THE BIG BANG OF CRYPTO

Now that we’ve (hopefully) enlightened you on why cryptocurrency was created and how people became interested in its potential, let’s take a step back—or rather go a couple decades back—to take a brief look what kick-started the Digital Age in the first place.

In the 1960s, the earliest rendition of the internet was the ARPANET (Advanced Research Projects Agency Network), initially created to share information over great distances without relying on phone connections and instead on a network of computers. This system was first used for both academic and military purposes only. By the time the ’90s rolled around, the World Wide Web as a browser was introduced by British computer scientist Tim Berners-lee as a means to navigate the internet better. On August 6, 1991, the browser went live; and in 1993, it was free for everyone to use and develop without any fees attached to using it. To quote Berners-lee, “the dream behind the Web is of a common information space in which we communicate by sharing information. Its universality is essential: the fact that a hypertext link can point to anything, be it personal, local or global, be it draft or highly polished.”

With that brief history lesson done on the introduction of the internet and the World Wide Web, how does that correlate to our present-day developments like blockchain, crypto, Defi, Web 3.0, and the Metaverse? (You can find out more about NFTS in our NFTS for Dummies article in pages 44 and 45).

The first, and most pivotal thing to remember is that it all started with the need for a more efficient way of communicating via the sharing of information. The second, is that the road to innovation is rarely ever an easy one, let alone creating a worldwide system as vast as the internet. It took us over half a century to get to this point, and until now, the system is still evidently growing. The third, which by now you all should have taken note of, is the idea of democratising the internet and empowering users. With that said, let’s talk about those developments we just mentioned.

DECENTRALISED FINANCE (DEFI)

The epicentre of all that is crypto and blockchain technology is a simple concept at first glance: instead of going through a centralised system with gatekeepers and regulators that ‘set the rules’ and have you pay a small fee for their services, you manage your own finances with your own digital wallet.

The keyword here is that decentralisation is democratisation—giving the user more control over their finances.

However, therein lies several caveats: 1. Because Defi is technically borderless and unregulated, should there be a financial crime, who do we report it to?

2. While it’s said that the blockchain can allow us to track stolen or lost crypto easily, as everything would be recorded in it, because there’s no regulatory organisation that oversees the transaction, the possibility of a user unknowingly falling for a scam is present as they won’t know who’s at the end of the line.

WEB 3.0

In a nutshell, it’s the third successive iteration of the World Wide Web—which has the potential for broadened connectivity, better ubiquity (accessibility), and a more user-oriented interface based on decentralisation.

What that jargon-heavy sentence means: instead of going to Google, Safari, or any fixed conventional data storage online for information that monitors your preferences, search history and online activity, you can now search for information freely without worrying about the sudden surge of furniture ads bombarding your social media platforms just because you looked up an Ikea bookshelf.

Based on that freedom, wherever you’re from, Web 3.0’s supposed ‘trust-less’ and ‘permission-less’ qualities can empower the user by allowing them more accessibility to information and direct engagement with one another without a ‘trusted’ third party. Data isn’t owned, but shared. (Here’s an example: VPNS.)

Going along the lines of being a more user-friendly space, Web 3.0 is said to implement artificial intelligence and machine learning to process how a singular user uses the internet. Again, instead of basing their data off of the number of times you Googled ‘cryptocurrency’ and thus creating relentless targeted ads on which trusted investment mobile app you should download (we speak from personal experience), computers will use data and algorithms that comprehend the meaning of human learning behaviour to improve its accuracy in sharing information relevant to our searches.

ETHEREUM

Two main things to know about Ethereum: like Bitcoin, it runs on blockchain technology but unlike BTC, which is mainly utilised as a decentralised digital currency, Ethereum on the other hand is an open-ended, decentralised

software platform—it has its own cryptocurrency called Ether (ETH), the second most popular digital token after BTC.

At its core, Ethereum goes beyond just being an online payment method in a peer-topeer network, and focuses on the potentials of blockchain technology of being a public, distributed ledger that implements a smart contract programme.

It is also programmable, meaning a user can technically create almost anything digital without the interference of a third party and not have to worry about the ‘contracts’ transacted as well as their ‘terms’ being reversed or lost entirely.

So what can you do with the supposed fluidity of Ethereum? And how do you do it?

On the Ethereum site, to create a decentralised application—one of the many possibilities of the platform—they used a vending machine as an example, that if one were to put in enough money for their selected item, they get the item they paid for. Take note on the ‘enough money’ bit—while groundbreaking, the question of whether it’s suitable for the average user remains still.

METAVERSE

We’ll get to the point: the Metaverse is the culmination of a digital world that was already years inthe-making, long before Facebook became ‘Meta’ in late 2021.

In the late 1990s to the early 2000s, we begin to see early formations of virtual realities in the form of massive multiplayer online games (MMOS) like Runescape, World of Warcraft, Maple Story, Ragnarök and so on. In these ‘open-world’ games, you could hop onto different servers and interact with other player characters on your chosen server. Games like Second Life, on the other hand, were a multimedia platform where you could create an avatar and live a ‘second life’ in a virtual world. The in-game items your 3D avatar would have are your digital assets, making you stand apart from the rest—sometimes, these items, including in-game currency, would be bought with real-world money.

Today, we see the same ideas reflected in top Metaverse realities like Sandbox, Decentraland, and

Roblox, to name a few, where your digital assets can take the form of NFTS or digital property that you’ve bought within their worlds. Ideally, you’d be able to connect with others, or efficiently complete the tasks you do in real life via virtual reality.

Ernest Cline’s dystopian novel in 2011, Ready Player One, depicts a world where people would use a VR headset and wired gloves to enter a metaverse called the OASIS, which functions as a virtual society where people can play MMOS within another MMO.

Now, think back to the global lockdown that took place two years ago—at its height, most of the world was forced to go online, and from lifestyles, business models to communication methods, applications that allowed for remote connectivity were pivotal for us to go on about our lives. But like Defi, Web 3.0, and blockchain technology, we still have a long way to go if we’re ever going to achieve sci-fi fantasy levels of tech. Equivalent to the Wild West, the Metaverse is still developing as we speak. There are things to consider if we upload our entire selves on the internet too, such as the actual feasibility of an extended reality and its uses when tackling real-world issues like economic, technological or societal disparities, the communities it will impact as it develops, information privacy and user safety as news about sexual harassment in the Metaverse and the reveal of mature content in a virtual reality where most of its users are under 18 have been brought to light in the early quarter of 2022.

STABLECOIN

In a nutshell, stablecoins are cryptocurrencies that are pegged, or tied, to another currency, commodity or financial instrument. The aim is to provide an alternative to the high volatility of conventional cryptocurrencies like Bitcoin.

But according to the President’s Working Group (PWG) on Financial Markets’ report on stablecoin, “an instrument can serve as a reliable means of payment or store of value only when there is confidence in its value, particularly in periods of stress.” Because of how its stablisation system relies on such ‘confidence’, this particuclar system now has an inherent weakness as it goes against the decentralisation.

To translate that: fiat-backed stablecoins, much less those that are run by an algorithm, require ‘trust’ in its ability to remain stable. Now apply that model of trust to an algorithmically backed stablecoin like Terrausd (UST). Originally, one UST was supposedly equal to US$1 worth of Luna, so you could swap one UST for a number of Luna. Then, when the market value of one UST is greater than one USD, you now have an incentive to trade US$1 worth of Luna for one UST. So when a large amount of UST was withdrawn from Curve Finance, a decentralised exchange, chaos followed—by mid-may, Terra-luna had crashed 99.9 per cent within just 48 hours, from US$120 to US$0.02.

What we can we learn from this is that we are currently stuck in a particularly vicious natural cycle; when the economy slumps, you cash out, and when one person cashes out, the rest soon follow, which then leads to a crash in value.