December21-Crypto notes: Basics of Crypto for Newbees

Power Storage Consensus- Filecoin Protocol - Proof of Space & Time

• Native Asset to the Network - i.e a native token called cryptocurrency coin
• Flexibility to use this native token as a capital formation mechanism by frontloading the sale of such tokens to investors in digital manner vs through shares allocation of a corporation
• Other Mature markets where developers are based are in Switzerland (Search String: Crypto Valley in Zug)
• Simple Agreement for Future Tokens(SAFT) - Temporary crutch developed native to US Legal Contracts- The right to participate in Asset(Token) and the network once
• Decntralization - It is the process by which power and function is distributed amongst several entities and away from a central unit
• Immutable Audit Trail + Copies of DB as Nodes + Mining(Appending the DB) = Blockchain
  • Bitcoin privacy is pseudonymous

What is a Data Monopoly and how might Blockchain help combat it?

When big corporations are built around users data and access gates to such a network of users there by driving control in the hands of selected few stakeholders who are not the main user community drivers of such a system. Such a few control hands running these big corporations have demonstrated the misuse/abuse of such powers to run propaganda, block participants and derive skewed monetary value without sharing it with the participants who helped build it. Blockchain promises a future of allowing native tokens to the internet as a mechanism to share with the participants the ability to own such a system in proportion to the participation with certain incentive economics. Blockchain promises opening up this monopoly of handful corporations

Simply put as large and exuberant amounts of data are collected by companies, new opportunities arise to build new markets and products based on this data. However, when giants such as Google, Facebook and Amazon are the ones collecting and owning the data it becomes increasingly difficult for new competitors to enter the market. One way that Blockchain can help combat this issue is through decentralization. Rather than one or more centralized units controlling the flow of data, the power is distributed amongst the users.

One Reason for Supporting Crypto:

It is the Web 3.0 progression to challenge the dominance of data monopolies and also move towards more resilient decentralised networks which has power to equitably distribute wealth by value creating participants throughout the journey of such a platform evolves vs just the initial organising founders of the platform like entrepreneurs, VCs and shareholders.

One Reason for Banning Crypto:

It has potential to undermine central authority like Govts. powers by allowing participants to use it’s decentralisation property to skirt monetary policy and financial controls put in place by a country. It starts to undermine the role of central banks by becoming a currency issuer and then also creating parallel economy GDP that can’t be taxed directly.

Internet’s own Jurisdiction - Baking trustlessness in Crypto

Incentive schemes that defines the tokenomics in the Crypto world basically achieves mapping human jurisdictions on top of computing jurisdictions and smart contracts is the interface between tghe two layers. It helps organise and co-ordinate people using these smart contracts

Fiat currency

Fiat currency is a currency without intrinsic value that has been established as money, often by government regulation. Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value. E.g. A Rupee currency backed by Indian Govt. with guarantees issued by central banks(here RBI) and sometimes backed by Gold in the form of fractional reserve system.

How is cryptocurrency different from fiat currency

There are many ways in which cryptocurrency differs from fiat currency, mainly that it is not regulated by any government or bank. You cannot easily ‘create’ more cryptocurrency like you can print legal tender. Bitcoin, for example, has a limited number of coins which will ever be created. Once all 21 million coins are available there will not be a way to create more. You also cannot reverse transactions easily as a bank could (meaning it would be difficult to confiscate). Cryptocurrency is not issued by central banks or Govts. but is a mathematical token guaranteed by the underlying math and issued by a group of organizers that define the initial set of incentive structures

Similarities, as well as differences, between legal tender and cryptocurrency

• Similar: both are identified by a code which also determines its value
• Different: the value of the crypto is not stored in legal tender but in the code itself. Once it is given away the code is then destroyed and re-created in a different code. However, when legal tender is transferred the value remains attached to the coin or bill.

ICO and Tokens - ICO

• It is the process of offering a token/cryptocurrency ahead in time before the project is built in expectation of an appreciation in value in future for it’s investors.
• Whereas tokens is a code offered as a property right to own a piece of that project/network/system for which the tokens were issued. An ICO, or “Initial Coin Offering” represents the promise of an investment in a token that does not yet exist.A token is the code which already exists and contains value.

Regulate Cryptocurrencies in US ?

• Investmengt contract and not a security
• Howey Test
• SEC’s quasi-warm stance on crypto is intentional wait and watch ?
• International vs Federal(National) vs State vs Payment vs Internet regulations all apply to crypto in one go