After having this conversation a few times with different friends (who are all a little confused as to the inherent value behind digital-currencies), I've decided to break this down so all you crypto-muggles can have a better understanding of the technology behind the scenes. Of course, I know that many of you on Steemit are crypto-aficionados, so I do not write this for you seasoned vets, but rather, people new to the community who are a bit confused, or just the folks typing this into Google in an effort to better understand the phenomena.
When we look at the world, and we measure a country's level of comfort, economic mobility, health, sanitation and military power, all of these values rise in accordance with computational power-- id est, the number of silicon transistors which fit on a microprocessing chip.
Until now, we have all been using an internet model which is dependent upon client/server relationships. That is, you (the client, using a computer) puts in an HTTP request to a server (say, Google, or your Wells Fargo Banking account) for information that they have stored on proprietary servers. These servers are maintained by the company and they pay for their system's bandwidth, upkeep, security, housing, technical staff, and even accountants and auditors which manage the company's official financial ledger.
So what do crypto-currencies (that is, the "block chain") do different? Picture this: imagine people like you, people like me, setting up all of their electronic devices to process transactions for a global network. Not just process those transactions, but keep an IMMUTABLE record of every transaction that is imprinted-- not only onto your computer-- but THOUSANDS of computers around the world. All of which store the exact same data on myriad devices. All of that data being cryptographically protected, and decentralized.
To further explain, most companies keep their information on servers which they own. Which they have control over. Which they (and only they) have access to the core code and programmatic methods which comprise the integrity of their data. These systems are highly risk-laden, and susceptible to probes and hacks from other sophisticated systems around the world. But, with the block chain technology, all of your information is encrypted, and all of your information is simultaneously stored on thousands of computers at the same time. Meaning, there is no ONE computer to hack. No ONE ledger that can become corrupted. There are thousands of these nodes in the network which would have to SIMULTANEOUSLY be compromised in order for their data to be corrupted.
These indelible records are not only secure, but they offer a network to companies which allows for cross-corporate participation (since there is no central authority, no person in charge, and no way to cheat the system).
This system, or block chain, allows for companies to harness the computational power of a massive network for a small network fee (which is generally that network's "crypto-coin"). They can abandon their own server farms, and instead, rely on a decentralized "internet of things" to manage, store, process, and secure their data.
With the Internet of Things (IoT) ALL devices will be able to participate in a network of your own choosing. A network you support. Your car, phone, fridge, tablet, computer, laptop, microwave, et cetera. No matter the brand, no matter what company made your device, all of those computational devices will be able to share data safely, securely, and no one party has to worry about cheaters because there is no way to corrupt the gestalt of data being stored on a hundred thousand different nodes. Not only that, all of these devices will be able to pool their spare computational resources in a way that allows all of our electronics to contribute to the network, while making us money for the effort.
I should also point out, that, money (and/or) bank accounts will not just be limited to individuals with social security numbers and state ID's. Machines themselves can have their own bank account built into them. A digital wallet, whereby they collect crypto-tokens for their shared computational power. Machines will be able to pay for their own maintenance, their own bandwidth, their own repairs and services employed.
I could go on and on about how integral this IoT will be, or how block chain is revolutionizing the internet as we know it, but aside from all of that, there is an underlying philosophical principle for why you should begin investing in crypto-currencies: freedom.
The freedom to be your own bank. To send money to whomever you want, anonymously and securely. The freedom for us as people to be the originators of our own currency, independent of governmental fiats and the hyper inflation associated with those who print money and call it "adjusted value."
This is our generations revolution. And we aren't doing it with clubs, broadswords, gunpowder, or stinger missiles. We're aiming our sights at the real weapon the world has always used against the common people: the illegitimate aggregation of personal wealth.
On another note, I should also say that Bitcoin, and all crypto-currencies, are FINITE in number. For example, there will be only 21M Bitcoins produced-- and the limiting of money is the limiting of political power. This is quite possibly the most valuable thing about crypto-currencies and shows us what mass adoption could mean for the world as a whole.
It's a super exciting time to be involved with this, and I just want as many of you as possible to get in on this train while it's still idling in the station. You might be thinking it's too late. It's not. 11% of people think Bitcoin is illegal, and 46% are unsure as to the status of its legality. That means more than half the market is clueless, and once the educational threshold increases, you'll see this quickly skyrocket to a 2 trillion dollar market. Even now, banks are starting to realize that they have to invest in this technology, being as the moment BTC hit 17k in value, it became the biggest international currency in market capitalization.
I hope that this wasn't too circuitous, or technical for the crypto-layman to decipher. If you have any questions, or corrections, leave a comment below. I'd be happy to further explain (or be chastised for my limited, didactic purview). :)