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I was just reading through some of the posts in this thread. And I realized there are a lot of misconceptions and misunderstandings about what cryptocurrencies are, and what is their purpose. Which really should not have surprised me as much as it did. But it's prompted me to make this post, to highlight the reason why cryptocurrencies exist and what is their purpose.

In the real world, money is a real thing. When you spend it, something changes hands from one person to another. The only thing that is required in order to make a transaction is the presence of the money. I give money to you, in exchange for something else. Now you have the money and I don't. Very simple, very effective. Nobody, and nothing else needs to be present in order for the transaction to happen. It works all by itself. Or maybe you just want to give some money to a friend or family member, as a gift maybe. That's all easily doable because money is a thing that you can give to a person.

Digital transactions are whenever you buy something with a bank card, or credit card. Doesn't matter whether it's online or in-store, it works the same way.
The way those transactions work is based on an agreed process between financial institutions. The process works essentially like this: You (the buyer) wants to buy something from a Vendor, let's say the product is worth $10. You swipe your card, or enter your card information, and then the financial companies go to work. Ignoring the technical details (because that's all they are, is details), the agreement between the financial institutions is simply the Vendor's bank agrees to add $10 to the Vendors bank account, and the Buyers bank agrees to subtract $10 from the buyers bank account. That's it.
That transaction REQUIRES that the financial institutions are involved, and sometimes other third parties as well (PayPal for example). The problem is that nothing actually changes hands in that transaction. That's why individuals are not able to perform this transaction by themselves. Because the "exchange" takes place entirely behind closed doors. Anybody in their right mind would think there is something wrong with that process. Not to mention that this really takes away from the freedom that people have enjoyed for centuries, doesn't it?

I think the majority of the people probably don't realize, or don't fully understand, or are just desensitized to how digital transactions work these days. Because if they did, there would be a public outcry, a demand for a better way.

Using cryptocurrencies, there is something that changes hands during the transaction. It's not just adding and subtracting values from a bank account. There is an actual digital thing, a "coin", that changes hands during the transaction. This means that two individuals are now able to perform a digital transaction (both online and in-store) without requiring that any third parties are required or involved for the transaction to work. I can give a coin to you, and now it's yours. Thus restoring all the freedoms that previously existed with a real money transaction. It maintains the security, the privacy, and the flexibility, that a real money transaction has.

Governments and many individuals are afraid of it, mostly because it's new and completely mis-understood. Governments are also afraid of it because they feel they have no control over it.
But if governments were to issue their own cryptocurrency, then they would have exactly the same amount of control over it as they have with real money. No more, and no less, exactly the same level of control. And isn't that the exact amount of control they should be able have? Since when do governments and financial institutions have the right to spy on every transaction we make? Never. They acquired that ability by default when transactions became digital. And now they are afraid of losing it. Cryptocurrencies would simply restore the balance back to where it is supposed to be.

Cryptocurrencies are the inevitable future. It's just a matter of time before governments start issuing their money in this way. Don't ask me how much time, there's no way to know. Could be 10 years, could be 100 years, could be 1000. But the day will come.



Before the discussion goes there, I will say: Yes, there is a dark underbelly to this stuff. It's been widely adopted in the black market for its anonymity. But it's no more anonymous than an exchange of real money between hands. Actually, it's probably slightly less anonymous, as addresses can be tracked to an extent. So it can't be said black market adoption is a problem with cryptocurrency. Rather, that's a problem with the entire monetary system altogether.
Edited by wedge - 6/25/13 at 8:27am
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Death Star
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Darksaber
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