Welcome back to the second episode of Bro, teach me crypto!
In this episode, from the rooftops of Nha Trang, I'll explain the blanket term that is 'crypto' to Pete.
Below you can find the explanation I devised prior to recording this episode.
Crypto is the most popular and impactful application of blockchain technology. And now that you understand what blockchain is, it’s time to explain crypto.
The term crypto is a blanket term. There are millions of different crypto-assets, each with unique use-cases and applications.
(I’m going to go into definition mode here)
At a high level, crypto refers to a virtual money or a digital asset that is secured by cryptography, which is issued not by a central authority like a bank or government, and instead runs on top of decentralised networks called blockchains.
From this definition, we can break this explainer into three main points.
Crypto is purely digital, meaning there are no physical coins or notes in circulation.
It exists only in electronic form, and all transactions are recorded on the blockchain.
Therefore, it is accessible anywhere in the world, provided there is an internet connection, which makes it ideal for cross-border payments.
Some worry about the fact that crypto is purely digital, and instead opt to use cash, perhaps for privacy reasons.
Yet whether we like it or not, the world is becoming more and more digital, and therefore it makes sense to also have a better digital financial layer.
As of November 2024, physical cash only accounts for approximately 2.7% of the (M3) money supply in the UK, and so, ‘digital money’ is already the vast majority of ‘money’.
For many, the fact that crypto is inherently digital contributes to a difficulty in understanding it, and so I'll do my best to use real world analogies in order to explain myself clearly.