Chapter I

A Short History of Money

In a moment we will take a deep dive into blockchain technology and it’s potential as a tool to create more socially equitable systems. Before we can take this dive though we think it’s important to examine the history of the primary system that blockchains are aiming to re-create, the monetary system. While blockchains can be used for all kinds of non-financial purposes, Bitcoin or Cryptocurrency are usually the first words that come to mind when people think of blockchains. Because of this, it is important that we get on the same page about what exactly plain old currency is before we add the ever so tricky “crypto” to the word.

So, what is currency? Sure, Dollars and Euros are currency, but beyond valuable paper in your pocket, what is currency really? We define currency as a technology that enables people to exchange value. Money, a term often used interchangeably with currency is actually an enhanced version of currency which enables people to both store their value and exchange it. By these definitions, money is currency but not all currencies are “money”. These definitions are important, but if they don’t make sense now, that’s alright! We will be expanding upon and clarifying them as we take a trip through the history of these technologies and closely examine their design.

At this point, you may be curious about our use of the words design and technology in reference to money and currency. Many people don’t think of currency or money as technologies, but they are not naturally occurring tools which means that someone invented them to serve a specific purpose. The fact that money and currency were invented as specialized tools to accomplish specific tasks makes them by definition, technologies. While these technologies aren’t updated as frequently as the iPhone, they have been updated several times over the past hundred thousand years. The story of these updates can provide good insight as to what money or currency truly is beyond just Dollars and Euros.

Before currency could be updated, it had to be invented, and for it to be invented, it had to not exist at all. As hard as it is to imagine, our world once existed without any proper form of currency or money. Around 100,000 years ago, this was the case. There was no interchangeable representation of value that could be held in one’s pocket and easily exchanged for nearly anything. As far as we know though, humans have always traded with each other and they must have had some system to facilitate such trade. Because of this, one may wonder, how was it that early humans managed to keep fur on their back and food in their stomachs? The common answer to these questions is “the barter system!” Like many simple answers to complicated questions, that answer is an oversimplification which borders on falsehood.

While the system used by our ancestors somewhat resembled barter, it wasn’t. The idea that ancient simple economies first used the barter system and that money emerged as an improvement to this system was first put forward as a mere theory by Aristotle. Later, Adam Smith adopted this theory as fact and popularized the idea in his book The Wealth of Nations. Like many of the other dubious theories presented as fact in The Wealth of Nations, Smith was wrong about this one too. According to Cambridge anthropology professor Caroline Humphrey (or any other anthropologist you might ask for that matter), there is no evidence that any civilization’s economy was primarily barter based, ever.

If you imagine a purely barter-based economy, it’s pretty easy to see why it doesn’t work. Let’s pretend you are a baker alive before the invention of currency living in a barter economy. You just baked some loaves of bread but you are in search of a balanced dinner of loaves and fishes. In pursuit of this balanced meal, you head down to the shore and you see a boat of fishermen landing there so you walk up to them and ask if they would be interested in bartering a loaf of bread for a fish. Unfortunately, the fishermen are already stocked up on bread and want none of yours, so now you are stuck with a bunch of carbs and no protein! What you have just encountered is the main shortcoming of the barter economy.

For a barter economy to function, it must rely on what is known as the double coincidence of wants. This means that for a person in such an economy to be able to trade what they have for what they need, they are required to find someone else who has what they need and is willing to trade it for what they have. This double coincidence of wants is hard to come by in today’s hugely populated world, imagine trying to find it in a small village of 30-60 people, it would be next to impossible! Because barter economies require such a double coincidence of wants to work, plain and simple, they don’t work.

Perhaps you are now wondering, if a purely barter-based economy never existed how did people transact before the invention of money? As far as anthropologists can tell, early humans used what is known as the “brain ledger system” to track credits and debits. Using the same example of the fisherman and the baker, here is how the brain ledger system works:

You are a baker interested in eating fish for dinner so you head to the shore and purpose a trade to the fisherman. Again, the fisherman already has bread so he doesn’t want to make a direct swap today. Fortunately, because it’s the year 90,000 BCE the world is small, you and the fisherman are from the same small village and have known each other for your whole lives, and he also recently became your brother-in-law! As a result of the trust created by your and the fisherman’s longstanding relationship, you two are able to strike a deal. This deal states that your brother-in-law will give you a fish today and in exchange, whenever he wants he can knock on your door and you’ll give him a fresh loaf of bread. This deal would be stored in you and your brother-in-law’s “brain ledger” as a one loaf credit for your brother-in-law and a one loaf debit for you.

This sort of informal system for recording credits and debits is called a “brain ledger” because of its similarities with a physical ledger like the one kept within a checkbook that displays a list of credits and debits. While the modern world primarily relies on physical ledgers to record transactions, brain ledgers still have their place among friends today. You may have used a brain ledger while out to dinner with a friend by saying, “I’ll get yours tonight if you get it next time!” In this instance, you probably wouldn’t write down that your friend owes you dinner and call them to collect on it someday. Rather, you would trust that you two would have dinner again someday and that they will pay for your dinner when that time comes.

If you have used this system then you know that a brain ledger is perfectly suited for informal transactions between two people with a trustworthy and lasting relationship. Perhaps if this system is familiar to you then you may have also had experiences which revealed some of the differences that lead brain ledgers to be unfit for most types of transactions.

There are two driving differences between physical ledgers and brain ledgers which necessitated the invention of physical ledgers. The first of these differences may be obvious. A brain ledger exclusively exists in someone’s head and entries are easily forgotten. Adding gravity to this issue, because there is no physical representation of credits or debits stored anywhere when people disagree on the state of the ledger, it’s just one person’s word against another’s. This can lead to serious conflicts which are next to impossible to resolve. The other difference between physical and brain ledgers is that the value represented on brain ledgers takes the form of specific real-world items, not standard units which abstractly represent real-world value. This system of recording credits and debits as specific items from specific people means that credits only usable with a single party rather than being able to use them to trade with anyone. These two differences mean that for large scale economies where lots of exchange takes place the brain ledger system simply cannot work.

While us modern humans are aware of how great physical ledgers are, there was once a time when they simply didn’t exist yet, so during that time, brain ledgers were the backbone of the economy. Early communities were both small and close-knit allowing people to be confident most debts would be repaid and credits would not be falsified. This trust and confidence enabled trustworthy people to safely trade for what they needed when they needed it. Unfortunately, not all people are trustworthy so a better system had to be created.

Around 25,000 years ago, evidence suggests that the brain version of the ledger system was slowly updated to a new and improved type of ledger. While there are no written documents recording this particular moment in history, the story is suspected to have unfolded in villages across the world something like this:

You are the same baker with a fisherman brother-in-law but you’re having a problem. Your brother-in-law keeps coming to your bakery insisting you owe him a loaf of bread when you know that you really don’t. You are a peacemaker and thus want to avoid fighting with your brother-in-law at all costs. The desire for peace leads you to come up with a brilliant idea. Next time you and your brother-in-law agree to trade fresh fish for a future loaf of bread, you will give him a unique bead. You inform your brother in law that the bead you just handed him is equal to one loaf of bread at your bakery. Anyone who brings the bead to the bakery can exchange it for a loaf of bread. If anyone claims they are owed a loaf of bread but they don’t have a bead to exchange for it, they won’t get any.

In this example, the record of debt no longer has to be stored in someone’s brain but instead has been abstracted to be stored in their hand in the form of a bead. This shift means that the debt has moved from a brain ledger to a token based physical ledger. In this example, the physical ledger is a bead, but physical ledgers took different forms across the world. Often they were unique tokens like beads, shells, or rare stones. Sometimes they were just tallies on a clay tablet. In fact, the earliest forms of writing are ledgers on clay tablets. Regardless of what they looked like though, the upgrade to a physical ledger system effectively fixes the two major flaws of the brain ledger system.

Firstly, continuing with the bead example, by declaring that one bead is equal to one loaf of bread the question of whether or not someone is owed a loaf of bread is no longer a matter of memory, nor is it one person’s word against another. If a person has a bead, they have a loaf of bread at your bakery, if they don’t, no bread. This clarity means that a physical ledger system is reliable enough to lower some of the trust requirements of transacting. Lower trust requirements allow a person’s number of potential trading partners to increase significantly.

The second fix brought by the upgrade to a physical ledger system is perhaps more exciting than the first. A physical ledger always employs a standard unit which abstractly represents value (one bead, one shell, one tally mark). This makes it possible to use the bead to trade for items other than a loaf of bread. In order to shine a light on the massive benefits brought by this upgrade, we will return to the fisherman, the baker, and their beads.

Let’s say that over time, the fisherman ended up with three beads. Instead of redeeming them for three loaves of bread, he gives them to his neighbor in exchange for a chicken. This trade is a win-win, the fisherman’s neighbor now holds three loaves of bread that will never go bad which he can use to trade for other things he may need in the future. The fisherman now has a chicken that is laying eggs which he can trade the baker for more beads. The ability to represent value in the form of a token has given the economy lots of room to grow and in turn, created a tremendous amount of new economic opportunity.

Over time, the beads issued by the baker become more commonly used for trade in the village. Soon, all of the village members begin to trust the value represented by the baker’s beads and started to conduct all of their trade using these beads. All the beads really are is an IOU from the baker, but nobody cares what they can be traded for at face value. People are trading using the beads because they all agree that they are worth the same amount. Because everyone believes that the beads have value, they will gladly trade goods or services for beads based on their agreed upon value. What these beads are doing is serving as a technology that enables people to easily exchange value. In other words, the beads are functioning as a primitive currency.

This story of taking debt (the loaf of bread) and representing it as a token (a bead) is how currency first arose all around the world. These tokens varied from region to region and included items such as shells, beads, stones, salt, or sometimes tallies on a clay tablet. While the form of the token varied, the function was always to make the exchange of value easier by moving the “ledger” from peoples minds to a standard system of physical units.

In order for a physical token to work as a unit for a physical ledger system, it had to embody five traits. Most importantly, all of the tokens used were regionally scarce. Scarcity makes falsifying or counterfeiting value hard. These items also were all durable so they didn’t wear over time, easily transportable so they could be brought from transaction to transaction, and recognizable so that people could easily tell they were accepting the right item in exchange for their valuable good or service. The final trait of these items is that they were Fungible, this means that they could easily be swapped for identical items allowing them to be used as seamless units of exchange.

Any token with these five traits could easily be turned in to a local currency. The one shortcoming to this system is the fact that these types of tokens are good for making the exchange of value easier but they are not good at storing value. Because these tokens do not store value over the long term, they are not money, merely currency. While it may seem like a token such as the bead from our example could store value over time, in practice, it doesn’t and here’s why:

In the village from our example, beads began to be used as a standard unit of exchange. The villagers were using this unit because a bead represented a specific amount of debt. Everyone using this system was operating under the assumption that all debt is equally valuable. When a villager used a bead to trade for another item, the person accepting the bead was agreeing that debt from one person is as good as debt from another. The person who just gave the bead does not owe anything to the receiver but the baker technically does. While the new owner of this debt from the baker probably plans on trading it for something else rather than cashing it in for bread, the thought that they could theoretically cash it in for bread gives the bead value.

Because the bead in this ledger system is equal to the baker’s debt, when traded, people are accepting debt as if it were a credit. In the short term, holding debt and treating it as a credit works, long-term however using debt as a unit of exchange presents problems. The main problem presented by this type of system comes when what is known as a “bank run” happens. While this is a modern term derived from the modern banking system, in the primitive bead based currency system from the example, the baker is functioning as a bank and is susceptible to a bank run.

In the event of a “bank run” one too many persons will go to the baker on the same day, hand him a bead and the baker will respond that he cannot give a loaf in exchange. The baker issued too many beads that have now been cashed in and he has no loaves left to give and no supplies to make more. Within a few hours of this interaction, the whole village has heard the news and suddenly nobody wants to use the beads to trade. The beads were valuable because they represented value upon repayment of the debt. When the realization that the debt isn’t going to be repaid strikes, the beads lose all their value. Even if the baker was able to offer a loaf of bread for every bead brought during his lifetime avoiding a bank run, eventually he is destined to die and the beads would then lose their value.

This eventual loss of value is inevitable in a system where debt is treated as a unit of exchange. As we know, not all debts get paid off, and a system that uses debt as the basis for value operates under the assumption that they will. This inevitability of lost value is the case with any currency that creates value from debt. The inevitable loss of value also means that any currency which derives its value from debt is only good for exchanging value in the short term but not storing it. This means that if the basis of value in a currency comes from lending, it is not money, and thus is not suitable for holding value long term.

The fact that the earliest forms of currency were not good at storing value coupled with improvements in transportation technology necessitated an improvement on this system. After a long time of regionally fragmented systems for exchanging value, humans from different regions were beginning to trade with one another and needed to adopt the first global medium of exchange. Eventually, gold emerged as the new and improved global unit of exchange. Gold served as a good global unit of exchange because it was (and still is) scarce all around the world, but it was also durable, transportable, recognizable, and fungible. Gold enabled anyone to safely and reliably trade with anyone from anywhere. For a long time, gold operated alongside regional systems, and by roughly 500 BC, most of the regional tokenized ledger systems (shells, rocks, and beads) were abandoned for gold as a universal ledger.

Many people wonder, why gold? Sure it shares the five properties of those older forms of currency, but so do other precious metals. For starters, humans have always found gold desirable and intriguing. Ancient Egyptians used it for jewelry as early as 5000 BCE while other early cultures used it to build statues of their deities. This natural attraction to gold gives it an intrinsic value that other primitive currencies were lacking. In other words, gold didn’t become valuable because it represented debt, gold became valuable because people viewed it as having value by itself. This intrinsic value also sets gold apart from those early currencies because it makes gold not just good for exchanging value but also for the storage of value. People wanted gold (and still do), not just because it’s scarcity gave it future value, but because they recognized it as a beautiful material with immediate aesthetic value.

Some would argue that aesthetics aren’t really a great reason to select a metal as the universal representation of value. So, primal attraction aside, why didn’t platinum or silver become the “gold standard”? While silver has seen widespread use as a currency, silver tarnishes much more easily than gold making it less durable than gold and inferior as a way to store value. Platinum, on the other hand, is almost too durable. Gold’s melting point is 1000 degrees Celsius while platinum’s is 1600 degrees Celsius. This large difference in melting points means that gold is much easier to divide into smaller units than platinum making it more transportable and fungible. Gold’s low melting point also makes it much more suited for the creation of coinage.

Because of gold’s malleability, durability, and unique ability to store value, it became the world’s first form of “money”. Gold was the first technology that enabled people to both exchange and store value with ease. As the idea of gold as a reliable unit of exchange which also stored value began to catch on, local governments took the idea and ran with it issuing the first standardized coin based versions of money that would meet our modern definition of the word.

Sometime between 700 and 500 BC Greek city-states began to issue uniform gold coins with governmental logos stamped into them. These logos certified that the coins were issued by the city-state and were trustworthy units of exchange. These easily standardized units of exchange made local trade seamless and easy. The fact that they were government issued gave the government increased power over the economy, something they probably didn’t mind. Because of the improvements brought by these government issued standard units of value, the idea of coinage took off and swept the world by storm streamlining the economy. By the time of the Roman empire, gold coins were standard and they stayed that way for a long time.

Like most technologies, eventually, gold coins became old news. One of the reasons gold was so great was because it could be divided into tiny coin sized units of exchange which could be used for small transactions. Around the year 1000, rising populations caused such a large increase in the demand for gold that even in its smallest form it became too valuable for day to day usage. This, coupled with the fact that people had begun to care more about the number stamped on a coin than the actual precious metals inside the coin created perfect conditions for a new type of currency. During this time the “banknote” was born, the earliest form of paper money.

Banknotes were basically pieces of paper signed by private precious metal bankers stating that the piece of paper could be redeemed for a fixed amount of gold or silver at the bank. Because people trusted that the notes had future value, they worked great as units of exchange. Banknotes were a step forward for currency, but a step back for money. Banknotes were significantly more versatile and transportable compared to gold, however, they functioned more like the IOU beads issued by the bread baker in the earlier example, making them useless as a store of value.

Because banknotes are very similar to the old token based currency system, they also fell victim to the same problems. Like in the example with the bread baker, all the precious metals bankers were doing was issuing IOU’s, meaning that the value represented in a bank note was created from debt. There are countless examples of bankers issuing more value in banknotes than they actually had in their vaults making them susceptible to bank runs. When bankers fell victim to bank runs, their bank notes would become worthless affecting everyone who held them. Additionally, just like in the example with the bread baker, someday the banker is destined to die. How could the note be redeemed then? The fact that these notes would always inevitability lose their value made them only useful for exchanging value, not storing it, making them a currency, not money.

Eventually, in an effort to add reliability to the system and to turn currency back into money, government-backed central banks emerged as the primary issuer of bank notes. The idea was that you could trust the government to not over-issue bank notes and to be around long term. Additionally, governments are thought to be longer lasting institutions than private banks. England was the first nation to sponsor central bank backed notes. Other European nations and The United States quickly followed suit.

Government sponsored bank notes did prove to do a decent job at holding their value and thus were more reliable than notes issued by the friendly neighborhood banker. Good bank notes did also hold some advantages over coins made from precious metals including the fact that they are easier to transport and divide, making transacting small amounts easier. These advantages turned government backed banknotes into the mainstream form of currency for centuries. Banknotes do however hold some serious drawbacks. The main drawbacks to bank notes and paper currency, in general, is that they are not very durable (water and fire damage are common) and they are also easily forged. Additionally, they are still basically IOU’s which as we have learned are not very reliable at storing value over time.

As time went on, central government backed banknotes became the standard form of currency. The specific term for a government-backed banknote is fiat currency. Over the past 600 years, dominant fiat currencies have risen and fallen with the power of the nation that issues them. For a long time, these fiat currencies were backed by precious metals, this is no longer the case. Right now the world’s reserve currency and the most powerful fiat currency is the US dollar, which ceased to be backed by gold in 1971, many other currencies lost their gold backing after WWI. Before the US dollar was the most powerful currency, it was the Pound of Great Britain. Before the Pound, were the fiat currencies of France, the Netherlands, Spain, and Portugal.

These dominant fiat currencies are all from different parts of the world and different times, but they do maintain common traits. The first thing that all dominant fiat currencies have in common is that their value correlates directly with the power of the nation that issues them. So long as the issuing nation of a fiat currency is an imperial power with a booming economy and a strong military, the currency is valuable. The second and far more unfortunate trait shared by fiat currencies is that eventually, the issuing nation loses some of their global power in one form or another and the currency loses all of its value. The lifespan of a dominant fiat currency since the 1400s has ranged between 80 and 110 years. The average lifespan of a fiat currency including nations that aren’t imperial powers is much lower than the lifespan of these dominant currencies at a mere 27 years.

While perhaps these statistics about the lifespan of fiat currencies are often accepted as facts of life, we believe them to be somewhat alarming. They equate to the fact that currencies are not a good way to store value. If the average global citizen were to start work in their early 20’s and save their extra wages for retirement, by the time they reach retirement the wages they saved will have likely become worthless. Even if the wages saved are not worthless, they will have significantly gone down in value. This means that in order to save money, a person needs to have access to financial instruments like stocks, bonds, or real estate in order to save their value over time. Most people simply do not have such access meaning that they are destined for generations of lifelong poverty as a result of the limitations imposed by the existing system.

The most recent evolution of currency was their digitization. With the invention of checks, credit cards, wire transfers and most recently technologies like PayPal and Venmo, people have slowly but surely stopped using cash. Sure, people still carry cash for small daily transactions, but most big purchases are done with a check, credit card, or a bank transfer. Because of peoples comfortably with the concept of money that they can’t touch or hold, over 90% of the world’s money supply is completely digital. This means that 90% of the money in your bank account only exists as a record on your bank’s digital ledger, not as cash stored in a vault somewhere. Regardless of what you think of this fact, it means we are living in the era of digital money and most people have no idea.

This is where our journey through the evolution of money and currency leaves us. Right now the majority of the value transacted in the world today is using digital fiat currencies (credit cards, PayPal, Venmo) that enable people to easily swap value but do not hold this value over time. In addition to the fact that these digital fiat currencies don’t hold their value well, they are very susceptible to security breaches such as hacks, identity theft, and other types of fraud. The security problems that are inherent with digital fiat currencies carry a cost which gets passed on to unknowing consumers. Digital fiat currencies are imperfect, this is because they were not designed for the digital world. Despite their imperfection, people continue to use them on a daily basis because they are both unaware of their flaws and unaware of any compelling alternatives. A compelling now exists, however, money that was created for the digital world we live in. Money is ready to evolve again.

Introduction

The first and most important thing to know is that Bitcoins and other cryptocurrencies are NOT actual coins. You may have seen pictures on the news of a gold coin emblazoned with a fancy “B”, this picture is just an abstraction of a bitcoin, not the real thing. Try to forget this association you have between cryptocurrencies and the physical coins that we are familiar with. In reality, Bitcoin and other cryptocurrencies are more akin to technology like the Internet than to Dollars, Euros, or any other currency that exists today. Starting out, this can be a confusing concept, but our goal with this guide is to demystify and make accessible all things crypto. We will come back to these technologies, what they do, and why they are valuable later, but first let’s cover the fundamentals.

In order to properly cover these fundamentals, we’ll have to introduce a small amount of crypto-jargon. These terms and the related topics will be covered in great detail later in this guide, but for now, here is how we will use this terminology and how these terms are related. Firstly, we will generally use the term cryptoasset in place of the more commonly used “cryptocurrency.” Everything you think of as a “cryptocurrency” can also be called a cryptoasset.

A cryptocurrency is an abstract type of digital coin intended to be used as money, like a bitcoin. Cryptoasset is a wider term used to refer to any digital representation of value recorded on a special type of shared ledger. This specific type of ledger made for recording cryptoassets is kept up to date by a peer to peer network of computers which collaborate by following strict mathematical rules. This type of shared ledger maintained by a network following mathematical rules is known as a blockchain. Any implementation of this type of shared ledger can be described as blockchain technology. Cryptoassets can only exist as a record on a blockchain, meaning that when the term cryptoasset is used, the fact that a cryptoasset is also a blockchain technology is implied. However, just because something is a blockchain technology, that does not necessarily imply that it is a cryptoasset.

Details surrounding these terms will be laid out later in the guide, but for now, only a general awareness of how they relate is necessary. The way these terms fit together can be arranged in order from most general to most specific as follows: blockchain technology, cryptoassets, cryptocurrencies, and bitcoin. Bitcoin is a cryptocurrency, but not all cryptocurrencies are bitcoins. Cryptocurrencies are cryptoassets, but not all cryptoassets are cryptocurrencies. Cryptoassets are a form of blockchain technology, but not all blockchain technology takes the form of cryptoassets. This guide will always use the most specific of these terms that are applicable within the context we are using it. So, with that hierarchy of terms in mind, we can return to the technology.

Perhaps your geeky coworker or tech-savvy cousin has tried to explain Bitcoin, cryptoassets, blockchains, or some other related topic to you before. Perhaps you learned something, or perhaps you were left with a whole lot more questions than answers. The reason for your confusion is actually very simple: Blockchain technology (the technology that powers Bitcoin and cryptocurrencies) is completely different from anything that you have ever heard of. Blockchains are not only a technological development, but they are also a social, political, and economic development.

Blockchains are complex technologies with the potential to become more useful in day to day life than the world wide web. With today’s difficult to use blockchain applications, the majority of people have no interest in using Bitcoin or any other blockchain. However, as these technologies become more user friendly, the interest in blockchains and their applications will begin to grow. With the information available in this guide, you won’t have to wait for blockchains to become mainstream to understand how they fit into your world.

In this guide, we will tackle the concept of blockchains and cryptoassets from all sides so that anyone can understand both the current and future applications of blockchain technology. We will also tackle the most commonly discussed aspect of blockchain technology, its value. Is it valuable? Can it provide you value? What does that even mean? This guide will delve deeply into the value of blockchains and cryptoassets, but we will never be discussing their monetary or speculative value. Instead, we will focus on what we see as the true value of this technology, its ability to help humanity create more socially equitable systems.

We at Blockteq believe that blockchain technology is valuable because it enables humans to create systems that everyone on the planet can trust, not just people of privilege. In order for a new blockchain based system to create this widespread trust, however, people will need some sort of understanding on how blockchains work. Once people understand how blockchains work, they can begin to imagine how a blockchain can be used as a tool for reconfiguring or replacing existing systems that have lost their trustworthiness. With that said, while there is great potential for blockchain technology to be used as a tool for creating more trustworthy and socially equitable systems, this is not a guarantee. It’s all up to how the users (that’s you) decide to use it.

For many, the thought of learning to use blockchain technology seems like more trouble than it is worth. Today’s blockchain technologies are complicated and unrefined, which means that they can be difficult to understand. While it this doesn’t need to be the case, we at Blockteq believe that there are two main reasons why people often find blockchain technology so confusing.

The first reason is that blockchains are a new type of technology, one unlike anything we have ever seen before. It is helpful here to think of technologies such as electricity, cars, telephones, computers, and the Internet because they too were all once considered new and confusing. Perhaps you understand the mechanics of how all of these technologies that we use everyday work, but you most likely don’t. We certainly don’t. What we do know is that a home lit by electric light bulbs functions differently than one lit by candles, that a car is completely different from a horse and carriage, and that the Internet is much more than a fancy telephone. We know this because we use these technologies constantly and understand their usefulness through experience. When these were still new technologies, it was difficult to imagine them being useful at all, let alone being used worldwide daily. The blockchain fits this pattern of an emerging technology with the potential to drastically shift our day-to-day reality. But, because of their current new and confusing form, it is still challenging to understand how they could actually make anything easier or simpler. Understanding the potential applications of any new technology before it sees widespread usage is difficult, Blockchain technologies are no exception to this fact.

The second reason as to why understanding blockchains can be difficult is that imagining how they function requires recognition of why we need them. As of right now, only a handful of people have connected the “how blockchains work technically” and the “what social purpose do blockchains serve” dots together. For blockchain technology to be used appropriately on a large scale, these dots will need to be connected. The former has many clear explanations, the latter, not so much.

Blockteq’s explanation of why we need blockchain technology starts with the fact that we believe that the dominant systems and institutions in today’s world limit a large majority of people from being able to experience the same quality of life which is afforded to the few. The inequality that exists within these systems and institutions means that they are oppressive by nature. As a result of the oppression maintained by these systems, a majority of people are in desperate need of new and improved systems. Blockchains can be used as a foundation on which new liberating systems can be constructed. We believe this to be the most useful aspect of blockchain technology.

Imagining the blockchain as a tool for liberation can be difficult when the initial wave of people adopting blockchain technology has mostly consisted of privileged financial speculators (stock trader types) who are not directly affected by the oppressive nature of our existing systems. Most of these privileged speculators already have a (relatively) stable fiat currency, a robust section of high-quality online banking tools, a government which they feel represents them, and very few if any social barriers from entering any market. This means that as of now, economic, social, and governmental systems are already working for this small group of privileged individuals.

These people are NOT who this technology was created for, and they are a minority globally. Most people alive today are oppressed and afforded few to none of the luxuries that the privileged blockchain speculators assume to be a natural part of life. Because of this, people who feel as if they can trust in our financial, political, and social systems typically have trouble understanding the need for blockchain technology. In order for people of privilege to see the full potential of this technology, they must put themselves in the shoes of an average person from Venezuela, Zimbabwe, Turkey or even the shoes of a less privileged person living in the U.S.

An empathetic shift in perspective allows a person of privilege to realize that the financial, political, and social systems in place today are beyond sub-par, they are oppressive. As this shift in perspective comes with the admittance that many of the dominant global systems are dehumanizing for the majority of the world’s population, we will name it the “human perspective”.

Accepting the ‘”human perspective” comes with admitting that oppressive socioeconomic and political systems are not exclusive to the developing nations, but are equally alive and well in “economically thriving” nations like the United States. Our nation is not immune to the problems of Zimbabwe or Venezuela, in fact, the same exact problems exist here. These problems are just hidden behind clever cultural myths such as “anyone can climb the ladder to the top” and “our fair democratic systems means everyone in the United States is afforded the same freedom.”

As a person of privilege, for whom these myths seem true, adopting the human perspective requires conceding that these myths are indeed myths. This means admitting that the economic, political, and social systems many of us believe to be secure, trustworthy, and fair are actually none of these things. In fact, these systems lack security, are untrustworthy and behave unjustly towards most of their participants. The fact that these systems already oppress certain groups of people means that they are inherently oppressive systems that could begin to oppress you at any time. Additionally, because these systems are highly oppressive to some people, nobody should trust them. For those who place their faith in existing systems, the thought that these systems are dysfunctional and dishonest can be a tough pill to swallow.

Because the truth about our systems is a hard one, adopting the “human perspective” and understanding the social need for blockchains as a person of privilege can often be much harder than understanding the mechanics of how blockchains actually work. This is why plenty of people understand how the technology works and are still screaming that blockchain technology has ”no use case”. In other words, these critics do not see why blockchain technology would be a suitable replacement for current systems because they do not see how they are oppressive.

Underprivileged groups of people, on the other hand, are already able to understand the unpredictable and oppressive nature of our systems from first-hand experience. They can see how this technology is useful because existing systems don’t work for them at all. Because of this, we believe that the most oppressed people in our world will be the first ones to discover the best applications for blockchain technology and unlock its true value. These most useful applications of blockchains don’t exist because oppressed populations are yet to have access to quality information on how blockchain technology can work for them.

Improved understanding surrounding the functions of blockchain technology paired with dialogue on how it can be used as a tool for humanization will lead to innovations that cannot be imagined today. In order for this to happen, however, a collection of educational resources must exist that facilitate a dialogue about the function of blockchain technology and how it can be used as a tool for social change. This guide aims to be one of many educational resources adding to this dialogue, not a resource declaring that we know the truest value of the blockchain and that you can too if you just listen. In order for the information offered here to be of value, it must be taken as our part of a dialogue in which you too are involved. The only way to cultivate a rounded understanding of the true value of blockchain technology is through dialogue, not by just reading a guide.

Adding to the confusion surrounding blockchain technology are many of the existing educational resources on the topic. These resources often reject the possibility of offering a rounded education through dialogue by adopting an extreme position on one of two opposing ends of a spectrum. At one end of this spectrum sits resources which exclusively explain the speculative financial value of the technology. At the other end of the spectrum, there are resources which offer highly technical explanations of blockchain technology but overlook its social purpose.

Educators focused on the speculative value of blockchain technology believe that the best thing about cryptoassets is their ability to be traded as speculative investments, much like stocks. These educators usually attach the “true value” to its price in Dollars, Euros, or another fiat currency and speculate that its value compared to these currencies will increase tremendously over time. Explanations which attach the value of cryptoassets to Dollars or Euros create various negative outcomes. One such outcome is that they lead some people to feel like they are being pressured to join a pyramid scheme. These people often think something along the lines of, “if this stuff were so great, they wouldn’t have to promise crazy returns to make people want to buy!” This group writes off the technology entirely because they are confident it is exclusively an asset forming a giant speculative bubble and is good for nothing but speculation.

Another likely outcome of this type of explanation is the opposite reaction. Overly hyped up explanations of the speculative potential of this technology make people excited about investing in a revolutionary, disruptive, world-changing technology. They can see how much cryptocurrencies have increased in value since last year, and they rush to buy something they have little to no true understanding of. This fear of missing out (FOMO) creates the very speculative bubble that the other type of person was afraid of. Thinking of Cryptoassets exclusively as speculative tools is counterproductive as it divides people into two extreme categories: the “cryptoassets are worthless” category and the “we will all be millionaires next year” category. Both groups are probably wrong, and neither group is prepared to use the underlying technology to create meaningful change.

At the other end of the spectrum sits the highly technical way of explaining blockchain technology. This style of education is perhaps less damaging than the other style, but certainly not more useful. The issue here is that while there are many good explanations of how the technology actually works mechanically speaking, they rarely explain how it can actually be used. This is a lot like explaining how the motor of a car works to a person in 1910 without showing them how it powers a four-wheel driving device. If you asked this person “Isn’t the motor impressive? Don’t you think it will change the world? Don’t you want to use this product?” This person would probably give you a long blank stare and then ride away as quickly as they could on a horse. This is how a lot of people react to technical explanations of cryptoassets. Even if a person does understand how blockchains work from a computer science perspective, it is difficult to see the social applications of the technology by just looking at it technically. This lack of connection between function and use can lead the average computer scientist to lose interest quickly.

The point of mentioning the current state of blockchain education is to say that this guide aims to avoid the common problems associated with blockchain education. We will examine both the technical and social sides of blockchain technology while optimistically imagining its potential and realistically discussing its shortcomings. Seeing as each reader carries their own knowledge about the world, we also invite and encourage you (the reader) to contribute any and all thoughts you have to share as they relate to the topics at hand. Using our collective knowledge, we can develop a base of knowledge that will offer a balanced understanding of blockchain technology and where it does and does not fit into our world.

Since you will be giving us a piece of your attention (and hopefully your perspective too), we would like to make a few promises in exchange. Firstly and most importantly, this guide will NEVER try to convince you that it is a good idea to invest in blockchain technology by buying a cryptoasset. Cryptoassets are highly volatile and as such, they are incredibly risky to hold as investments. We at Blockteq do not recommend cryptoassets to the average investor and are never offering financial advice of any kind.

Once you have finished reading this guide, you will have a great amount of knowledge about cryptoassets, blockchains, and their true value. With this knowledge, you may or may not decide that owning a cryptoasset is for you. You will, however, have a sufficient amount of knowledge on blockchain technology to begin to imagine how you could use it to improve systems which you participate in. Perhaps you might discover that blockchain technology could improve some aspects of your life without having to actually purchase a single cryptoasset for yourself. Either way, this guide will never try to sell you anything, and that’s a promise.

Secondly, we promise never to present our opinions with the thought that they are absolute truths that you should believe too. The information presented here surrounding the reality of our human situation is never intended to replace what you already know. You are a subject in your world and we don’t know more about your world than you. Only you are an expert on the world from where you see it. This guide simply is an explanation of our perspective on the world as it relates to blockchain technology, when it contradicts with your perspective, make a note of this and let us know! The discovery of these contradictions will help us develop a much fuller picture of the objective reality in which we both exist and will enable us to come up with much more effective solutions to the problems we encounter in this reality. This guide has been created to begin a dialogue and is never intended as a one-sided presentation on an objective reality that we are all participants in.

Finally, this guide promises to never attempt to explain any technical aspect of a cryptoasset based solution without first explaining the real-world problem it attempts to solve. In other words, this guide won’t just point at the motor and say “look, a carburetor and fuel valves, what a nice motor!” This guide will say “this is a nice motor because you can feed it gas! It will turn these four wheels and take you to the grocery store and back without leaving a pile of horse poop in the road.”

We promise that we will hold true to these promises so that the reader can easily, comfortably, and safely learn about Bitcoin, blockchains, and cryptoassets. Our goal for this educational resource is for it to be one small part of the large dialogue on how blockchain technology can be used to create a world full of more socially equitable systems. Our hope is for our readers to take this information in with the same participatory intentions. To help the reader fully realize this intention, this guide asks three things from you.

1. Think from the “human perspective”.
2. Engage in a dialogue with the text, our view is limited.
3. Constantly imagine where blockchains fit in your world/where they don’t.

If you can agree to these things, then you are ready to begin your journey of becoming an expert on the topic of Bitcoin, Blockchains, and Cryptoassets. Thank you for joining Blockteq with the intention of co-creating a more trustworthy and equitable world through the use of blockchain technology. We are excited to co-create it with you.