Easing into Crypto, Part 4: How crypto offers autonomy, why it can’t be stopped, and the value of decentralization

Michael CalozCryptoLeave a Comment

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This is part 4 in my cryptocurrency educational series.

⭐ Each part builds on the previous ones, so I suggest starting with:

Part 0: Overview of my series, who this is for, why you might consider listening to me, and how easy it is to think you understand crypto when you actually don’t.

Cryptocurrency 101 series (i.e., core principles and Bitcoin):

  1. Part 1: Why should I care? What’s in it for me? Why is crypto important (it’s about a lot more than just making money!)?
  2. Part 2: How crypto actually works, why Bitcoin is valuable (even if it’s just “made up!”), and what you should know about blockchains (the tech behind them and how they could influence the future of our world)
  3. Part 3: How the blockchain keeps running, where new Bitcoins come from (i.e., how mining works), and concerns about Bitcoin’s environmental impact
  4. Part 4: How crypto offers autonomy, why it can’t be stopped, and the value of decentralization
  5. Part 5: How to store and use cryptocurrency, some basic cryptography, how wallets work, identity management, and the future of democracy
  6. Part 6: Overview of the different types of wallets, which one is best for you, what to be careful of, and why a hardware wallet might be worth the investment

Cryptocurrency 102 series (i.e., intermediate principles, Ethereum, and other coins/tokens):

  1. Part 7: Ethereum (the #2 most popular cryptocurrency, and the one I’m most excited about), smart contracts, dapps, gas (and the high gas fee problem), Proof of Stake (PoS), and Ethereum 2.0
  2. Part 8: Coins vs. tokens, and some real Ethereum use cases—oracles and DEX’s
  3. Part 9: Intro to NFT’s (collectibles, research funding & historical significance, and music)
  4. Part 10: More categories of NFT’s (art, video games, virtual reality)
  5. Part 11: Wrapping up NFT’s (what you can actually do with them, upsides, downsides, risks)
  6. Part 12: DAO’s (organizations managed by algorithms, governance tokens, collective ownership, and the “network state”)

Cryptocurrency 103 series (i.e., advanced principles, investing):

  1. Part 13 (in progress): DeFi (decentralized finance): yield farming, liquidity staking, and more
  2. Part 14 (in progress): Investing (principles, leverage, indexes, risk/reward, and my favorite options for making money in crypto)

Part 4 Reading Time: 18 minutes

Updated July 5, 2021: Added a section about the benefits of decentralization for content creators and influencers.

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With the blockchain, no one can falsify records after they’re entered.

Let’s go back to my example from Part 2: To run your business, you keep track of all purchases on a ledger.

If there were only one copy of that ledger—on a piece of paper in your office, or even in a spreadsheet on your business computer—it would be possible for an employee or hacker to modify it.

But if your ledger were on the blockchain instead, it would automatically check with the other computers (that the employee or hacker has no control over), and it would quickly recognize the fraud.

In other words, it’s nearly impossible to falsify records on the blockchain (or to create counterfeit Bitcoin).

This goes way beyond business ledgers—crypto can give you personal autonomy and safety.

Ok, so an employee or hacker might try to mess with your ledger to steal from you.

Let’s think bigger.

What if an authoritarian regime came into power and decided to shut down your business or seize your personal assets? What if there were a terrorist attack or some other major news event that sparked panic?

The bottom line is that systems governed by centralized authorities can be shut down. If your money is trapped in that system and you want to pull it out, you’re out of luck. For example:

  • During a national panic in 1933, banks were closed, and all transactions were suspended for a full week.
  • After big sell-offs in 2008, trading was halted on the New York Stock Exchange.
  • Even companies like PayPal can shut down accounts without warning.

Power in cases like these is in the hands of a small group of people (who are not typically held accountable for their actions).

What if there were a different way?

Crypto can’t simply be shut down or halted.

The blockchain network could only be turned off if every single person running a node agreed to shut them down at the same time.

Does it sound naive for me to say it’s that resilient? Surely the US government would be powerful enough to shut it down, right?

Nope, and this isn’t just coming from crypto-savvy programmer types.

Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission (SEC), said in April 2021: “I think we were past that point [being able to shut down Bitcoin] very early on because you’d have to shut down the Internet… I don’t see how you could ban it. You could certainly make the effort. It would be very hard to stop people from [trading Bitcoin]. So I think it would be a foolish thing for the government to try to do that.”

In contrast, traditional centralized tech services can be seized or shut down—and that includes everything from social media services to literally any website.

The Domain Name System (DNS) is the service that connects URL’s (web addresses that humans understand) to the actual IP addresses behind them that computers understand.

For example, google.com is actually 142.250.217.100 (in other words, the website actually lives at that IP address, but “google.com” is just a shortcut to make it easier for humans to access).

If a malicious actor were to take over the Domain Name System, they could change google.com to point to a different IP address (e.g., to a fake website that looks like google.com but actually asks you to log into gmail and then steals your password).

The Domain Name System is controlled by ICANN, an organization based in Los Angeles and thus subject to California (and United States) law. That allows the US government to do things like shut down Iranian news websites.

I won’t argue whether that’s good or bad, but it is important to recognize that so much power rests in the hands of a single organization. And, that that organization—which is responsible for the entire global Internet—is bound by the laws of a single country.

It also makes quite a tempting target for hackers and oppressive governments: one single point of failure.

Imagine if the Domain Name System ran on the blockchain instead, and it were decentralized across thousands or millions of nodes around the world.

There are in fact a number of blockchain-based DNS projects in development.

Increased regulation on crypto is possible. But governments should be wary since remote work is increasingly common.

The blockchain can’t be shut down. But what the government could do is regulate on-ramps and off-ramps—the websites used to convert regular money to cryptocurrency (and back).

But it’s become clear that over-regulation here can backfire. Blockchain technology will be the foundation of some major emerging technologies in the future. If the US government makes it too hard for Americans to operate in the crypto space, this country will be left behind.

That actually happened at the state level in 2015. New York state passed some laws that made it unfavorable to crypto developers. The result was that a lot of promising startups simply moved to a different state with friendlier regulations. This was known as the “Great Bitcoin Exodus.”

It’s becoming easier and easier to work remotely from anywhere. The pandemic has caused a lot of tech people to move away from expensive cities like San Francisco. And I’ve seen a number of articles arguing that the future of Silicon Valley will no longer be a single physical location (or in the United States) but rather in the cloud and distributed around the world.

Cryptocurrency is a worldwide phenomenon, and there’s a real risk of emerging businesses simply leaving the country if the US government passes regulations that are too strict.

Hopefully, it won’t make that mistake.

Crypto is resilient and borderless.

If your government turned corrupt and tried to seize your traditional bank accounts, you might be out of luck.

But with Bitcoin, you could theoretically memorize the secret key to your account, flee to another country, and log on to any Internet-connected computer or smartphone to get access to all your Bitcoin (Bitcoin ATM’s are even becoming increasingly common across the world).

There’s an interesting story where a Federal agent betrayed the US government and stole money via the case they were supposed to be investigating (the infamous Silk Road). Since they were a Federal agent with the proper credentials to conduct secret investigations, they could go to banks and demand that they erase the records of their theft.

The banks complied, not realizing what was happening.

What finally led to his arrest? When he stole Bitcoin, there was no way for him to cover his tracks, so investigators were able to use the blockchain record to track him down.

Remember that every node carries a complete copy of the blockchain, i.e., every single transaction ever made by everyone. So, as long as one single computer survived, theoretically, it could all restart.

Technology evolves too of course, so Bitcoin itself might not be around forever. But even if the Bitcoin protocol (i.e., the software governing it) is eventually superseded by a new one, the blockchain ledger behind Bitcoin will very likely carry on.

Blockchain-based financial networks are resilient against not only government intervention but also catastrophe—even if the Internet itself collapsed, you could still theoretically carry the blockchain on a laptop and physically wire it to other laptops.

Bitcoin (or whatever future-Bitcoin is called) would survive, along with a record of all transactions.

(By the way, if you’re worried about the government tracking all your Bitcoin transactions, there are alternative cryptocurrencies like Monero that are designed to be anonymous and untraceable while retaining the other benefits of blockchain technology.)

Crypto is decentralized, which means power is less consolidated and compensation goes directly to the “workers.”

One advantage of decentralization is that Bitcoin can’t be shut down because the blockchain is copied across lots of different computers.

Another advantage is that compensation and decision-making power can go directly to the “employee level” rather than remaining at the “executive level.”

Imagine that you want to send an international wire transfer to another country. The traditional way would be to use a company like Western Union, which has to charge enough to pay its 12,000 employees.

With Bitcoin, you instead have thousands of independent people (node owners) competing to validate your transaction. You pay the winner a small fee, and it goes directly to them with no middle-man. Plus, if any of those node owners want to get even more involved in how their blockchain works, they can vote on changes to the Bitcoin platform or even directly contribute to its open-source code.

Decentralization also gives content creators and influencers the freedom to switch platforms.

Let’s say you’ve spent years building up an audience on YouTube or Twitter. What started out as a hobby has turned into a business, and you now rely on your audience for your livelihood. Or, maybe it’s not even about money for you—maybe you’re a powerful voice in the social justice space with a lot of followers eager to hear what you have to say.

Unfortunately, in the current world, your voice is now completely in the hands of YouTube, Twitter, or some other centralized platform (i.e., governed by a single company).

If they adjust their policies or you want to move to another platform for whatever reason, you’ll effectively have to start from scratch. Sure, you could try to copy over your content, but the real trouble is your subscribers. You might know their Twitter handles, but that won’t help you find them on whichever new platform you switch to. 

Now, imagine a future where YouTube and Twitter are competing with equivalent services that are decentralized and blockchain-based. In this world, you’d be able to easily access a list of all the public keys of your subscribers. Then, you could easily switch from one blockchain-based platform to another without losing them.

This would have two important effects:

  1. It would pave the way for more innovation—if it’s easier for creators to switch from one platform to another, it incentivizes the platform developers to keep implementing feedback and improving their service.
  2. It offers creators more safety and stability. With a centralized platform like YouTube or Twitter, you’re at the mercy of a giant corporation. If you depend on their service for your livelihood and it’s hard to leave, it’s easy to feel captive and anxious if that platform makes changes you don’t like (e.g., censoring your content, adjusting your compensation structure, etc.).

Sure, viable alternatives to YouTube and Twitter will take a while to gain traction, but one space where blockchain-based alternatives have already become quite robust is the financial world. In a future post, I’ll go into detail on how blockchain-based DeFi (decentralized finance) is already offering a lot of the same services as big traditional banks—but with much better rates and a lot less bureaucracy.

Is crypto really secure? Can I trust my hard-earned money to live on a blockchain?

Crypto has certainly gone through some growing pains over the past decade, but it’s getting much safer.

A lot of brilliant people are constantly working to bolster the security of the major blockchains.

Still, it’s a very tempting target for hackers. And, in some senses at least, there are fewer guardrails in crypto compared to traditional financial platforms.

Regular bank accounts are insured by the FDIC and protected with legal guarantees. Whereas if you lose the key to your crypto account, it’s lost forever, and there’s no legal body you can go to for help. (I’ll explain in my next post why that’s not quite as scary as it sounds.)

The “Wild West” analogy was more true several years ago, though. Although it’s still not super intuitive to new users, the crypto world has already become a lot more stable than it was.

Years ago, it was more like a group of hackers hanging out in chat rooms discussing the latest coin tech.

Today, the tools are more robust, and there’s a lot more scrutiny on the industry. It’s still possible to be scammed if you’re not careful, but if you use a major exchange (e.g., Coinbase) to buy a small amount of Bitcoin, you probably don’t need to worry that it’s going to suddenly disappear. Coinbase manages $90 billion worth of assets, and there’s over a trillion dollars invested in the crypto market overall.

My point is that this is a sturdy ecosystem that a lot of people (including me) trust with their money—as long as you take the right precautions. In a future post, I’ll go into a lot more detail on how to safely get into crypto investing without being scammed.

(If you absolutely can’t wait, I personally choose to use Coinbase Pro, but please avoid buying any crypto coins other than Bitcoin and Ethereum until you understand more, even if your friend tells you they have a hot tip for something else.)

In terms of the blockchain itself getting compromised, the biggest threat is probably China.

Remember that the blockchain relies on the consensus of many computers to verify that transactions are legitimate.

Since China controls so many computers via its “Great Firewall” (which China uses to censor the version of the Internet that its citizens see), it could theoretically launch an attack on global blockchains by having a huge number of Chinese computers run the blockchain software to act as nodes.

Those nodes could then work together to falsify transactions and claim to the rest of the blockchain network that this corrupt version of the blockchain is the legitimate one. If they had more computers than the rest of the world combined, they could theoretically replace the legitimate version of the blockchain with theirs.

Luckily, this is also a known threat that people are watching for.

There are already plans in the crypto community to combat this kind of attack. Here’s my understanding:

  1. Blockchain technology is open-source (i.e., the code is accessible by anyone), and it’s not controlled by one central body. So, any of the prominent groups working on the technology could simply “fork” it: Imagine that the current blockchain is traveling straight down a road (i.e., more and more transactions are being piled on and verified with each step forward). “Forking” the blockchain means creating a fork in the road to split it into two parallel roads that start off exactly the same but then diverge.
  2. Say the Chinese government initiated their hostile takeover yesterday at 5 pm. Groups of security experts elsewhere in the world would easily notice and jump into action to stop it. All blockchain records are easily visible, so these experts could simply move backward along the blockchain to find what it looked like at 4:59 pm. Then, they could fork the code at that point.
  3. Now, one of the parallel “roads” would be running China’s version of the blockchain, and the other parallel “road” would be running the proper one. Of course, it wouldn’t be very secure if anyone could simply change the blockchain at any time. While anyone can fork the code whenever they want, that new version will only become the standard if everyone else agrees to hop on.
  4. So, the next order of business would be for those programmers to convince the rest of the world to switch their nodes over to run the new fork of the blockchain. Once the rest of the world switched over, any Bitcoin transactions happening in China would be logged and verified on the Chinese version of the blockchain, and any transactions elsewhere in the world would be logged and verified on the new “rest of the world” standard version.
  5. By the way, because of how blockchain technology is designed (i.e., very complex cryptography techniques), even if 51% of the node-owners in the world colluded to make malicious changes, it would actually be impossible for them to go back to change past transactions. Those are sealed in place by complex math like a fly in impenetrable amber. These bad actors would simply be able to intercept and modify new, very recent transactions.

That’s of course a highly simplified version of what would happen. But the point is that blockchain technology was designed to be resilient against bad actors.

At the end of the day, it’s a never-ending war between cybersecurity experts and malicious hackers. However, the fact that crypto technology is open source and global in scope means that there are a whole lot of smart people constantly working to make it more and more secure.


Ok, at this point, you hopefully understand the big ideas around cryptocurrency. But one thing we haven’t touched on yet is how Bitcoin actually works at the transaction level.

How does a person store their coins or use them to pay for things (and what makes it safe)? In my next post, we’ll dig into the answer: Part 5: How to store and use cryptocurrency, some basic cryptography, how wallets work, identity management, and the future of democracy.

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