Learn > Introduction To Cryptocurrency

  1. What is cryptocurrency?
  2. Why do we need cryptocurrency?
  3. What makes cryptocurrency better money?
  4. Who invented cryptocurrency?

TLDR; Today’s money requires a network of trust between governments, banks, and the people but the participants have proven they can’t be trusted.

Now that we understand what money is and that it’s issued and managed by The Federal Reserve, let’s dig a bit into The Fed’s consumer facing operation – the banks.

The banks aren’t owned and operated by The Fed, but in 1913 Congress appointed the Federal Reserve as manager of the money supply and chief regulator of the banking system. So banks are required to follow the Fed’s rules – and there’s a lot of them. From The Fed’s Website:

“The Federal Reserve is responsible for supervising–monitoring, inspecting, and examining–certain financial institutions to ensure that they comply with rules and regulations, and that they operate in a safe and sound manner.”

Before computers, people stored their wealth in physical assets like paper money, coins, precious metals, stock/bond certificates, real estate titles, etc. A guarded bank vault was the best option to keep your wealth safe, so banks popped up on every corner. We no longer need massive physical vaults to store our wealth. Well, most of us, anyway.

Queen Elizabeth
Queen Elizabeth counting her “money”

The digitization of money has made most consumer banking services irrelevant, however, they live on because banks have a pretty epic business model. Remember that 40-page contract you signed when you opened a checking account (Probably not!)? It says that once you deposit money into your account the money is technically not yours anymore – it’s the banks!

The bank promises to make money available to you when you need it while at the same time fractional reserve banking allows them to invest your money or loan it out at a ratio of 10-to-1. Considering banks hodl virtually all the world’s money, this is a massively powerful position. We put our trust in banks with the belief that our money is safe and that the banks know what they’re doing. Turns out, this couldn’t be further from the truth.

Bank Fines

For example, banks caused the 2008 global financial crisis by making inexcusably poor investments – and that’s just the beginning. Since 2008, the largest and “most trusted” banks in the world have been fined over $200 Billion for everything from outright fraud, aiding tax evasion, money laundering, consumer protection violations, market manipulation and more.

But isn’t the Federal Reserve responsible for regulating and overseeing the banks to prevent this type of thing from happening? They sure are, and all of this happened under their watch – which is why they had to “bail them out”.

So we have a money supply which is publicly and knowingly manipulated by The Fed held by a network of banks which can’t be trusted, all of which was built for a world before computers existed. Why are we still using this!? 1) Habit 2) Until now there hasn’t been a better alternative.

The promise of cryptocurrency is to eliminate trust from the equation and create an alternative to the broken financial system as we know it.

Next: What makes cryptocurrency better money?

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