Hi, course participants!
It’s me again, Alina from CryptoRobotics.
I am glad to see you on the first lesson. We named the first lesson «Are cryptocurrencies — money?»
For me, the answer to that question is yes, of course. In this video, I will explain to you why I think so.
To do this, we will learn:
- How money used to look like and why its properties were constantly changing
- What is crypto and we will analyze the first cryptocurrency in the world, the Bitcoin
- Where and how to use cryptocurrencies instead of money nowadays?
Are you ready? Let’s get started!
What is crypto?
First of all, it is a currency, that is, money. And unlike the money we are used to, such as euro and dollars, it is not issued by the central bank of a government, it is developed in a computer network — its value is ensured by a special encryption data TECHNOLOGY. In the next lesson, I will tell you about this technology, and it will become clear why technology, not the government, ensures this currency so well.
So, crypto is an independent currency, and every person in the world can legally own it, and crypto is only virtual, it is not represented in the form of banknotes, and exists in digital form only.
It is important to know that compared to crypto, ordinary money issued by governments are called Fiat money, or Fiat, easy to remember, like a car.
This term will often come across to you — remember, euros are Fiat, dollars are also Fiat.
Almost all economists in the world consider crypto to be a new generation of money with new properties that were not inherent in any types of money before.
Therefore, using the evolution of money as an example, I decided to show you how currencies changed and what properties were added to each type of currency.
The first money was goods, such as chickens or shells, their property was their value to the person who gave them in exchange for another valuable item for you, such as wheat.
As society developed, people realized that products could spoil and they were not the most convenient way to pay, so they came up with first paying with just pieces of metal, and then with metal coins, which added another new property to money — storability.
Metal money was used all over the world for a long time, but as people began to travel more and buy goods abroad, it became more difficult to transport large sums of money over long distances, ships sank and many of the currencies of those times rest at the bottom of the ocean.
Thus, the first paper money appeared, and initially they were secured by the country’s gold currency reserve, this country printed them. Later, the economy and industry became the guarantor, as in the US.
Paper money had new, important properties: homogeneity — all banknotes of the same denomination look the same, 50 dollars will look the same in any wallet, secondly — divisibility and unification, for example — into one bundle of money, value stability and recognizability, for example — special watermarks or imprints.
With the development of tourism, there was a pressing need not to carry paper money with you anymore, and then banks began to issue plastic cards, which we use every day — it is safe, convenient to carry with you, and from the point of view of printing money — economical — the card is issued only once, and billions of funds can be passed through it.
It would seem that what could be more convenient than a plastic card? But it turned out that there are still payment problems in other countries, exchange when paying money in other currencies, sanctions and very high commissions, and much more.
And so, cryptocurrencies appeared with new properties of money — deflation, transparency, and decentralization. We will come back to these concepts later.
I hasten to note that during the evolution of money, each new type of money retained the properties of the previous generations, so cryptocurrencies are also stored, homogeneous, and valuable like paper money.
Professional programmers came to help create cryptos, but not on behalf of the government, but on behalf of people who would like to spend money freely around the world without any restrictions.
On January 3, 2009, the first 50 bitcoins appeared in the world, it is believed that they were created by a programmer named Satoshi Nakamoto.
Who actually became the founder of this currency is unknown, but it is believed that it was a whole group of developers who took such a nickname.
But let’s get back to the definition of the word Bitcoin — it is a digital currency. From the word bit — a unit of information, coin — is a coin. It is both a currency and the name of the technology on which it was created. It is denoted as BTC and changes in value every minute.
Because of the fact that the price of Bitcoin often changes significantly, Bitcoin has been repeatedly predicted to face imminent demise. On your screens, you can see that in 2017, 2018, and 2021, experts predicted the imminent collapse of the first cryptocurrency, but Bitcoin first fell and then grew hundreds of times more in 2021, reaching a price of almost $70,000.
And here comes the term deflation, which is the opposite of inflation.
Inflation is when a year ago you could buy products for dinner for 50 dollars, but today you can only buy a half of it for the same amount.
Money becomes cheaper, both euro and dollar. Cryptocurrency, on the other hand, is constantly becoming more valuable, so you can buy more for it every year. 13 years ago, 10,000 Bitcoins could buy you 2 pizzas. And today, you can buy 1,000 Lamborghinis with the same amount.
It is probably difficult to consider a currency that can quickly become cheaper or more expensive, although there are equally striking examples of the behavior of fiat currencies, such as the Turkish lira or Chinese yen, which can change by 10-20% in a day.
But to be sure that the cryptocurrency stored in my wallet will be worth the same tomorrow, there are cryptocurrencies that are tied to the value of the US dollar and other currencies. Since the whole world counts funds in dollars, it is easier to use such cryptocurrencies as stablecoins, tied to the value of the dollar and backed by real dollars. For example, the USDT currency — its price is almost always 1 US dollar.
On the slide, you can see the exchange rate of the most popular stablecoins, and it is approximately equal to 1 dollar for all of these currencies.
You can view all current crypto exchange rates on coinmarketcap website. At the end of the lesson, you will have a link to this super useful resource.
And finally, I want to share with you information about what and where you can pay with crypto, and that payment for different types of services endows cryptos the functions of ordinary money.
The first function of money is the measure of value, that is, we can evaluate how much this asset is worth — for a long time, all popular cryptos have been traded on global exchanges and have their fixed and official exchange rates. — the first function exists.
The second function is global money, when governments allow goods and services to be paid for in cryptocurrencies, for example, as it was suggested for accepting crypto as payment for gas. I do not exclude that such transactions will begin to be made soon.
The third function is a means of payment — when you can pay taxes and fines in crypto, and in El Salvador, it has been possible to do this already.
The fourth function is the function of circulation — when each of us can buy goods for crypto — it is possible to buy a Tesla for crypto, and many online services around the world can be paid for not only with Bitcoin but also with other cryptos.
Well, the fifth is a means of accumulation — can you become a millionaire by buying crypto? Yes, but it is better to become a billionaire, like the co-founders of Facebook, the Winklevoss brothers, or Matthew Roszak, a venture investor and crypto enthusiast, one of the first to believe in Bitcoin and hasn’t made a mistake.
I really hope that this lesson did not tire you out, I tried to tell you a lot of important things.
At the end of each lesson, you will have a slide or slides with a vocabulary list to remind you of the main definitions and terms. We will have about a hundred of them throughout the course.
Also in this lesson, I am happy to recommend to you Digital Gold book, which was my first book about crypto. It is written as the story of the first crypto enthusiasts and helps to get inspired and understand why cryptocurrencies are with us forever. You can always find it on Amazon or any other online store and order it there.
As promised, here is the link to coinmarketcap — a service for tracking crypto exchange rates. And under the video, there is a small but useful home task and a test of only 5 questions to test yourself.
See you at the second lesson on the topic of «Blockchain,» where I will explain in simple words what technology it provides for crypto and its value.