Cryptocurrency — an exercise in semantics

As I continue to build an understanding of Blockchain technology I can't help but run up against it's partner in crime — cryptocurrency. It's something inherently vital if Blockchain is going to be used in a a decentralized way (either to disrupt a current trust institution or support an ecosystem). Simply put, cryptocurrency is the reward for engagement and effort, and it is something that can be assigned value. 

It is important to understand that you can have a Blockchain without cryptocurrency but you can never have a cryptocurrency without Blockchain — they are two very separate things. Blockchain can be a very difficult concept to grasp and even harder to understand from a technical perspective, whereas cryptocurrency is equated to as money and much easier to align your thinking with. You can exchange two Bitcoin for US dollars and buy a car; it's something easy to understand, as well as captures the imagination of making great wealth.

Recently I was having a conversation with a successful investor and entrepreneur (an intrinsic value investor to be specific, and a student of Benjamin Graham and Warren Buffet); in our conversation it came up that I was on a sojourn to understand Blockchain technology. Ultimately the blockchain conversation became a discussion about cryptocurrency and investing. I mentioned that someone ask me if they should invest in cryptocurrency and my answer was if you have to ask me then the answer is "no".

He then looked at me and said, "Speculate. The term is speculating. You don't invest in cryptocurrency"

Investing* — in simple terms it refers to purchasing an asset with the hope that it would yield income in the future. Investments can be made in a number of forms depending on the investment return the investor requires and the risk that he is willing to take. 

Speculating* — the taking of higher risk and standing the possibility of losing all money invested. Speculation is similar to gambling and entails a very high risk that an investor may loose all his money or make very substantial returns if his speculation turns out to be correct. However, it must be noted that speculation is not exactly the same as gambling, because a speculator will take a calculated risk whereas gambling is more of a decision made on chance.

He went on to say that if a "Speculator" came into his office to discuss cryptocurrency he would entertain the discussion because there are many very successful speculators. Although if an "Investor" came into his office to discuss cryptocurrency the conversation would be very short — as an intrinsic value Investor cryptocurrency simply did not align with his investment thinking because it is impossible to calculate an intrinsic value. For me it was good we had this little talk.

So this is what I know about cryptocurrency —

• I would rather be discussing Blockchain.
• If you want to be involved with cryptocurrency you are by definition a "Speculator".
• If you speculate in cryptocurrency you must be prepared to loose all of your money.
• If you are building an ecosystem using Blockchain technology cryptocurrency is vital.
• Cryptocurrency isn't going away anytime soon.

As I said, it was a good little talk.

iamgpe

* Definitions from www.differencebetween.com  

My understanding of Blockchain continues (at least I keep telling myself that)...

"My caution to all is get as much information as you can about this technology but look hard at what they are saying. I'm pretty sure there is a pony in here under all this manure."                                                                                                                                               — Jerry Fletcher

Jerry is a smart man so I have continued to get as much information as I can about Blockchain technology — not only to understand it for cocktail party banter but to determine if there is a place for me in all of it. 

As I continue to dig into the utility of Blockchain technology I've categorized it into three general areas for consideration —

1. Blockchain technology used in a centralized manner for data integrity and process efficiency — current trust institutions (such as banks) that want to be more efficient and effective with the integrity of their data management.
2. Blockchain technology used in a decentralized manner to disrupt current trust institutions and middlemen — challenging the way we do things, such as banking.
3. Blockchain technologies used in a decentralized manner to create new "ecosystems", as well as new value creation becasue of its activities — the creation of defined value where there was none before (represented through its cryptocurrency).

As I have mentioned before, I am not a very good futurist so there are probably many other areas of consideration.

I've also come to appreciate that if you're looking at Blockchain from a "decentralized perspective" you need to have some sort of "currency or token" involved — it is used as an incentive for the network (or "ecosystem") to ensure it works properly. A currency is required to support the efforts of the people in the network in a sustainable way, and ultimately will reflect the value associated with what is happening in the ecosystem. 

As I continue to search for the "pony" I have come to believe I'll align with the third consideration for two simple reasons — I don't have any coding skills to speak of that would help an established institution and I just don't have the energy to be very disruptive. Although strangely enough, I do have the energy to get involved with new ecosystems. Go figure. Maybe it's my marketing background, or my increased efforts with blogging, or my interests in personal branding or even my increased involvement with social media... I don't really know; whatever the reason though, it seems my place in all of this is leaning towards blockchain and it's utility with social media — and I suppose by extension, personal data and identity in the virtual world.

Because more than ever we are living in both the real and virtual world (with each becoming as real as the other) — and frankly, I want only one of me in each.

iamgpe

PS — As always let me know where I've gone off the rails.

Blockchain and recreational marijuana...

I was recently sitting across the table from an associate who is trying to raise money for a couple of ventures she's involved with and as part of the conversation she said (with a sigh), "If it doesn't have the word blockchain or marijuana in the title of the pitch deck no one cares. Blockchain and recreational marijuana is all anyone wants to talk about".

If you aren't aware, Canada is planning to legalize recreational marijuana July 1st of this year (although the Senate is already saying maybe August), and the speculation and preparation is at a fevered pitch — personally I think when it finally does become legal the shakeout from a business perspective will turn everything into one big hot mess. Blockchain though is something very different — although admittedly I was struggling to understand its potential other than the platform that allowed for the crazy speculation that surrounds bitcoin and its cryptocurrency cousins.

By nature I am not a "tech guy" and rarely an early adopter, but it became apparent after talking to other people (and the recent deal between the social media platform beBee and a blockchain company called Profede) I needed to have a deeper understanding of what blockchain is, and more importantly what blockchain can do.

I wanted to ensure that if I missed any opportunity it wasn't because I was too lazy to become more knowledgeable. 

I've done a fair bit of research so far and I'm just starting to glean the potential of blockchain, although I'm still blind to most of it — I definitely have come to understand why people say it's the next iteration of the Internet though. There will probably be a great many holes in my thinking about blockchain but I wanted to make an attempt at articulating what it is, and more importantly, what it can do. And I think it's best to start with the internet.

The thing about the internet as we know it today is everything can be copied... over, and over, and over again — and because of this the content of the internet has been "devalued" to a point it has no innate value, as well as virtually no level of trust associated with it. Is that beautiful photograph the original or the millionth copy?

Blockchain allows for both trust and value to be created on the internet.

Using very complicated math and a decentralized network of computers, a public ledger can be created that offers what I call "immutable uniqueness" — it allows for the creation of something that can not be copied and is verified (and policed) by a public, decentralized system of users. The need for a third party trust institution (such as a bank) to ensure a transaction is honest is no longer needed. This I understood right away, but frankly I didn't want to be caught up in the very big turf war that is brewing between the currently trust establishments and something so very disruptive.

What I didn't appreciate was blockchain also allows you to create "ecosystems" (economic systems, not ecological systems).

The bi-product of a system that offers "immutable uniqueness" is that it creates something which can be given "immutable value". And I suppose you might as well call it currency because it is inherently used as a reward for any effort in the ecosystem — bitcoin miners are rewarded for all their computer power, brains, and involvement with bitcoin. Blockchain enables ecosystems to be created which allow you, through your "efforts and involvement in that ecosystem" to create currency from the system that unto itself has value — much like a country's economy is reflected in the value of it's currency.

And one last concept that ties this all together — fiat currency.

Fiat currency is defined as a currency established as money by government regulation or law or an ecosystem, and is derived from the Latin fiat ("let it become", "it will become") — simply put, it's a currency that is worth what it is worth because we have decided to believe it is so. How else would you explain bitcoin having a value of $12,804 as I type this?

My biggest problem now is that I'm not imaginative enough to grasp all the ecosystems that blockchain will create — something that is now on my immediate to-do list.

iamgpe

PS: I may be looking at this all wrong, so any help in this regard would be appreciated.