When I first heard of Bitcoin a few years ago, it was just a weird tech investment that I couldn't even understand properly.
Ever since then, it only got more complex and weirder, with the crypto universe grasping at metaverses, NFTs and even getting regulated as official currency in El Salvador. I'm getting more and more familiar with the concepts, but for a beginner it's still extremely hard to understand the concepts, so I'll share my points of view here and try to come up with simple explanations to everyone that is just getting started with this huge and complex ecosystem.
In this first post, I'll just say what are the three most relevant concepts in crypto in my opinion:
1. Descentralized
You'll hear this all around crypto-related topics. The main concept of all crypto finance and ecosystems is the descentralization of things. In the financial side, it's very easy to understand: usually you have centralized entities that control the economy (governments), the currency (central banks) and the access to it (banks/exchanges). Crypto is all about putting the control of on the market's hands.
But what does it actually mean? To put it simple: there's no entity that controls anything woth unilateral decisions. All the fees, structures, values are supposed to be decided by either the users' votes or their behavior. Instead of having one entity with a lot of power, it goes to the actual behavior of the users. I believe Hayek would've been very happy with this type of structure in finance, as it's what he defended.
When thinking about other scenarios, it just means that people have more power in decisions. Couple of examples outside of the financial world that help understand the descentralized term:
publish0x the most voted and interesting articles are rewarded, instead of the platform chosing the reward amount and the highlighted articles
a social media where artists are incentivized via crypto and NFTs to make the users decide which should be more popular and, consequently, more valuable
2. Blockchain
This is the tech part, in my opinion very complex, but the easy way to see this is: a technology to speed up communication and make internet more secure through blocks of info connected in a huge chain.
Honestly, that's all you need to know about the tech. It uses different nodes (you can think of it as mini-servers) to store and process info and descentralizes the structure of the network.
What else is important: there are multiple blockchains with different specifics, apps, communication protocols etc.
Ethereum is probably the most used and adapted blockchain out there. Each blockchain requires specific wallets, has specific assets and it's very important to understand that when setting things up. Think of it like railway systems. Each one has its own measures, speed constraints, stations and ramifications. You can't navigate between an american railway and an european one without outside connections (like airplanes or boats) and you need tickets and properly designed trains in each railway system to be able to ride it!
Assets are 'the things you own" in a blockchain. You can own many things now: currency (a.k.a. cryptocurrency), NFTs (tokens that can represent almost anything) and probably much more to come.
I hope this serves as a good guide, I'll be publishing a little bit more of my experience and perspective in the future to discuss (and hopefully simplify) much more concepts in this big world of crypto!
