.
Web3 and the Switchover
Web3 is coming. Here is why this will make the world much, much fairer.
The arrival of Web 3.0 means a lot of freedoms that we don’t get from Web2.
Most importantly, ‘Big Tech’ can’t control it. Facebook, Google, Apple and Amazon won’t own our information. We can interact on Web3 social media platforms without having to give over our details. This is incredibly important. You can read more about that here.
In a nutshell, web3 is owned and controlled (theoretically) by the people, not by big companies who make money from us. The people who are making it are the smartest in society. Mathematicians, developers, software gurus. They run stuff now, not big tech.
Facebook have changed their name to Meta to try to catch up. But it is too little too late. Survey after survey shows that no one trusts Zuck with their information. Upon finding this out, it seems Meta have de-escalated their plans for their own Metaverse. Nobody trusts their crypto, Libra, either, and it has been sold on to another organisation.
Whatever about Big Tech, the most important change Web3 will make, is to the lives of desperately poor people of the world. And this has everything to do with cryptocurrency. Cryptos are the currency of Web3, which is why they are so important.
Web3 and Poverty
After Web3 takes hold, banks won’t run our financial lives, which is a good thing. Banks are centralized. This means that a CEO or a team of bankers run it, and they do what is good for themselves.
However, the new financial system is decentralized. This means that no one person or entity runs it. We all run it. This is what the blockchain is. Metaphorically, it is lots of little “blocks” that are connected.
The new Web3 financial system is called decentralized finance, or DeFi.
The main reason that DeFi is a much better fairer system, is because the banking system is incredibly unfair to the world’s poorest people. However, with DeFi, the whole world will change for the poorest of people.
Many poor people in Africa, Asia and South America are unbanked. What this means is that because they have no fixed address, or no funds to start with, they can’t open a bank account. Also, some of them can’t even get to a bank.
This means that they can’t get loans, they can’t get paid, and they can’t get financial traction. Cash is no good in a lot of these countries because of hyperinflation. That is, what they can buy for one dollar one day, is worth 100 dollars the next day. Their cash is worthless. They have corrupt governments who just print more money to solve the unsolvable. Or the bank just freezes their accounts and take their money anyway. They are trapped, which is criminally unfair.
However with DeFi, using a cryptocurrency like Bitcoin, all people need is a phone and a digital wallet to save and trade. Poor people do often have cheap phones. Using them, people can pay each other peer-to-peer. This is outside the system of government and outside the bank system, which favours wealthy or established people anyway. And because Bitcoin is not controlled by anyone, corrupt officials can’t print more of it to make themselves rich and everyone else poor.
Cryptocurrency and El Salvador
El Salvador has made Bitcoin legal tender. It means that everyday people can use Bitcoin to get around almost unsolvable problems El Salvador has with its economy.
A cryptocurrency like Bitcoin is independent of governments and a banking system. This is why the uptake has been incredible in places like Nigeria. The government is so corrupt there, and so badly managed, that young people are taking their future into their own hands and using crypto to be able to live normal, stable lives.
There are multiple networks of cryptos. Bitcoin is the most famous. But there are other networks, like Ethereum, and Solana and Cardano. It is largely a myth that they are environmentally damaging compared to our current system. Yes mining of the cryptos takes up electricity. But so does the entire banking system in infinitely higher numbers. Newer cryptos are built so that they have little to no impact on the environment, and the older ones are moving to the new system in order to compete.
Cryptocurrency: Which Ones Should I Look Out For?
In my opinion, Bitcoin is the gold standard of crypto. That is why it is the most expensive, and always will be. And it is finite. There will only ever be 21 million Bitcoins in the world. But, every bitcoin is broken down into smaller units called a Satoshi. And it is these Satoshis that poor people use to buy things, and trade, and save.
There are joke coins, or meme coins, like Dogecoin (DOGE). However, these have no specific function. So do be careful with these. But if you look into cryptos like XRP Ripple, Ethereum (ETH) and Cardano, you will see that they were created for a specific function and their uses are fascinating and have the potential to make the world function better.
The thing to remember is that the brightest minds in our population are all working as developers in this field. And a lot of them are doing it specifically so that the usual rich suspects get dethroned.
When it comes to cryptocurrencies, most people think it is just a thing you buy, and then you wait for it to go up in price. But that isn’t the end goal. Crypto is just the tool. It is a token of exchange. It isn’t the end goal. Forget crypto bros who got rich in the early days by buying and selling. It is the use of crypto that will change the world, NOT the buying and selling of it that is important here.
Web3 and the Bigger Idea
The bigger idea is freedom from banks and the way they just keep getting richer while normal people keep getting more and more debt.
Crypto is merely the token of exchange. The price of crypto can be volatile. But, all money fluctuates. It is what we can do with crypto tokens and peer-to-peer transactions that make it worth developing.
A simple advantage of using crypto versus traditional finance (TradFi) is sending money internationally. Say if you have a relative in Africa, and you send them money. Without a bank account, you must use a transfer company, and the end recipient can lose up to 25% in fees. This is usually a lot of money for the recipient in the poorer country.
Or say if you pay workers abroad. If you pay via the bank, they not only take a ridiculous fee. But they also hold your money sometimes for days. If the transfer is electronic, there’s no reason to do this, other than to get interest from your cash before passing it on.
With crypto, you can put money directly into the employees’ digital wallets yourself. Then they can cash out into their local currency, or just hold the crypto in their digital wallets. This is faster and cheaper than using the international banking system or money transfer companies. We can use it with each other, without the banks even getting involved… and that’s where the freedom begins for the poor.
Cryptocurrency is Spreading
While you think this won’t ever affect you, it already is. So many organisations are starting to accept crypto. You can now shop online in a lot of places using crypto. And you can now shop in a lot of places in the real world using cryptos. I myself get paid in crypto for some freelance jobs. It goes into my digital wallet, and I can either change it into normal money and transfer it to my bank account, or just keep it in my wallet to buy things online.
I use an accounting system called Xero, I can invoice in crypto, and my accountant has been trained to work out how I pay my tax on it.
Also, the transaction is instant, even though some jobs I do are on the other side of the world.
We literally can now live without banks. You can unbank your bank. They don’t deserve us anyway. We have always deserved better.
Ukraine
When Ukraine put out the call for help, people donated crypto. They did this because Ukraine’s banks stopped everyone from withdrawing more than $33 each. But crypto was given directly to both individuals and to charities and other organizations immediately. And therein lies the power of operating outside governments and banks. Read more about that here. The crypto was immediately spent the day it was received, something that normal money via the banking system could not achieve.
Interest
There are other advantages right now to owning crypto. While the banks are offering absolutely miserable rates of interest for savings or term deposits, the crypto industry is actually doing the opposite.
A term deposit, in the crypto world, is called staking. At the moment, if you download a digital wallet, and buy bitcoin, you can stake it at around 5%. Other cryptos can be staked for an interest rate of up to 12%. You have to leave your crypto for a period of time, just like a term deposit. But after the staking period, you can get it back plus the interest too, generally speaking. Each offering is different, so be sure to check out the terms and conditions. There are high-risk staking offers, with excellent rewards, but like with normal investing, be careful.
While traditional banking has always favoured the bankers, this new system is for everyone. There are no barriers to entry. All you need is a crypto wallet and off you go.
Play-to-Earn (P2E)
And finally, you can even earn money from playing blockchain games. It’s not much in countries where the cost of living is high. But for people in poor countries, it is a new and very important career.
The reason why game developers pay people to play, is to develop the games, provide feedback, and to have a pool of active members.
When people from rich countries enter the game, they usually spend their money. They buy things like virtual guns and virtual clothing. These are called “in-game assets.” Just like you buy your kid RoBucks to play in Roblox, there’s no difference. So having the P2E team there helps the game ecosystem. If you want to read more about this, then here is a good article.
In conclusion, Web3 has the potential to make the world so much fairer than it is. Forget crypto bros making big money from rising and falling markets. The bigger picture is so much more exciting.
In an ideal world, in my opinion, we will have two systems of money. The traditional system. And then, web3 and cryptocurrency. This way there’s a safety net from both sides of the coin.
None of this is financial advice, seek out your own experts before making any financial decisions.
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