The news is out, Facebook is looking to float its own cryptocurrency and even before the Whitepaper is released, word is some of the biggest names in payments, startups, and tech funnelling $10 million each to buy a single node of this crypto token.
Some crypto enthusiasts and many who do not understand the fundamentals of crypto seem to think this will drive adoption and awareness. But it is not so.
Here are basic tenets or principles behind cryptocurrencies and why FacebookCoin or GlobalCoin or just another Shitcoin – as we call it in the crypto community, is against everything that crypto and Bitcoin stands for.
Why was Bitcoin created?
For the uninitiated, and some who think they are initiated, Bitcoin was a result of lack of trust in traditional financial systems. Now I will have to write a 200-page book to summarise all the reasons why modern Central Banks and big institutions have failed the common people by controlling the money supply, flow, and various other variables.
You just need to know that the wealth gap is ever widening, we have abandoned the Gold Standard (no, your USD or GBP or EUR or INR is not backed by Gold anymore), and Quantitative Easing is the latest of evils unleashed upon common people by those who play Gods in the financial institutions.
Bitcoin was invented as a way to give power to common people and certain basic principles are to be followed.
Basics of Crypto
Crypto token has to be decentralized. This means the ledger that contains all the information about every transaction is encrypted and stored on the Nodes. These are just machines that carry the copy of these transactions. Miners are those who validate transactions. They run a program on specialized hardware which helps validate a transaction.
These players are the key to decentralisation. If I float a coin – CoinCrunchCoin – and host it on my Amazon server and give some nodes to my friends for their server, I can shut this blockchain down any time. Just like governments and banks can freeze our money any time (you didn’t know that?). I can reverse a particular transaction if I have God-like power over the system.
Basically, a crypto that is not decentralized enough, which means nodes need to be in control of common people and in different countries/continents, it is just another poker token that can only be redeemed in X Casino. One criterion for being a Shitcoin is not enough decentralisation.
When a transaction is confirmed, and if there is an entity that can reverse it, I need to be able to trust that entity to be fair. Are governments fair? Are bankers fair? Bitcoin is trustless. This means you do not need to trust any one person or party. The system is self-governing and there are various checks and balances that make sure your money is with you (unless you send it to a scammer or an exchange that promises to multiply your money for nothing).
Apart from these two, the principles of Bitcoin say that the code should be open-source – so that everyone can examine and audit it and the blockchain has to be permission-less. This means there should be no gatekeepers collecting your data or providing you with special access to the blockchain. It should be equally accessible to all.
There is no CEO, association or government running this network. It is hence impossible to control, modify or ban Bitcoin. A company or an association that is formed in the United States will shut its systems down to the rest of the world if the government orders them to. They will manipulate and work the system in favor of their company, association members, country and whichever tribe they belong to. Bitcoin has no such issue.
FacebookCoin or GlobalCoin
We already know that Facebook has sold their nodes to entities who can shell out $10 million – thereby excluding common people and breaking the principle of decentralisation. Here is a list of companies who will control the network and hence control the whole blockchain. The moment you have a dispute with any one of them, they can reverse the transaction or block your wallet or one of the hundred other things that a government or a bank can do right now.
So what is the point or replacing the bankers and bringing in tech giants to print, monitor and manage our currency? Why would we not use a system that is open source, proven its robustness and security for 10 years (yes, Bitcoin’s network has never been hacked for 10 years now)?
Will this be good for crypto industry?
Now we come to the crypto enthusiasts reading this. Facebook is a media company. It has replaced newspapers and TV for billions of people. It has been known to run misleading Ad campaigns, rigging elections, censoring the news and selling private data. Do you think they will go around educating people about the real principles of crypto / Bitcoin or divert the attention to their coin and try to mislead people about Bitcoin?
I know this is speculation. The whole crypto industry is. If you were to take a bet for a truly decentralised global currency, do you think Facebook’s coin even features in that list?
And if you’re in mood to just read more about the kinds of shitcoins that plagued or are still plaguing the industry, here’s a read for it.
Cover Image by William Iven from Pixabay
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