top of page
  • Writer's pictureInvoke Creations

Bards Lost in The Metaverse Episode 18 - Cryptocurrency Part 1: What is it?

This week we kicked off the first episode of our cryptocurrency mini-series by tackling the topic of what is cryptocurrency.

Note: Please be aware, we are complete noobs in this area but believe if we want to engage and learn more in the web3 environment and explore the metaverse, then we need to be across cryptocurrency which is a fundamental aspect of the web3 world. We are not financial experts in any way and strongly recommend everyone does their own research. All of the information included in this episode was obtained through our own research, with many (but not all) utilised resources listed at the bottom of these notes.

With that out of the way, let's get into the notes. Below is an overview of all the information covered in this episode.

What is cryptocurrency:

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.

A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

7 Key concepts from Coinbase website (linked in resources section)-

  • Transferability

  • Crypto makes transactions with people on the other side of the planet seamless.

  • Privacy

  • When paying with cryptocurrency, you don’t need to provide personal information to the merchant. Which means your financial information is protected from being shared with third parties. And because no sensitive information needs to be sent over the internet, there is very little risk of your financial information being compromised.

  • Security

    • Almost all cryptocurrencies are secured using technology called a blockchain, which is constantly checked and verified by a huge amount of computing power.

  • Portability

    • Because your cryptocurrency holdings aren’t tied to a financial institution or government, they are available to you no matter where you are in the world or what happens to any of the global finance system’s major intermediaries.

  • Transparency

    • Every transaction is published publicly, without exception. This means there's no room for manipulation of transactions, changing the money supply, or adjusting the rules mid-game.

  • Irreversibility

    • Unlike a credit card payment, cryptocurrency payments can’t be reversed. For merchants, this hugely reduces the likelihood of being defrauded. For customers, it has the potential to make commerce cheaper by eliminating one of the major arguments credit card companies make for their high processing fees.

  • Safety

    • The fundamental ideas behind cryptocurrencies help make them safe: the systems are permissionless and the core software is open-source, meaning countless computer scientists and cryptographers have been able to examine all aspects of the networks and their security.

Other points of interest:

  • Operates using Public-Private key cryptography

  • Value of coins is heavily determined via supply and demand

  • Three different types of “stable” coins - which we’ll go into a bit later

Cryptocurrency History

  • Having a clear method to exchange goods has been a cornerstone of human civilisation for millennia. What has changed though is the way products or goods are exchanged. This has changed from exchanging products or belongings (like livestock, produce or belongings), to using metal coins (eg pieces of gold or silver), to using FIAT currency. And now cryptocurrency is offering another new way of exchange.

  • FIAT currency is what commonly used throughout the world. This is a currency the government has proclaimed is legal tender and is managed by central banks, but is not backed by a commodity like gold.

  • Crypto currencies have been around for quite some time. The first cryptocurrency was eCash, developed by the company DigiCash in 1990. The concept and company were created by cryptographer David Chaum, who in 1983 published a paper titled "Blind Signatures for Untraceable Payments.” Several other attempts ultimately led up to Bitcoin's creation, but it took more than 20 years to evolve into the popular cryptocurrency it is today.

  • Another early issue with Cryptocurrencies was how to solve the Double Spending problem.

    • Double-spending is a fundamental flaw in a digital cash protocol in which the same single digital token can be spent more than once. Due to the nature of information space, in comparison to physical space, a digital token is inherently almost infinitely duplicable,] leading to ownership of said token itself being undefinable unless declared so by a chosen authority. As with counterfeit money, such double-spending leads to inflation by creating a new amount of copied currency that did not previously exist. Like all increasingly abundant resources, this devalues the currency relative to other monetary units or goods and diminishes user trust as well as the circulation and retention of the currency.

    • In a decentralized system, the double-spending problem is significantly harder to solve. To avoid the need for a trusted third party, many servers must store identical up-to-date copies of a public transaction ledger, but as transactions (requests to spend money) are broadcast, they will arrive at each server at slightly different times. If two transactions attempt to spend the same token, each server will consider the first transaction it sees to be valid, and the other invalid. Once the servers disagree, there is no way to determine true balances, as each server's observations are considered equally valid.

    • Most decentralized systems solve this problem with a consensus algorithm, a way to bring the servers back in sync. Two notable types of consensus mechanisms are proof-of-work and proof-of-stake.

    • Proof of work (PoW) is a form of cryptographic proof in which one party (the prover) proves to others (the verifiers) that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part.

    • Proof-of-stake (PoS) protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. This is done to avoid the computational cost of proof-of-work schemes.

  • 2008 following GFC Satoshi Nakamoto (Unknown person/persons) released the Bitcoin whitepaper.

  • Bitcoin started 03 Jan 2009 Genesis block and is the longest lasting Cryptocurrency still on the market today.

  • Bitcoin originally had no exchanges, no buying, and was earnt through people mining on PC’s. There is still over 1 million Bitcoin to be mined then it will stop at $21Million.

  • May 2010 was the first Bitcoin transaction for a tangible asset. 10,000 bitcoin for 2 pizzas. ($284M today).

  • Bitcoin had a rough start being used with the silk road and illegal activity due to the main people using it being people who wanted to remain anonymous.

  • At the same time Ethereum started (2014) with smart contracts and provided flexibility for use in dApps:

    • Decentralized applications (dApps) are digital applications or programs that exist and run on a blockchain. DApps are therefore outside the control of a single authority as they are run in a distributed manner.

  • This then spawned the development of Alt coins (specific coins).

  • Coinbase and Binance started and were more professional.

    • These are now the biggest cryptocurrency exchanges.

  • ETH had a DAO running it but in July 2016 it was hacked where approx 3.6 million ETH were stolen. That's just over 8 Billion dollars today. Yep Billies.

  • 2017 Crypto became very popular and mainstream and companies wanted to do ICO’s (Initial Coin Offerings) But most were scams so in 2018 the government stepped in and said Bitcoin was a fraud.

  • Then in 2019 it flipped and big firms in Wall street started to play in the game as they saw potential for profit.

  • Then in 2020 Defi (decentralized Finance) showed up on the scene.

    • Decentralized finance (DeFi) is an emerging financial technology that challenges the current centralized banking system. DeFi eliminates the fees that banks and other financial companies charge for using their services and promotes the use of peer-to-peer, or P2P, transactions.

Blockchain Vs Cryptocurrency

Blockchain is the technology that enables the existence of cryptocurrency. They are intrinsically linked technologies, but you can have blockchain without cryptocurrency, but you can’t have cryptocurrency without blockchain.

What are the most popular Cryptocurrencies today (Jan23)

  • Bitcoin (BTC)

As the harbinger of the cryptocurrency era, Bitcoin is still the coin people generally reference when they talk about digital currency. Its mysterious creator — allegedly Satoshi Nakamoto — debuted the currency in 2009 and it’s been on a roller-coaster ride since then. However, it wasn’t until 2017 that the cryptocurrency broke into popular consciousness. Uses POW as their consensus mechanism.

  • Ethereum (ETH)

Ethereum — the name for the cryptocurrency platform — is the second name you’re most likely to recognize in the crypto space. The system allows you to use ether (the currency) to perform a number of functions, but the smart contract aspect of Ethereum helps make it a popular currency, and its flexibility in this regard has made it the blockchain of choice for dApps. In 2022 Etherium changed to using POS as their consensus mechanism.

  • Tether (USDT)

Tether’s price is anchored at $1 (US) per coin. That’s because it is what’s called a stablecoin. Stablecoins are tied to the value of a specific asset, in Tether’s case, the U.S. Dollar. Tether often acts as a medium when traders move from one cryptocurrency to another. Rather than move back to dollars, they use Tether. However, some people are concerned that Tether isn’t safely backed by dollars held in reserve but instead uses a short-term form of unsecured debt.

  • BNB (BNB)

BNB is the cryptocurrency/token issued by Binance, among the largest crypto exchanges in the world. While originally created as a token to pay for discounted trades, Binance Coin can now be used for payments as well as purchasing various goods and services which we will get into.

  • USD Coin (USDC) - Coinbase

Like Tether, USD Coin is a stablecoin pegged to the dollar, meaning that its value should not fluctuate. The currency’s founders say that it’s backed by fully reserved assets or those with “equivalent fair value” and those assets are held in accounts with regulated U.S. institutions.

  • XRP (XRP)

Formerly known as Ripple and created in 2012, XRP offers a way to pay in many different real-world currencies. Ripple can be useful in cross-border transactions and uses a trust-less mechanism to facilitate payments.

  • Binance USD (BUSD)

Binance USD is a dollar-backed stablecoin from top crypto exchange Binance in partnership with Paxos. Binance USD was launched in 2019 and is regulated by the New York Department of Financial Services. BUSD runs on top of the Ethereum blockchain.

  • Cardano (ADA)

Cardano is the cryptocurrency platform behind ada, the name of the currency. Created by the co-founder of Ethereum, Cardano also uses smart contracts, enabling identity management. Also uses POS consensus mechanisms.

  • Dogecoin (DOGE)

Originally created as a joke after the run-up in Bitcoin, Dogecoin takes its name from an internet meme featuring a Shiba Inu dog. Unlike many digital currencies limiting the number of coins in existence, Dogecoin has unlimited issuance. It can be used for payments or sending money.

  • Solana (SOL)

Launched in March 2020, Solana is a newer cryptocurrency and it touts its speed at completing transactions and the overall robustness of its “web-scale” platform. The issuance of the currency, called SOL, is capped at 480 million coins. Also uses POS consensus mechanisms.

  • Litecoin (LTC)

Litecoin was created in October 2011 and is one of the original altcoins. Founded by Google software engineer Charlie Lee, Litecoin aimed to have faster transaction speeds than Bitcoin with the hope of becoming more useful as a payments-focused cryptocurrency.

Stable coins (three different types):

  • Fiat-Collateralized Stablecoins

Fiat-collateralized stablecoins maintain a reserve of a fiat currency (or currencies) such as the U.S. dollar, as collateral assuring the stablecoin's value. Other forms of collateral can include precious metals like gold or silver as well as commodities like crude oil, but most fiat-collateralized stablecoins have reserves of U.S. dollars.

Reserves are maintained by independent custodians and are regularly audited. Tether (USDT) and TrueUSD (TUSD) are popular stablecoins backed by U.S. dollar reserves and denominated at parity to the dollar. As of late August 2022, Tether (USDT) was the third-largest cryptocurrency by market capitalization, worth more than $67 billion.

  • Crypto-Collateralized Stablecoins

Crypto-collateralized stablecoins are backed by other cryptocurrencies. Because the reserve cryptocurrency may also be prone to high volatility, such stablecoins are overcollateralized—that is, the value of cryptocurrency held in reserves exceeds the value of the stablecoins issued. A cryptocurrency worth $2 million might be held as reserve to issue $1 million in a crypto-backed stablecoin, insuring against a 50% decline in the price of the reserve cryptocurrency. For example, MakerDAO's Dai (DAI) stablecoin is pegged to the U.S. dollar but backed by Ethereum (ETH) and other cryptocurrencies worth 150% of the DAI stablecoin in circulation.

  • Algorithmic Stablecoins

Algorithmic stablecoins may or may not hold reserve assets. Their primary distinction is the strategy of keeping the stablecoin's value stable by controlling its supply through an algorithm, essentially a computer program running a preset formula.

In some ways that's not so different from central banks, which also don't rely on a reserve asset to keep the value of the currency they issue stable. The difference is that a central bank like the U.S. Federal Reserve sets monetary policy publicly based on well-understood parameters, and its status as the issuer of legal tender does wonders for the credibility of that policy. Algorithmic stablecoin issuers can't fall back on such advantages in a crisis. The price of the TerraUSD (UST) algorithmic stablecoin plunged more than 60% on May 11, 2022, vaporizing its peg to the U.S. dollar, as the price of the related Luna token used to peg Terra slumped more than 80% overnight.

Benefits of Cryptocurrency

  • Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor, allowing value to transfer globally, near-instantly, 24/7, for low fees.

  • No company, country, or third party is in control of it; and anyone can participate.

  • Most importantly, cryptocurrencies allow individuals to take complete control over their assets

News Topics

Must address the current state/last 12-48 months performance. Market has dropped, and there were two significant crashes:

  • Crash of LUNA/ Terra USD

    • TerraUSD is a stablecoin operating on the Terra blockchain. TerraUSD, which trades with the symbol UST, is always intended to be worth exactly one dollar, enabling transactions to process with predictable results and giving cryptocurrency investors and traders an option to store their assets in cryptocurrency without the risk and volatility associated with typical digital currencies.

    • However, sparked by a drop in overall cryptocurrency values, the UST stablecoin plunged in value beginning May 9, 2022. According to CoinGecko, the currency hit a low value of $0.298 on May 11, 2022.

    • This is the opposite of what was supposed to happen. So why did TerraUSD fall? It was driven by the underlying assets that were supposed to give UST a stable price.

    • The TerraUSD currency is not backed by U.S. dollar-denominated assets. Instead, a computer algorithm creates (mints) and destroys (burns) both UST and LUNA to bring the price back into equilibrium.

    • This worked reasonably well in practice from the inception of Terra and Luna until the recent market plunge, when the downward pressure on TerraUSD was too much for the algorithm to keep up.

  • Crash of FTX

    • FTX collapsed in early November 2022 following a report by CoinDesk highlighting potential leverage and solvency concerns involving FTX-affiliated trading firm Alameda Research. FTX's collapse shook the volatile crypto market.

    • FTX was a centralized cryptocurrency exchange specializing in derivatives and leveraged products.

    • FTX's founder and former CEO Sam Bankman-Fried was arrested in the Bahamas, extradited to the U.S. to face charges of fraud, embezzlement, wire fraud, money laundering and violating campaign finance laws. He was released on a $250 million bond/bail agreement in late December (highest bond recorded!). A 10% payment is sufficient to secure bail, which would be returned if and when he appears for trial.

    • Collapsed due to now financial backing. Company had used received fund to invest elsewhere and didn’t have the coins on hand when there was a run on people pulling their money due to market dip.

As always, we have a lot to do and a lot more to learn. Hope you all have fun following along as we improve our understanding and knowledge!

You can find this podcast episode (and all our other episodes) here: , or directly on your favourite streaming services.

NOTE: Everything discussed during the podcast is simply our own interpretation of information we come across as we research topics, or is commentary based on our own personal experiences. We highly encourage everyone to conduct their own research into topics of interest as information, especially in the technical space, changes regularly.

Music track featured this week was titled Grey Muss and can be viewed/listened to here:

To check out our latest art and music adventures, make sure you like and subscribe to both our Instagram account and Youtube channel

Or, if you want to read some musing from Sharn and Andy, or maybe see some random pictures of the two of them where Sharn doesn’t know what to do with her hands, then follow us on Facebook

Or if everything is just too confusing and you can’t remember where all our stuff is, head to our website and it will point you in the right direction.

As always, we’re off to put our bums on seats and do some work, so until next time stay dangerous!




Audio Books

  • Cryptocurrencies and Blockchain 101 - From Bitcoin to NFTs by Goffredo Righi Schwammer

  • Investing in Cryptocurrency by Jason A. Welch

  • Crypto Currency for Beginners by Michael Scott

YouTube Videos

News Articles:



bottom of page