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Lesson one: what is dead can never die
~ 6/18/17 ~
Today, let's learn about the future of our economic world shall we? Bitcoin and Ethereum are two of many crypto-currencies vying for space within a new network of decentralized computational value. What the heck does that mean?
It means that the old way of bartering money for goods and services is dead. It's not dying it's already dead. The current economic model is to base economic purchases or transfers on electronic ledgers that are held and calculated by a central system or group of systems within a bank's ecosystem.
When you have multiple banks within an environment, the transaction records that have to be sent between them increase in size and volume to the point where calculations require advanced computers to handle the load securely and efficiently. Thus Digital Banking becomes necessary.
DIGITAL BANKING is the digitization (or moving online) of all the traditional banking activities and programs that historically were only available to customers when physically inside of a bank branch. This includes activities like: Money Deposits, Withdrawals, and Transfers. Checking/Saving Account Management.
At a heavy load, banks have to use mainframe systems to handle the computational load. Learn more about it here. Mainframes are understandably very expensive and hard to maintain. ANd banks are always looking for the newest and best technology to help them spend your money faster.
In a system where money exchanges hands at a reasonable volume, normal banking data management systems can handle it. But what happens when economies change and volumes of exchange change? How can the current banking model hope to keep up when spending on data management and IT is already maxing the rest of most industries.
In fact, banks are going to account for most of the spending in digital information for the foreseeable future, and that entire idea is based on something that is already dead. Do you remember ? Traditional banking is already dead, and these projections are still promisingg increased expenses on management of asset growth in the future. These kinds of overover valuations are what eventually led the 2008 financial crash which crippled growth for almost 10 years.
But what is dead can never die. And like the kraken of the deeps the banks have held onto assets that give them the ability to manage capital at volumes that have never before been seen. So what is the problem? Well, we peasants have stumbled upon a way to do it faster, at a lower cost, and have the system be independetly secure and regulated by it's own pricaples of design...
Enter Crytpo. A technology that was born into the world on the back of an Internet so profound that it managed to entirely change the way Human society functions within 50 years.
While the banks have managed to keep up with the transition the future is utterly unreachable with the current limitations of the banking model which are outlined here:
- Increased Volume = Increased Expenses To Manage Data
- Traditional Economic Systems Require physical "Handshakes"
- Unchecked Valuation Leads To Crashes
Crypto-Currencies are based on blockchain technology instead of the pyramid structure of the traditional banking institutions. The transaction data is actually providing the backbone to something much more powerful, and that limitless growth is not capped like a traditional financial model which accumulates wealth at the top. The block chain is best described like this:
Imagine you have a train, each car of that train holds not passengers or cargo but the balances and transaction data of an entire economic system. These cars are secured not with iron interlocks, but with encrypted algorithms that essentially obscure all the data within the car. These algos take processing power to crack and that's where we Nodes come into play. Nodes are machines that "mine" crypto-currencies.
When I say "mine", I mean the process that allocates processing power from a CPU/GPU(s) to crack the algorithm that is protecting the value of the data. While this might sound malicious, imagine this more as a truck weighing station. Each car has specific data holding specific values of transactions. They are dynamic, but the entire system is tracked because every-time a node verifies the encrypted value of the car is must check it with other nodes to confirm that value is true. If weight were to leave the truck between weigh-ins at a station the whole system would know that something was up.
Now, the train and truck analogies work as models to explain how data flows, but here is how a transaction works.
This basics are cool for bar chat, but we need to dive deeper, so this video on the fundamentals should be watched by next Sunday. We can then touch back next with with our first group discussion and Q&A. Check back soon for this weeks:
Crypto Projections >> XRP ARTICLE UP
And How to Start trading >> coming soon!
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