What is cryptocurrency? Ethereum is a cryptocurrency that is well named since it suggests something ethereal; in other words, not of this world, immaterial, intangible. That’s my take on cryptocurrency.
Cryptocurrency: Backed by Nothing but “Confidence”
In today’s world, where “investing” gets confused with “betting,” cryptocurrencies make sense in that strange ethereal way. Crypto are digital-only “assets” traded and transferred using the one good thing that has come out of the crypto revolution: the blockchain. If you don’t know what blockchains are, I have written and posted articles here on the 21st Century Tech Blog to gain familiarity with the concept of a shared ledger that is bank-independent, tamper-resistant, and a vehicle for moving assets from one entity or person to another.
Cryptocurrencies lie outside the realm of the normal. Anyone, even you, can invent a cryptocurrency because you need no collateral, no bank and no national treasury to back it up. In other words, you need nothing except the technical means to launch your own currency, called tokens, and even your own blockchain to track transactions. If you don’t know how, hire someone with programming and computer skills, and voila, you’re in the confidence-game business.
Do-it-Yourself Cryptocurrency Using AI
So, creating a cryptocurrency appears to be pretty simple. The challenge is promoting and selling it. I asked an artificial intelligence (AI) to help me. It took the AI a minute and 51 seconds to process my request before sending me a list of what it can and cannot do.
What the AI told me is that it cannot engineer or audit a cryptocurrency project on its own. It cannot act as a legal advisor. It can, however, be a capable development assistant. It can help create a blockchain and launch it publicly. This is how:
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AI can design the concept: the token’s purpose, supply rules, fee model, governance, and target users.
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AI can write and explain the code: generate smart contracts, program, test, document, and deploy scripts.
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AI can build a blockchain: configure the chain using a software development framework, include modules, settings, and transaction testing.
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AI can set up the trading network: run and manage configuration and testing, create incident response mechanisms, an online community and automate the entire operation.
What the AI said it could not safely do on its own are the following:
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AI cannot guarantee security: AI-generated smart contracts and chain code need to be audited by humans.
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AI cannot manage private keys, nor provide legal clearance: keys and treasury controls need human input, and licensing the marketing and sale of tokens to the public needs adjudication by judges and qualified legal authorities.
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AI cannot create demand: marketers, validators, developers, liquidity, users, and credibility are basic requirements to launch and support a new cryptocurrency.
Digital Assets, Not So Real and Definitely Vulnerable
One of the reasons I decided to write what you have just read is a headline in The Washington Post: “Massive crypto hack probably the largest theft of digital currencies in history.” The article describes a $6.3 billion hack of Binance, the world’s largest cryptocurrency exchange that trades $95 billion daily. It led to a frenzy in the cryptocurrency world, including the freezing of 40% of cryptocurrency transactions involving $1.57 billion of Tether and Circle, as well as $27 million of crypto coins at World Liberty Financial, the Trump-founded company.
The finger-pointing as to who is to blame appears to be singling out a North Korean group called TraderTraitor. Binance suspended trading and announced it would cover losses using its $1 billion Bitcoin rainy-day fund.
Needless to say, hacking is a common occurrence in the cryptocurrency world. That alone should point to the precarious nature of trading in these unsecured digital coins.
And now that AI is on the scene, expect to see even more digital currencies flood the market, in the same way online gambling and gaming are overwhelming small screens today.
Assets created from algorithms are like puffs of smoke. If you believe they are real, you can create the illusion only for so long before the smoke dissipates.
