Switching to Cryptocurrencies
Decentralization of a cryptocurrency means that the cryptocurrency doesn’t have a central point of storage, authority or failure. For example, a traditional bank would typically have a chief executive officer, a board, a main branch and then a number of smaller branches. None of this exists with cryptocurrencies.
A cryptocurrency network operates not because there is someone in charge or someone running it, but because users choose to engage in transactions and miners choose to create blocks of the blockchain on the network.
Every user and every miner is a part of the ecosystem. All digital copies of the blockchain on a cryptocurrency network are equal to each other, which means that to shut a cryptocurrency network down, it would be necessary to shut down all the computers on the network at the same time.
The way blockchain cryptocurrency networks work is similar to how large technology companies such as Facebook, Google and Amazon operate, it is just that blockchain networks take decentralization to a whole new level. For example, when you type a search keyword into Google, you get a result almost instantly no matter where in the world you are located. The same happens when you log into Facebook or search for products on Amazon. The websites show you the results every quickly.
They are able to do so in part because the request for information that they receive from the Internet browser on your computer or your mobile device does not go to one central server in Silicon Valley for Google and Facebook or in Seattle for Amazon. The companies have servers all over the world and the request goes to one of the servers. This is also one of the reasons why big technology companies are able to process multiple requests at the same time – there is no one central server. There are multiple machines that respond to user requests.
The fact that the governments can’t control cryptocurrency networks is more important in the developing world than it is in the developed countries because in the developing world people trust governments much less than people in the developed world. People in the developed countries are also satisfied with their lives more because while the governments everywhere do have their inefficiencies, the governmental systems in the West do work, which is not the case with dictators staying in power for decades and replacing each other in the developing world.
For this reason, it is likely that a cryptocurrency would become a de-facto currency in some developing country first. It will start with the appearance of cryptocurrency ATMs here and there and people exchanging regular currency for cryptocurrencies.
Then, the government of the country will make a number of mistakes and the inflation will skyrocket similarly to how it did in Zimbabwe in 1990s and 2000s, it is just that during the last period of hyperinflation in Zimbabwe cryptocurrencies did not exist yet. When this happens, an entire country will switch to Bitcoin or some other cryptocurrency because the cryptocurrency will be completely independent from the currency of the country and the actions of the government will have no impact on it.
Owners of stores that sell goods and providers of services will have no other option but to switch to using a cryptocurrency because at some point one the inflation will reach crazy numbers such as 1000% inflation per week. The currency of the country will be worthless and everybody will be looking for a solution.
An event like this would completely transform the notion of a nation state that people have had in the past, because even to this day people think that to be a nation state, a country needs to have its own currency. There simply haven’t been examples of countries functioning without their own government-controlled currency, but such examples will inevitably appear in the future.
The shift in the developed countries would be happening in a different way. It will be happening slower, and not at once as a result of hyperinflation or some other critical event in the banking industry.
Cryptocurrencies today are similar to what the Internet was in 1990s. Back then the Internet was more of a toy for tech geeks than it was a necessity for every person, yet things have changed very quickly. In the 1990s and early 2000s, most people were using the Internet not to conduct business, but to send jokes to each other and to visit chatrooms. Today the things have changed drastically. Instead of being a toy, the Internet became a part of the life of people all over the world.
People started buying computers. Then, they started to buy modems. CDs from AOL were available all over the country.
Next, modems started becoming faster and Internet service providers have replaced their old equipment with fiber and new cables created to run the Internet connection. Companies such as Google and Facebook replaced companies with lousy websites and lousy service.
Next, the Internet moved to audio, then to video, then to the era of social media. Recently, just about a decade ago, the devices started becoming mobile and instead of accessing the Internet from desktop and laptop computers people started accessing it from smartphones and tablets.
Today, Google gives an opportunity for viewers of videos on YouTube to share the videos on Twitter and Facebook not because it loves to cooperate with competitors, but because it wants the traffic that it will get from Twitter and Facebook.
The same will be happening with cryptocurrencies. More and more businesses and organizations will have to start accepting them not because they want to but because they have to. Bitcoin ATMs and other cryptocurrency ATMs will play an important part in this process because people will need to be exchanging their regular currency into Bitcoins and this process will go on for many years.