Cryptocurrencies may be the most mysterious asset class to emerge in the history of world finance. Although many things have been said about them, there is no clear definition of what they are. There are those who claim to be currencies, commodities or securities. Since public authorities do not know which asset class to include cryptocurrencies in, it is difficult to regulate.
The story of cryptocurrencies began in a mysterious way from the very beginning. In 2008, Satoshi Nakamoto invented a cryptocurrency called Bitcoin, made possible by a new technology called the blockchain. However, although 13 years have passed since this invention, it is unknown who Satoshi Nakamoto is. Those who research the subject are talking about 3-4 candidates associated with this name and the early period of Bitcoin. However, these candidates do not reveal the identity of Satoshi Nakamoto. Among the explanations brought to the subject, the hypothesis that Satoshi Nakamoto collectively represents the creators of Bitcoin stands out.
We can ignore the mystery of Bitcoin's beginnings by adopting the adage "eat your grapes and don't ask your vines". Since Bitcoin emerged just after the 2008 crisis as a reaction to the current financial order, its creators obviously resorted to such a way of protecting themselves. Maybe they are people who are uncomfortable with the public interest, or they do not want to make a statement about it before cryptocurrencies gain full legal legitimacy.
The mystery that prompted me to write this post, beyond the creator of Bitcoin, was how cryptocurrencies could gain value so quickly. Although crypto prices are currently declining, we know that Bitcoin is gaining an average of two times a year in dollar terms. When we evaluate cryptocurrencies other than Bitcoin on a total basis, we encounter an annual average price increase of 3 times since 2013.
I remember that the increase in the value of cryptocurrencies was explained with the "pyramid chain" theory in 2018. As we all know, the Ponzi scheme is a system in which the money of those who join the system later is transferred to those who have entered before. When there is no new participation in the system, the chain breaks down and the system crashes. However, no known Ponzi scheme has survived for more than 10 years. In addition, unlike the Ponzi schemes, cryptocurrencies generate economic benefits beyond the transfer of funds from person to person. Today, blockchains have numerous uses such as value storage, value transfer, trading, credit transactions, rewarding content, registration of digital assets.
The works I have listed above can also be done using digital systems that do not contain blockchain. What additional benefit do blockchains and the cryptocurrencies connected to them provide that attract so much attention?
We know that blockchains essentially solve the problem of trust between parties. In this way, individuals can collaborate without the need for a third party such as banks, giant technology companies or governments. The fact that a system is built on the blockchain does not de facto prevent the concentration of power in one hand. In addition to the blockchain, a widespread ownership structure is also needed.
Thanks to their decentralized structure, blockchains give power to individuals rather than institutions. There is no similar situation in the content published in any media or in the books published.
Networks created using blockchain technology have some characteristic features.
Anyone can open an account on any network without permission. For this, it is enough to have an internet connection and an account/crypto wallet:
Crypto projects are often written in open code and are easily imitated.
Transactions taking place on the networks can be monitored transparently.
Thanks to their decentralized nature, they cannot be stopped by states or participants.
Applications on the same network work in integration with each other.
Assets on decentralized applications cannot be transferred without the consent of the person.
As you can see, the crypto world has many characteristic features. Also, I find it important that those who are included in this world are people who are open to innovations.
Despite all the explanations I have brought, I do not think that I fully grasp the essence of the crypto world. Over time, the stones will probably fall into place.
