Cryptocurrencies are not the star of the show. They are simply a product of the technology that allows them to exist. We dipped our toe in to the pool that is “blockchain” during the first #myforkingeducation. However, blockchain mainly represents the accounting/storage aspects of this new frontier. Value, on the other hand, stems from our next intimidating concept: “Digital Scarcity”. Remain calm...
Last time around, we used a "history book" to represent how a blockchain operates. To make digital scarcity a little more relatable, let’s use baseball cards. You are an enthusiastic collector, trying to get the most value possible out of your collection...
How is it that you go about determining each card’s value? Producers print endless copies of most cards they distribute. At any given time, if the demand is there, they can print even more. As a collector, do these common, mass produced duplicates have value to you?
What if it was an autographed card, equipped with a certificate of authenticity? A limited production where very few are in circulation and no more will ever be created. Truly rare cards that you own and no one will ever duplicate. This card is “scarce”; there is an insufficient amount distributed, based on the demand. Scarcity is what drives value. If there is an endless amount of a resource, it holds little to no value.
Think about Bitcoin (BTC) like our baseball cards. Only 21 million Bitcoin (BTC) will ever exist. Currently, only ~16.8 million are in circulation. Blockchain technology allows everything you own to be authenticated, uniquely in your possession. There is a measurable value of Bitcoin that can be based on the demand.
The mass produced cards? Sadly, that is the US Dollar and other government issued currencies of the world (aka “fiat”). The amount circulating grows on a daily basis. There is no cap on the amount that can be created. It is increasingly insecure in digital form and rapidly becoming obsolete in physical form. If you are looking for true value, the choice is clear.
This new way to create and store value does not stop with currencies. You could even say that a digitally scarce currency is only the beginning. Today, we face many challenges due to the fact that scarcity hasn’t existed in a digital sense. Here is a common struggle...
Taylor Swift is coming to town! Unfortunately, tickets sold out before you could get them on Ticketmaster. Scouring the web, you find a solid deal on Craigslist and lock up your tickets. Thanks to “modern” technology, you enter the event with a digital ticket on your phone...how convenient? Unfortunately, when the usher goes to scan your ticket, it reads as if it has already been used. Shafted. Not only have you lost the money you spent on the ticket, you also have to make the walk of shame away from the arena. Is this one of life’s lessons that you should really have to learn?
Digital scarcity has been brought to life. Sooner than later, you will comfortably purchase tickets without fear, uncertainty, or doubt. Data has the ability to become truly unique and unable to be replicated, essentially providing a certificate of authenticity along with every transaction. Once tickets are received, you are the sole owner of those tickets.
There is no copy remaining on the seller’s computer. You are in sole possession of the unique coding that defines those tickets. Further cementing your ownership: the blockchain, itself. As the transaction is confirmed, the details are placed as a new block on the blockchain...or you might say as “a new chapter in the history book”. Everyone is in agreement that you are the owner of two front row, VIP tickets with backstage passes to see Taylor Swift. Lucky you!
Digital scarcity allows everything from media, art, and more to be delivered in a manner where ownership is mathematically verified. While Bitcoin is the prime example, it is already being put to use elsewhere, creating the first of its kind: CryptoKitties. Yes, CryptoKitties. They are digitally unique collectible cats that people are spending millions on. Think Beanie Babies in digitally scarce form but each CryptoKitty has its own unique “genetics”.
“You can buy, sell, or trade your CryptoKitty like it was a traditional collectible, secure in the knowledge that blockchain will track ownership securely. But, unlike traditional collectibles, you can breed two CryptoKitties to create a brand-new, genetically unique offspring. It results in something special—just like you!”
Now, isn’t that just adorable?!?!?! While CryptoKitties is a very primitive example of digital scarcity, it also shows that we are only in the beginning stages of exploiting this new technology. As we dive further in, we will begin to look at specific companies and cryptos that are attempting to leverage digitally scarce property in a revolutionary way.
As always, thank you so much for taking the time to read. Make sure to pass this along to anyone who may need some help understand the basics of the cryptoverse. Also, give me some feedback by commenting below. You took the time to ready, now let me know what you thought!
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Don't forget to check out the rest of The Hard Fork's blog entries that cover:
- My Forking Education:
- Showcasing the things I’ve learned that are inspiring me to stay on my path
- Quick Breakdowns/Easy Reads
- Written so those with no prior knowledge of a given topic can comprehend and learn
- Forking Updates:
- Describing the roadblocks, obstacles, and breakthroughs I’ve encountered
- Forking Inspirations:
- Profiling examples of others that provide great learning experiences
- Other Steemians
- Celebrities
- Obscure entities, great examples
- Profiling examples of others that provide great learning experiences
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Great post! I like your relation to digital scarcity and crypto kitties!
CryptoKitties definitely created an easy to understand example of what digital scarcity is. Some of the big picture ideas are pretty mind blowing. The gaming industry will be flipped upside down. Anyone that considers themselves a gamer should be incredibly excited for what is to come. I'm not even a gamer and I'm excited.
very nice post
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Thanks for taking the time to stop by. Just followed you, looking forward to reading your content!