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The Wrong Way to Understand Cryptocurrencies and the Blockchain

As the circle of general public awareness around cryptocurrencies grows further, additional new opinions from newcomers start to get formed around what they represent and what they don’t.

William Mougayar
William Mougayar
To use an old analogy, cryptocurrencies and the blockchain are like a big elephant. If you come to it with your eyes blinded and not knowing what to expect, your first impression will depend on what part of the elephant you have first touched.

First impressions matter. And one of these first impressions we often hear about cryptocurrencies is bewilderment that they aren’t backed by anything, followed by the deduction: “how do they amount to being worth anything”?

Newcomers are deducting these early impressions, based on their partial experiences as the whole truth. But the reality is far from it.

Then, these distorted thoughts are amplified when we hear a public figure calling “crypto a crock” at a US House hearing, or when we read ludicrous reports trying to explain why Bitcoin Could Fall Below $1,000 with preposterous claims like “there is no value in it.”

Of course, like anything in life, our current traditions influence and limit the optics of how we see things.

We are used to governments being the sole sovereign backers of national currency, and we are used to relying on financial institutions as the sole providers of sacrosanctity on financial transactions, because all roads lead to a bank or a government.

However, there is a news flash that changes all of this, and challenges these two long-held traditions. And the stakes are very high on the outcome of these changes.

If you put aside what you don’t understand about the blockchain, you just need to remember the simplest and most fundamental novelty behind it: the valid transmission of transactions without the involvement of financial middle parties. And that is the more important revelation about the new world of cryptocurrency.

So, the next time someone tells you: “cryptocurrencies are not backed by anything, they are like thin air”, your response should be to change the conversation to what the blockchain enables, instead of what cryptocurrencies appear to be. You could say:

“For the first time, we have a new technology that allows the final settlement of financial transactions between any two parties without the involvement of financial intermediaries.”

Imagine the implications of that statement. Imagine if financial and value-based transactions for any type of asset could be settled directly from one entity to another, while at the same time maintaining valid records of such transactions.

Doesn’t that give us promise for a new financial system that is more efficient than the current one? This technology is systemically disruptive, which is why it is facing headwinds from incumbents who want to cling to the old system.

But don’t go the rabbit hole of critiquing sovereign governments who are the current money authorities, or attacking the banks who currently maintain our accounts and move our money. Frontal attacks are not useful, and rarely effective. It is better to surround the incumbents and make their market shares smaller while making them gradually irrelevant, by growing the number of cryptocurrency users and raising the general public’s awareness and openness about the technology’s promise.

By opening people’s minds further, the rest will follow.

William Mougayar is a Toronto-based entrepreneur, Ethereum Foundation advisor and advisor to Consensus 2016, CoinDesk's flagship conference. He is also the author of the upcoming book, The Business Blockchain:

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