Are you a video pro who lacks knowledge about cryptocurrencies? Check out our Crypto 101 guide to get started with the new-era technology in no time. You will learn the basics about cryptocurrencies: what they are, how they work, and how video experts and filmmakers can benefit from this new technology.
Cryptocurrencies have been around for over a decade now. They have already become popular among investors, while becoming a new method of making payments across borders and countries.
Cryptocurrencies are still young in their development, which is why they may be volatile. Take Bitcoin as an example. According to Yahoo Finance, its price peaked at $64,000 on April 1, 2021. It has since fallen back down to under $20,000 at the moment of writing this article, in September of 2022.
Despite the fact that there was such a huge fluctuation in Bitcoin’s prices, people haven’t lost their enthusiasm for digital currencies. So what exactly is crypto? Why would video makers and filmmakers need to keep an eye on this new technology and payment method? How can cryptocurrencies transform filmmaking?
Let’s get started! We will start by talking about cryptocurrencies, the technology behind it, and some useful application cases. Later in our story, we will talk about cryptocurrencies as a transformative way for the film industry.
What is Cryptocurrency?
It’s derived from two words—crypto meaning encrypted and currency, which means “money.” Cryptocurrencies are digital currencies designed to operate independently of any central authority, using encryption techniques similar to those employed by online banking systems.
Unlike money, which circulates between people via banks and credit cards, cryptocurrency flows from one person to another by way of computers connected to blockchains. Any cryptocurrency runs on blockchain, which is a relatively new technology.
How Blockchain Works
A blockchain is a distributed database that records transactions, tracks assets, and builds trust among participants. Anything with an agreed upon price can be tracked and traded on a blockchain network.
A transaction is recorded as a single piece of digital information on the blockchain ledger. It can include any kind of information about the transaction, such as who made the purchase, when the transaction happened, and where the transaction was conducted.
Each of these groups of data elements are linked together so they can not be altered independently of one another. This affirms sequential transactions. These links ensure that any single group cannot be modified without affecting every subsequent element in the sequence. This gives credibility to the entire transaction history. It also adds an extra layer of security against tampering by criminals who would wish to change the transactional history of the assets they hold in their possession.
How Secure Blockchain Is
In all honesty, nothing is 100 percent safe. From smartphones to credit cards, we rely on technology every day. But what if your phone gets lost? What happens if someone hacks into your online accounts? What if someone steals your identity? These may sound like extreme scenarios, but they could happen to you. Blockchain is not immune to hacks and breaches, but its security level are very high.
After years of development and optimizations, Blockchain has proven itself as an effective tool for secure transaction processing. When used correctly, these technologies help protect against unauthorized access to your personal information.
Decentralized blockchain stores information in a distributed fashion, making it much harder to hack than traditional centralized database systems. With user-created cryptographic credentials that are stored in “private” key files, individuals are responsible for controlling their own personal information. Anyone who attempts to intrude upon the system will find that they are unable to gain entry without permission. The decentralized nature of the network means no single entity can control how people utilize the system. Each individual controls their own personal information through cryptographic software (also known as “public” key) that allows for easy access to the records.
Blockchain networks are highly secure, but the private networks are actually more secure than the public ones. Anyone can participate in a public blockchain, but they need to be verified before doing so. Private blockchains require members to use their own digital signatures to confirm their identities.
In summary, any digital network can only be secure if its users use all necessary precautions. Even though blockchain networks are extremely secure, consumers lost over $80 million in crypto scams and frauds in 2021 (according to the US Federal Trade Commission). This is still a minor fraction of the scale of credit card frauds.
How Cryptocurrency Works
How does blockchain create a digital currency? Cryptocurrency is an electronic payment system based upon cryptographic techniques. The process involves two parties who come together to create a record of ownership of a certain amount of virtual currency. Once the transaction is complete, both parties can transfer the coins between each other without any central authority. This means that transactions take place directly between users without any intermediary. The main advantage of this method of exchange is that it allows people to send payments to anyone else across the globe quickly, easily, and cheaply.
Because of its decentralized nature, proponents of cryptocurrencies call them “money 2.0” or “new money” because the cryptocurrency ushers in a new paradigm for transferring value. They’re managed by peer-to-peers networks and run on free open source platforms, so anyone with a computer can use them regardless of where they live.
Cryptocurrency also works independently from banks and payments processing companies. It can be exchanged between people worldwide, at any time and almost instantly. In such, cryptocurrency can be used to buy and sell goods and services with lightning-fast speeds.
Here is an example of cryptocurrency in action:
You’ll send a Bitcoin payment to your friend by transferring funds through their cryptocurrency address. The transaction is encrypted and sent to the blockchain for verification before being recorded as having been made to your friend’ s account.
As we’ve already mentioned, cryptocurrency exchanges are transparent in that anyone who registers an account with them can view transfers made between accounts. However, they aren’t able to identify which person initiated each transaction.
Each transaction is then tied up with a specific key pair (public or private key), the owner of which holds the corresponding private key and therefore controls the funds. It’s similar to having an online banking system where whoever has access to the login credentials also has access to the money stored there.
Transactions are added to the ledger by creating a block of data. These transactions become part of a chain, from which is derives the term “block.”
How Cryptocurrency Is Mined
Now that we’ve discussed how cryptocurrencies function, let’s take a closer look at how cryptocurrency is created or mined. Mining is the process by which people create new currencies. It works just like any country’s government creates new dollars, peso, pounds, and such — people mine cryptocurrencies by using computers.
Why is the process of generating new crypto coins is known as “mining”? Well, it’s because the whole process simulates diminishing returns, much like gold miners who dig deeper and deeper into the earth to find ever smaller amounts of gold.
Bitcoins, for example, are produced by solving complex mathematical problems, so they’re not really mined—they’re rather minted. Each time someone solves one of these problems, he or she gets rewarded with a certain number of bitcoins (oftentimes fractions of bitcoins). The total number of bitcoins that exist today is capped at 21 million. When the limit is reached, no further bitcoins will be added.
It seems like Bitcoin doesn’t have any room left, but it won’t really run out until the year of 2140. Currently there are 18.9M bitcoins in circulation, which means that the total supply of bitcoins will eventually reach 21M by 2140.
To get bitcoins, miners use specialized computers to perform the complex math needed to confirm each transaction on the blockchain. This process, known as Proof Of Stake (PoS) requires them to complete billions of calculations to verify a single transaction.
Even though it sounds complex and difficult to start, mining for cryptocurrencies is extremely competitive. It requires a lot of computing power, though. Once a miner completes a certain amount of computations to validate a particular set of transactions, they may be awarded a reward of newly minted cryptocurrency. Miners would use the so-called mining rigs to achieve this goal.
A mining rig consists of several high-performing graphic card units (GPUs) that work together to perform complex calculations. These GPUs are usually pre-configured for mining purposes. People who mine bitcoins often pool their resources by sharing the profits they generate. They may also work in cooperatives where everyone shares the profits they generate.
Currency is added to a pool by solving an equation. Solving the equations verifies each transactions, which get recorded in the new block. Therefore, the system adds new currency by recording and verifying each transactions.
What Are Cryptocurrency Exchanges?
A crypto exchange is any platform where you can purchase or sell cryptocurrencies. You can use them to trade one type of crypto coin for another or to change a crypto coin into a traditional government issued currency such as the US dollar or Euro.
You can also purchase cryptocurrency using regular currencies, or park traditional currencies in accounts with the intention of buying cryptocurrencies later. You can then make exchanges at whatever market prices are currently available at the moment of the transaction.
There are a wide range of options when it comes crypto trading platforms, the choice of which needs to be determined by your personal circumstances. You should evaluate your personal situation and find an option that fits your transactional needs.
Aside exchanges, you may also consider crypto payment processors if you look for a way to send or receive payments in bitcoin.
Bitcoin vs Ethereum
While there are a lot of cryptocurrencies today, bitcoin and Ethereum established themselves as the two leaders in the cryptocurrency space. Bitcoin is currently the most traded crypto with Ethereum second. Although these two crypto coins have some similarities, they also differ significantly. They both are digital currencies exchanged through online exchanges, and both are stored into the wallets. Furthermore, both are decentralized, and both utilize the blockchain distributed ledger technology.
However, they differ in how they function. While Bitcoin aspires to replace traditional currency systems, Ethereum intends to serve as a platform for decentralized applications (DApps) and smart contracts. In other word, Ethereum is used specifically for decentralized finances, smart contracts and the purchase NFTs.
Crypto Investing and Trading
Because of how cryptocurrencies fluctuate, they have become a source of speculation and short-term investing. You probably know people who invest in crypto. How do they do that? There are several ways to invest in cryptocurrency (they are all risky!).
A cryptocurrency exchange is the most common way to trade cryptocurrencies. People use this method to speculate on the rise or fall in value of different cryptocurrencies.
Buying stocks in crypto exchanges is another way to invest in cryptocurrencies. However, you may lose some of the upside potential by doing so, but you’re also mitigating some of the risks associated with investing in crypto.
Before jumping into the world of cryptocurrency investing and trading, you may want to take some extra steps. It might help if you learn more about the market by studying it thoroughly beforehand. There are plenty of free online resources for traders who want to learn more about cryptocurrency and automate their trades.
After getting more knowledgeable about cryptocurrency, you’ll first need to get yourself a cryptocurrency wallet. These come in both software and hard drive forms. Experienced crypto enthusiasts suggest using a hard drive form because they’re less likely to be hacked than their software counterparts.
What’s In It for Filmmakers?
Film production and its associated industries have been around for less than a hundred year but they’ve undergone dramatic changes since then. Today, for example, it’s extremely challenging to get an independent movie into theaters.
Filmmaking can be expensive, especially if your budget is low. You may not get any grants, so you’ll need to find alternative ways to finance your movie. One option is to ask friends and family members for money. Another option is to apply for loans.
However, these methods aren’t very common, because they’re difficult to obtain. A better option is to sell your own product (merch or old-school DVDs) or services (such as screenwriting). These products might cost money upfront, but they could also make you money later.
Filmmakers often use different types of debt financing, which may pose a high risk for them if their movies don’t perform as expected. Private investors usually view filmmaking as too risky.
Crowdsourcing is a relatively new way for filmmakers to get their films funded. However, in its present form, the ability of filmmakers who use crowdsourcing site like Kickstarter to fund their projects is somewhat limited by the size of the platforms and the lack of meaningful rewards offered to backers.
NFTs have been taking the world by storm this past year. Digital artisans such as Beeple have discovered new methods of generating value from their creations.
For the indie filmmaker who wants to raise funds through Kickstarter, this is a game changer. Many Kickstarter films offer digital rewards, including artworks or poster or access to behind- the-scene footage. But this type of digital merchandise doesn’t create the scarcity that makes it valuable for collectors.
Issuing these merch assets as NFTs can provide a lucrative source of revenue to filmmakers. Plus, fans will be able to own a liquid piece of intellectual property about the film. If the film is a success, this merch can turn into significant revenues for the fans.
Using crypto as a way to raise funds through donations is another source to get money for your next film. The horror film Braid managed to get $1.4 million in crypto donations back in 2018.
Let’s take a look at an example.
This documentary – “This Machine Greens” – was fully funded with bitcoins.
There is one interesting caveat here. People who are far from understanding cryptocurrencies may not participate actively in this type of film finances. As such, the type of funding comes mainly from inside the tech community rather than from traditional art patrons. This may be somewhat new for the filmmaking industry.
Accepting Cryptocurrency as a Filmmaker
If you are a studio or a solo business looking to accept cryptocurrency as a new payment method or as donations, here are a couple of easy steps to take.
1) Create a cryptocurrency wallet
You’ll need to set up a cryptocurrency wallet. It works just like a regular bank account, where you transfer funds from one place to another.
As there are likely to be different kinds of cryptocurrency you might receive from different customers, it’d be best to use a multi-cryptocurrency wallet that holds multiple kinds of crypto coins.
2) Add cryptocurrency payments to your website
After setting up your crypto wallet, it’s now time to start integrating cryptocurrency payments into your site. There are various plugins available for setting up cryptocurrency payments on e-commerce sites such as Shopify, Magenta, and WooComerce (for WordPress). You can also add the details to your other online outlets.
Next Steps for Filmmakers
If you want to get funding through cryptocurrencies (like bitcoin payments), you will need to spend some time educating yourself. In our article we provided the basics about cryptocurrencies and the benefits for the filmmaking community.
It will be up to you to do research about the specific platforms and services to use for all crypto operations. When you choose a crypto payment processor, check this important information: transaction fees, supported countries, custom service, payout frequency.
Cryptocurrencies use their own unique terminology. Here are some of the most commonly used terms.
Alternative coin or altcoin: any type of cryptocurrency other than Bitcoin and Ethereum.
Bitcoin: the original and most well known cryptocurrency.
Blockchain: the underlying technology for all cryptocurrencies.
Cold storage: the approach of storing cryptocurrency wallets completely offline.
Cryptocurrency mining: the act of solving cryptographic puzzles by running computers at full capacity for long periods of time. Mining cryptocurrencies requires large amounts of electricity and specialized equipment.
Decentralized Finance: financial transactions that do not involve a government, regular bank or financial institution. Also known as the abbreviation DeFi.
Distributed Ledgers (DLs): digital ledgers that record financial transaction data across multiple nodes. They’re often called blockchains because they create blocks of data that contain records of every transaction ever made. DLs are decentralized networks where each node has equal access to the entire database and no single entity controls the network.
Ethereum: the second biggest cryptocurrency by market cap after bitcoin.
Non-Fungible Tokens (NFTs): an acronym that refers to a type of digital asset used in blockchain technology.
Public key: the address of the bitcoin wallets with which you’re going to transact.
Satoshi Nakamoto: The pseudonym for whoever wrote the original Bitcoin whitepaper.