Three events in three countries over the last three months have forced even die-hard critics of cryptocurrencies to sit up and take note of. An oil pipeline major on the East Coast of the US had to suddenly shut shop, disrupting about 45% of fuel supply in the region. Concurrently, El Salvador’s populist president introduced a legislation to make Bitcoin a legal tender in his country. A continent away, China has introduced digital Yuan and is rolling it out to the public. Earlier this year, a digital artist named Beeple sold his collection of photographs titled ‘Everydays: The first 5,000 days’ for a whopping $69 mn through a Christie’s auction.
Though seemingly disconnected, a common thread runs through these events – they are all part of the new ‘token economy’. Token refers to a digital construct which is unique and cannot be ‘double-spent’. Token economy includes cryptocurrencies like Bitcoin and Ethereum, Altcoins, Stablecoins, Non Fungible Tokens (NFT), Decentralised Exchanges (DeX), Decentralised Finance (DeFi), Decentralised Applications (Dapps), Smart Contracts, and could include Central Bank Digital Currency (CBDC). The underlying machinery which makes these complex systems work is advanced cryptographic math coupled with a robust Distributed Ledger Technology (DLT). Collectively, it is referred to as Blockchain technology.
Blockchain is often known as trustless systems, where no one needs to vouch for another market participant and mathematical algorithms provide the needed trust (for any transaction). Once any system becomes trustless, it obviates the need for any intermediary or a central agency. Not having any intermediary makes transactions more efficient and less expensive (in theory). Using tokens, digital payments can be made directly from buyer to seller of a good or service without having to route the transaction through a bank.
With this background, let’s decode the events mentioned earlier. The first is the case of Colonial Pipeline, which was subject to a ransomware attack and had to pay $4 mn to hackers to restart their operations. The ransom was paid in Bitcoins – supposedly hard to trace (half of which, interestingly enough, was successfully seized by the FBI). The second case is of El Salvador, a small coastal country with a population of 6 mn and a GDP of $55 bn (PPP), where the US dollar is the legal currency. They have become the world’s first country to have legalised Bitcoin. Third pertains to China, which has a stated ambition to be the global power in blockchain. Its own National Blockchain Service Network (BSN) is to checkmate the rise of crypto coins with its digital yuan. A new phenomenon is the sale of art through NFTs, to provide superior efficiency for digital and intellectual property transactions over traditional ways.
To be continued (Misra is CEO, TNeGA. The opinions expressed here are his own)
Sold for Rs 29 crore, Doge is most expensive NFT meme
'Doge’- the image of an excited looking Japanese Shiba Inu, which is considered as one of the most iconic memes on the internet, was recently sold as an NFT (non-fungible token) for a massive sum of $4 mn (Rs 29.999 crore). This sale has turned Doge into the most expensive NFT meme in history. Atsuko Sato, a Japanese kindergarten teacher, who happens to be the owner of the dog whose image had gone viral, turned the meme into an NFT and put it up for sale last week. Several offers were lined up for the ownership of the Doge meme which is based on her dog who is named Kabosu in real life, and was adopted from an animal shelter.