What the heck is a crypto currency?
By: Arrash Yasavolian
Tags: Crypto, Blockchain, Cryptocurrency, Blockchain Technology, Bitcoin

Intro

Okay, so you might have read my last article my two cents on crypto currency and been like, what the hell is he talking about and why does it even matter? So, in this article Im going to try and summarize a few things: what crypto currency is, what they are founded on, and a sample use case and industry its disrupting. Hopefully by the end of this you’ll have a quick understanding of what this crypto craze is all about.

What is a crypto currency?

This cat knows his shizz. This meme pretty much summarizes this entire section.

The basis of crypto currencies is around this concept of blockchain technology. I’ll try and not get into the nuts and bolts of blockchain technology, if you want a technical analysis on what it is and how it works you can google it or just message me, but I do want to let you know how it works at 50,000 ft. It’s important to be educated if you want to know whats going to be changing in the future because things will change and blockchain will be a big part of that.

So, High Level, How Does it Work?

We’ll break down this statement, but here is what it is…

Blockchain technology securely allows the addition of entries to a decentralized and distributed open ledger in a verifiable and permanent way.

Okay, now that you’re left in utter confusion by me, what the hell did I just say? Lets break this thing down. We’ll take the example of how Bitcoin works for below. Say you send Bitcoin to your friend to pay him (if you didn’t know already, these are currencies so you can pay people in them just like the USD). This will be a transaction, as you are sending Bitcoin that you own to your friend.

The transaction will be added to something called a block with other transactions that are occurring. This block will then be securely encrypted, validated, and appended to the blockchain which is a decentralized open ledger.

Below is a breakdown of these sequences.

Blockchain technology is secure. We’ll continue with the Bitcoin example below. First off, when you do any transaction of data or information you use a public address, you don’t use your personal information as part of the transaction that is visible. This allows for a level of anonymity in the open ledger where the transaction will be stored.

An example address would be this:

12f7c4c8977a5b9addb52b83e23c9d0f3b89be15

Crypto currency stands for cryptographic information. Typically, a bunch of transactions occurring are put together into a single block. This block will be added as an entry onto the blockchain. This block needs to be encrypted before it can be added. Different crypto currencies use different methods of securing your data, but essentially all of them use a certain kind of hashing algorithm. Not only do they use this hash algorithm, they use a method to make it an extremely secure version of the hash so it can’t be easily hacked. This can take a lot of time and energy to do, especially in the case of bitcoin.

Entries are verifiable. Okay cool, so your data has been put onto a block and secured to be put as an entry. It is then validated by the network (which is a bunch of other computers). There are many ways this is done, but almost all blockchain technologies use a method of validation to ensure the security portion. After its been validated, it is then added to the blockchain (aka a ledger)!

Decentralized ledger. Now what does decentralized mean? Okay… so most companies outside of crypto that we’ve dealt with are centralized, meaning there is one central authority that owns the information (think Google and Facebook). Decentralized means that the ledger is spread out to many locations. Data is therefore complete, consistent, timely, accurate, and widely available, with some having the intent of having no one truly owning your data except you.

The blockchain can also be fully audited and is fully accessible with public ledgers. A public ledger means that the information is accessible publicly (sounds obvious enough). Not all ledgers are public, but Bitcoin for example is public. Like, you can actually go see the transactions that are being done all the time. Here is an image of some recent transactions for bitcoin for example.

Entries are permanent. Because blockchains are decentralized and distributed the method that is used to secure and verify the block to the blockchain is permanent. I won’t go into details here but you can’t go back and change data in the blocks that are added to the blockchain.

(If interested and want to look into this further you should research Proof-of-Work (PoW), Proof-of-Stake (PoS) and in general the Byzantine Fault Tolerance (BFT) that these methods solve for in order to add a block onto the blockchain).

How Important is Data Security and Immutability?

Before I get started, I want to point out something that might not be so obvious. With centralization, it becomes incredibly hard to continue to keep data secure and immutable. Personally, I work for a company that spends 24/7 making sure that our data is secure, doesn’t get in the wrong hands, and I swear it keeps our entire Tech Ops team up at night (I’ve asked they don’t sleep a lot). If one thing goes wrong with data security or alterations to data, it could destroy our entire company because we deal with very sensitive information.

Lets note some important events that have recently unfolded.

The equifax hack. the Equifax hack 143 million people’s identities were leaked. The Equifax hack was a relatively easy hack. The yahoo email hack. It affected every yahoo account (3 billion!). The LinkedIn Email and Password hack. This compromised 117 Million LinkedIn Emails And Passwords. (You should probably go check to see if you got hacked).

I can keep going. We are starting to live in a more dangerous world where cybersecurity is becoming of upmost importance, and the biggest cause of a lot of these hacks? Human intervention with data access and data security.

Cool so security is important and blockchain is some next-level stuff, I think I get it? So where can it be used?

So lets see… let’s recap the advantages of blockchain tech. It’s transparent, fast, and cheap. It’s not centralized so no company owns your data, and the data is immutable or permanent. Its open so it can be easily audited.

So, we’re talking about anything that needs to properly secure data, make sure its unchangeable, and be fully audited.

Blockchain Application to Online Identity Protection

Lets just take a look at one industry which was destroyed by Equifax, your online identity. You want to be able to authenticate to any application using your personal information, but you don’t want any of your data getting hacked. I’ll paraphrase this article here to give you an example of how it’ll change, but when you use a crypto currency named Civic you give it your personal information, it then verifies this info against a government agency. Once it verifies it, it moves your information to the blockchain and deletes your information from its possession.

Okay so at this point, your info is safe, your personal devices are the only thing that has your personal info.

When any app want to verify you, they ask for some personal information, those companies then communicate with Civic’s algorithm, and it checks the data in the blockchain and verifies you. The companies can then remove that data you passed them. Again, nobody has your information.

Here’s the big takeaway… If Civic or any of the companies using Civic for authentication face an intrusion, all you personal data is safe, since it was never stored anywhere other than on your device.

Let’s compare that against Equifax. Equifax had your personal information, got hacked, and now your info is spewed all over the place. Pretty substantial difference.

Yeah, you said it Keanu. Im not going to get into all uses cases in this article, but the application of blockchain is immense. If you Google industries that blockchain will affect you’ll see a wide variety…

Thanks for reading my good ladies and gentlemen, you made it through the whole thing!

I hope you now have a high level understanding of the underlying technology behind crypto currencies, why its important, and how it can affect an industry.

What’s Coming Up

We’re going to chat about how to get started investing in different crypto currencies (if you’re interested), some current crypto currencies that I think are going to do extremely well and disrupt entire industries, and you’ll get my great old opinion on where the market is heading and what to stay away from.

Cheers till next time!