Pros and Cons:
A) a standardized and neutral confirmation policy backed by software that has no human agendas.
What does this mean?
Imagine I want to send Joe dollars to buy his house. I need to trust all of the middlemen between Joe and me: local bank, central bank, lawyers, governments, Joe’s bank, etc to approve of this transaction if I do it in dollars.
This is ok but at each step someone can be untrustworthy. They are all humans, even the government (humans subtly influence the price of the dollar and also share details of the transaction with unfriendly parties (the IRS)).
Also, each step in the above has a transaction cost. So inflation is built into the system.
If this were a bitcoin transaction, enough miners need to approve that this transaction is valid. So even if a few miners are not trustworthy, the bulk of them will be and we can trust that the transaction between me and Joe is legit.
[This process is complicated. Suffice to say, it works on Bitcoin and any other “legit” cryptocurrency.]
This is the ENTIRE reason for cryptocurrency: avoid governments, borders, middlemen, extra transaction costs. As well as have high security and avoid forgery.
(there is another reason for cryptocurrency, which is to do more complicated transactions that we can call “contracts” without lawyers, etc. This reason is sometimes the basis for legit ICOs).
Imagine the history of money. Money is used as a store of value OR as a way to transact without having to use a barter system.
Store of Value
First it was the land you owned and the resources you developed on that land (wheat, grains, etc).
Then it was metals. Gold, silver, etc. You traveled with it by fashioning it into jewelry. Too much gold = harder to travel.
Paper currency. Backed first by gold but then…faith in God (“in God we trust”) or government. (Or a pyramid…with an eye in it????)
Electronic currency. Easily transportable. But transaction fees all over the system. Zero privacy.
And the next generation is Cryptocurrency. Easily transportable, little to zero transaction fees, no human intervention between payor and payee, high anonymity, and even functionality.
Money evolves, like anything else, and the natural evolution of money is always as a store of value that is easier to move, more secure, and more private.
[RELATED: The Ultimate Cheat Sheet For Investing All Of Your Money]
Transactions have the same history. And the same issues. How can you transact across a far geographic area with less fees, less costs, less chance for human error, higher security and privacy.
A natural evolution leads go crypto-currency.
THE BIGGEST TREND:
Theism ==> Humanism ==> Data-ism
Think about every industry in human history:
Theism: A country planning on going to war would make sacrifices to their gods. Would pray. And would surrender to the fact that whosever god was stronger would win.
Humanism: More people, more bullets, more human intelligence, equals the winner in a war.
Data-ism: This is the war being fought every day right now. We saw tiny snapshot of it with the election but it’s only a snapshot in a ten year long movie.
The war is on every single day. It’s fought in every country. It’s fought with data and hacking and piracy.
Theism: Shamans and priests would pray for health or do rituals to enhance health.
Humanism: The doctor knocks your knee, puts hand on head, take two aspiring and call me in the morning
Data-ism: Bloodwork, DNA work, robotic surgeries, fMRIs, Catscans. Statistical matching with massive database of similar scans to do diagnosis. All medicine is starting to be outsourced to data.
Theism: “In God We Trust”
Humanism: Let’s throw a President on there. Let’s get the signature of the Secretary of Treasury up there. “Don’t worry, we’re good for it.” While we print a few trillion without telling anyone.
Data-ism: The natural evolution: Cryptocurrency.