Our last article on What the heck is cryptocurrency? was very popular. Crypto is easier to learn and use for women and minorities, according to an article I read on CNBC. Traditional investments, such as stocks and bonds, require specialized knowledge, and dedicated brokerage accounts where they ask you nosy questions about your trading experience, income, and net worth. Even a simple checking account requires forms of ID to ensure you are who you say you are. It’s unfortunate, as many people do not have access to traditional financial services. Crypto, can be easy or hard to set up. Apps like Robinhood and SoFi have made it easier.
In our previous article, we introduced you as the ruler of Banana Bread Land (BBL), whose currency was the muffin. Things were going smoothly, until some things were brought to light that not everything was okay with the original system.
The subjects of your land are complaining that the business owners charge high fees, the fees change on a dime, and it takes a long time to process a transaction. As dear ruler, what do you do to help your people? You propose anyone owning muffins will be able to create new ideas, and each idea will be voted upon. If more than 51% of voters approve, the new idea will be introduced to the muffin currency. The people agree, this sounds democratic, clever and smart.
The people get to work. After creating and voting on ideas, 5 make it to the top. These 5 ideas will be implemented on August 5th, 2021.
- (1) Fees will be decreased
- (2) Users will pay a standard fee, depending on how busy the muffin network is. The busier the network, the higher the fee.
- (3) A portion of the fees will be lost forever, meaning there will be less muffins over time. This should increase the value of each muffin over long time frames.
- (4) Business owners who process the fees will get less. Previously, they got 100% of the fee.
- (5) Business owners can receive “tips”, to prioritize one transaction over another.
This is similar to what #2 cryptocurrency Ethereum will go through tomorrow. There are a few more technical changes, noted in detail here. This is called a hard fork. It’s called a hard fork because new transactions using the new system will only be stored on the new crypto ledger. The old currency will continue to exist. If voters (in this case those that mine the currency) don’t like the new system, they can use the old system, fight against the new system, or accept and use the new system.
This is what Ethereum is doing. It is reinventing itself, to make itself more relevant, easier to use, and grow a bigger network. How many assets and currencies do you know that can do that? London is the name of this hard fork, since that was the place of a big Ethereum conference in the past. The city of the conference rotates every year. Eventually, the goal is to move Ethereum from energy intensive proof of work to much cheaper to validate proof of stake. That will be the subject of more changes in the coming months.
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