Cryptocurrency investing is the hottest thing in the news right now. Some people shy away from it because they think it is too speculative, and others flock to it thinking they’ll get rich quick. While crypto has made many people rich quick, namely bitcoin, what exactly is crypto and how does it have any value at all anyway? Cryptocurrency is a decentralized form of currency, which means that it is not controlled or printed by any government. It runs on a technology called blockchain. This technology basically chains together interactions of stored information. As one interaction ends, a new one begins and a new block follows the previous therefore creating the blockchain. The most common use of this technology is in the form of a ledger which is how bitcoin predominantly operates. This form of transaction is special because it is decentralized meaning that it has no connection to any other entity than those involved in the interaction. Another benefit of blockchain technology is that its interactions are irreversible which makes hacking into transactions and altering them as close to impossible as there is. These are just some of the benefits cryptocurrencies and blockchain technology has to offer. There are many coins out there today that have caught steam, but the two constant powerhouses have been steady being Ethereum and Bitcoin.
Bitcoin is the first form of cryptocurrency ever created and remains the gold standard today in this field. Its value has reached almost $60,000 USD a coin this year due to the influx of new investors trying to get their assets out of USD and other sinking currencies which are facing massive inflation due to the printing of money in mass amounts for covid-relief government programs. The premise of Bitcoin when it was created in 2009 was to create a safe and secure network where people can interact financially without worrying about government or company oversight, and that is exactly what it has developed into today. How many times has your credit card been hacked and people bought things using your name forcing you to call your bank to issue you a new credit card? This happens very often, and with Bitcoin’s blockchain technology as explained above, it is close to impossible to hack. Later in the article, we will go over ways to layer in even more security with your bitcoin assets through the use of wallets. Transactions with Bitcoin are peer-to-peer without any intervention of banks or any other services that process payments. Having access to your own money without it being in the bank’s possession or under the oversight of the government ensures your assets can’t be seized by any of these entities. This is true freedom. Freedom from fear and government control. The people own Bitcoin, and they control how it is used. This rule goes for all forms of cryptocurrency. Bitcoin is also disinflationary, which means that over time the circulation supply of Bitcoin will decrease making sure the value remains relatively uninflated. Inflation commonly occurs with the dumping of more currency into circulation in mass quantities therefore decreasing the value of the currency. Bitcoin is put into circulation through a process called mining. Without getting into the technical details of the process, mining is the mechanism that connects and secures bitcoin transactions, and is in the hands of the people rather than a centralized authority. Miners are paid to do this in the form of the crypto they are mining for through an operation call proof-of-work. If you want to learn more about mining, I recommend you check out this article here, Bitcoin.com Mining Article. Keep in mind, mining requires a huge amount of electricity and resources in most instances, and will warrant further research by those who are interested in it. Bitcoin is an ever-evolving technology and improves technically each and every day.
Ethereum is the second most popular form of cryptocurrency and is similar to Bitcoin in many ways. One of its starkest differences however is Ethereum’s smart contract ability. This ability allows a user to define a predetermined set of rules, and then once the parties involved reach agreement have those rules automatically executed on the Ethereum blockchain. This huge advancement and capability of this crypto has helped make it the second most popular and known coin on the market.
The genius technology that is cryptocurrency is such a young field and growing by the day. There are numerous new launches of what are called alt coins such as dogecoin that enter the market regularly. Like the stock market, the coin market has developed exchanges where people can exchange their currencies for crypto, and publicly trade on the market. The most popular apps to do this on currently are Coinbase and Gemini which each offer their own unique features. Coinbase offers lots of opportunities to earn free crypto by watching and reading educational videos about it. This will only come to be the equivalent of a few dollars, but it all adds up and free money is free money! Also, Coinbase has a pro version where you can clearly see chart trends of cryptos you may want to trade. The commissions range on Coinbase and I’ve noticed that a lot less commission is taken out when you trade on Coinbase pro rather than regular Coinbase. I don’t know why that is but it is an observation I have seen occur multiple times. One of the main disadvantages of this platform is that it does not allow for many alt coins to be traded on it. For example, the popular dogecoin is unavailable on this platform. Coinbase is great for beginners but I tend to like Gemini better for a couple of reasons. Here is a link to Coinbase so you can sign up and see how you like it if you feel this may be the right platform for you: Coinbase.
Gemini like Coinbase is an exchange where crypto is bought and sold. I like to trade on Gemini better because of its “Earn” function. This function allows for interest to accrue on your crypto by lending it to institutional borrowers. This does not mean the value of said crypto can’t fluctuate, it just means you will earn fixed interest on your investment which is a great perk. Also, there are more alt coins available for trade on Gemini currently including the popular dogecoin. Here is a link to Gemini if you feel this is the choice for you: Gemini.
Both Coinbase and Gemini act as a wallet, and they provide security against a potential hack. These are both great platforms for cryptocurrency investing, however in my opinion the best way to store the vast majority of your crypto is offline through a physical crypto wallet. You can upload your crypto to your device which then gives you access to your own private key offline. A private is like your own personal access key to all your crypto. When you store your own crypto in something like an offline external wallet, you are in charge of this private key. It is essential you put this in a safe place and never lose it because if you do, it could mean losing all your crypto forever. You can always reupload crypto to your online wallets such as Gemini and Coinbase in which you can sell your crypto or buy more. Even though you may hold your crypto offline, its value fluctuates the same as it would if were online. The only purpose of the external wallet is to provide the most security possible. You are like your own bank! How cool is that?
Perhaps one of the things that makes crypto feel a bit more tangible is its growing ability to be used in stores and for everyday purchases. Recently, Tesla’s CEO Elon Musk announced they would accept dogecoin as a form of payment! Observing organizations as big as Tesla put their backing into the value of crypto so much so that it is an acceptable form of payment is a remarkable thing to see. Other companies that accept crypto as a valid form of payment are Lowe’s, Regal, Petco, and Bed Bath & Beyond. These are just a few examples of the large companies that see the opportunity that is crypto, and are accepting it as the future of currency. This is a huge sign for all crypto skeptics to do some homework and try to understand crypto and why it’s so valuable before denouncing it as a bubble or too speculative.
There are countless crypto projects taking place right now. If you are skeptical about crypto but it interests you, I would encourage you to do some of your own research. None of what I say is financial advice, and I encourage you to do your own due diligence before making any large financial decisions. I myself am confident that crypto is the way of the future. With centralized currency and overreaching government, there has been collapses in currency value all over the world. Like gold and silver, crypto provides the next era of decentralized currency. Gold and silver are valuable assets and are decentralized which definitely makes them great. However, they don’t have the evolutionary ability or security cryptocurrency has. For these reasons, I am a strong believer in crypto, and I’m sure with intense research, you will be opened up to a new world of possibility made possible by this amazing asset.