The money world had been going online for quite some time then – you didn’t need a bank to pay your bills and paypal was a money transferring service that made checks and money orders obsolete. But there had never before been a money system with its own currency.

And the time was certainly ripe. The global economy had just crashed due to the greed and dishonesty of the entire banking system. Ratings companies like S&P and even central banks, like the US Federal Reserve, were seen as accomplices with the world’s major banks in defrauding entire populations of their savings. Online trading took a huge step forward when investment houses were discovered to be betting against their own clients.

And one fine day, a still unidentified man named Satoshi Nakamoto in 2008, he published a paper on cryptography and the creation of a peer-to-peer digital currency system. Nakamoto claimed that the two biggest ills of finance are credit and misplaced trust – misplaced because we place it in the hands of governments and banks – i.e. PEOPLE. He solved the first problem by stipulating that nobody can spend what he or she doesn’t have – no more credit.

He solved the second by suggesting a distributed online ledger in which all transactions between bitcoin participants are recorded. Trust in the system is created by the fact that there are as many copies of the ledger as there are people willing to participate, and by creating a virtually un-hackable system of cryptographically stamping and sequentially locking groups of transactions. He calls each of these groups “blocks”; and as new blocks are added, they form an unbreakable chain – the BLOCKCHAIN.

Now, we need to differentiate between distributed ledgers and centralized ledgers. The first is non-hierarchical. There is no central entity guarding the blockchain. Each participating computer has a copy and once a change is made, the entire system must verify it and accept it for it to be validated. The second distinction is between code-assisted money or money in the form of code, and monied code. Cryptocurrencies are the latter – code that in itself is valuable. In fact, the people running the blockchain get paid in bitcoins for their work. It’s how new bitcoins are minted and why these people are called miners.

Only there’s no money. No coins. Only digital wallets. Each user gets a personal code and a coded identification. You store the wallet on your phone or computer.

Since the invention of Bitcoin there have been many OTHER cryptocurrencies, and it seems that the newest industry is ICOs – initial coin offerings. That’s where a new technology will fund itself using newly created cryptocurrencies as shares.

But the latest innovation has been without doubt Facebook’s proposal for its OWN crypto named Libra. The Libra proposal has central bankers and governments rearing on its back legs and for good reason. With 2 and a ¼ billion users, all facebook would need to announce its sovereignty would be a flag. But beyond that, such a widely used crypto would be a real threat to the established way of doing financial things. Let’s see how bitcoin does it.

Bitcoin creates trust by the infallibility of its blockchain. The way it works can be likened to a train backing into a warehouse. Here, we have 3 carriages in which the furthest one is being loaded with transactions. Each one includes the buyer’s user code, the seller’s, the amount and a timestamp. Once all this data has filled a carriage, it gets locked with a code – a hash that includes all the data plus the hash code of the carriage before.

This next carriage is getting locked. What that means is that all the participating miners are looking for a nonce – that’s an operative that creates the hash lock. That hash has to fulfil certain preconditions – be of a certain length or what have you. The first miner to find the correct nonce presents it to all the rest of the miners who verify the block. Once that block is verified it gets backed into the chain and the next one is on its way.

The new hash code is then included as one more component to be hashed for the next block.

Now, the beauty of this is that if you want to go into the warehouse and add, change or delete a transaction, you’d be changing the hash of that block and the hashes of all those after it – basically impossible since you have no way of knowing how to reverse engineer all those hashes.

As for the miners, since they’re competing against each other, they need to present the proper nonce for it to be accepted by everybody else. And only the correct miner gets paid.

In short, computers instead of banks, incentivized programmers instead of bank and fund employees. And a monetary system that can’t be tampered with until it melts down.