Blockchain Technology Basics: An Introduction to Cryptocurrency
Will companies of the future run on blockchain technology, or will we find an even more trusted and reliable way to store data? Will bitcoin become more popular than the dollar, or will it be forgotten as new forms of digital currency emerge? The tech world is hard to predict, but if you want to know where it’s going, it helps to understand where it is at the moment.
If you don’t own any bitcoin or work at a blockchain startup, it’s likely that you only have a vague awareness of what words like “blockchain” and “cryptocurrency” even mean. Like the tech industry as a whole, women are underrepresented in the blockchain world, and one way we can change that is by educating ourselves about blockchain technology and cryptocurrency and learn more about how they’re being used. This article won’t tell you everything there is to know, but it’ll help you learn enough about blockchain technology to figure out if these emerging industries might be of interest to you. We will also guide you to other resources where you can learn more.
For help, we turned to Veronica Reynolds, Cofounder of Los Angeles Women in Blockchain and a founding member of Blockchain at UCLA. She is a student at UCLA School of Law, where she is researching blockchain technology and the law.
Her fascination with these technologies began in 2013 when she took a class called Virtual Communities at UC Berkeley as part of her undergraduate degree. Her professor lectured about bitcoin and blockchain. “I had always been a bit of a rebel, super interested in subcultures, so it really fascinated me,” Reynolds says. Her insights will help us explain these technological “subcultures” and their value to our culture at large.
What is a Blockchain?
In basic terms, a blockchain is a way of storing information. As the name suggests, data is stored in individual blocks. Once a block is created, it can’t be easily modified because of its place in the chain. Each block of data is linked to the previous block, which helps keep all the data secure.
Therefore, instead of storing all the data in one place, blockchain technology uses a decentralized network of individual computers. This makes the whole thing more secure, because it’s only possible to modify the data if all the computers agree to the change. This is complicated stuff, so it helps to look at how it is being used. One example of how blockchain technology is being used is cryptocurrency.
What is Cryptocurrency?
Cryptocurrency, in basic terms, is digital cash that uses blockchain as a way to track transactions. The most popular cryptocurrency is bitcoin, but there are many others. Unlike traditional forms of money, bitcoin isn’t issued by a country or a bank, and it’s not stored in a bank either.
Despite having the word “coin” in the name, a bitcoin isn’t a physical coin you can hold in your hand. It only exists digitally. However, it works like cash, so it can be sent from person to person. When it changes hands, the transactions are stored on a blockchain.
Veronica Reynolds describes this use of blockchain technology as “a distributed ledger that anyone in the world can add to.” She says, “You can’t change it. No one person can change it. That’s the powerful thing. The transactions are all visible. You can append to it—you can add a transaction—but you can’t go back and change things.” Because individual people can conduct blockchain transactions, there’s no need for a third party, like a bank.
Other kinds of data can be stored this way, too. Reynolds says, “Blockchain has applications outside of cryptocurrency. With blockchain, you can record information in the same sort of way, but you don’t have to be sharing money.”
How Do I Buy Bitcoin?
If you’re interested in blockchain and cryptocurrency, Reynolds suggests investing in it yourself. “I don’t suggest replacing your 401k, but take $50 or $20 and sign up for an account. Learn by doing. I think that makes it more real, and it’s definitely much more exciting,” she says.
To get started, check out Reynolds’ Medium post on how to buy cryptocurrency for the first time. A few things to know before you start:
- During cryptocurrency transactions, you will share your public key with the other party. Do not share your private key with anyone.
- There’s no bank involved, which means there’s nobody to help you if you lose or giveaway your private key by accident.
- Be very wary of phishing attacks, because anyone who gets your private key has full access to your account and any cryptocurrency in it.
- The price of bitcoin is far from stable. The technology is still developing, so it is subject to some growing pains.
What are the Limitations of These Systems?
There are challenges that the blockchain community is still working to overcome. Reynolds says one such example is CryptoKitties, a company that started selling one-of-a-kind virtual cats on the Ethereum blockchain platform in 2017. The virtual cats were like Tamagotchi pets that needed their own care and breeding, and you could trade, sell, and buy these cats amongst other users on the blockchain platform.
“[CryptoKitties] realized that everything that goes viral on the internet starts with cats, so if cryptocurrency was going to go viral, it was going to be through cats,” Reynolds says. Their strategy worked. Cryptokitties really did go viral, and everyone wanted to buy them. Unfortunately, this plan quickly backfired.
Reynolds explains, “They were clogging up the [transaction] system, and a portion of the community was frustrated. They thought, ‘We’re trying to solve real world problems, and you’re clogging the system with virtual kitties?’ They just couldn’t process all of the transactions.”
While blockchain technology is promising, Reynolds says, “They’re trying to figure out the scalability. It can only process so many transactions per second, and they don’t have that solution yet.” This explains why going viral isn’t actually a good thing for cryptocurrency at the moment, until blockchain experts can figure out a way to process that volume of engagement.
Building Connections in Blockchain Technology
Another glaring issue with cryptocurrency systems is that there are a disproportionate number of men versus women involved in the blockchain community. Reynolds realized very early on that this was the case. She was inspired to start her own networking group after speaking with a man in blockchain about his “community” events. He told Reynolds that he regularly invites founders, co-founders, CEOs, and other powerful people to his blockchain networking events. Then he added in a matter-of-fact manner, “We used to invite women, but they’re just too much of a distraction.”
When Reynolds couldn’t find a blockchain community in Los Angeles, she launched a Meetup group called Los Angeles Women in Blockchain. She says, “We had our first meetup and I noticed a lot of the women didn’t have any experience with blockchain technology. We wanted to create a space where women who were interested in blockchain could learn about it.”
At a recent meeting, the discussion focused on blockchain basics. Women from an assortment of industries — including entertainment, fashion, and tech — showed up to hear a blockchain expert explain how to buy bitcoin. Then the women with more blockchain experience shared tips with blockchain beginners.
Among the takeaways: The process of buying and trading cryptocurrency is still pretty rough because the technology is so new. This new asset type has tons of room for growth. There are signs of progress in terms of gender equality. One such example is MyCrypto, a cryptocurrency wallet service with a woman CEO, Taylor Monahan.
To expand your knowledge of blockchain, bitcoin, and related topics, Reynolds recommends Jill Carlson’s Cryptocurrency 101 Reading List and Laura Shin’s Unchained Podcast, especially the Crypto 101 and Blockchain and Cryptocurrency Basics episodes.
She also suggests checking out Michael Casey’s book The Truth Machine: The Blockchain and the Future of Everything. She notes, “If you don’t know anything about blockchain, there may be points [in the book] that are a little over your head, or you might have to look up a few terms — but it’s a really good foundational overview of the major players in the space, the concepts, and history.”
Veronica Reynolds created Los Angeles Women in Blockchain because she wanted more women to make space for themselves in the technology world. She says, “We need to realize that we are left out of many conversations, and maybe we need to strategize different ways to get in the game a little bit more. If we’re being left out, let’s fix it.” C’mon, ladies. Let’s do this.