“What is cryptocurrency and what should you do?” by Maxim Sindall
The expanding cryptocurrency market has created widespread confusion across the world. As Bitcoin rose 800% from 2017 to 2018, it's easy to see why people misunderstand and are scared of this new form of currency.
If you are baffled, interested, or anxious about cryptocurrencies, this article is for you. To fundamentally understand cryptocurrencies, we first have to look at the characteristics of money. Money or FIAT currency is based upon four principles; first, the currency has to be a medium of exchange, meaning it should be able to exchange products for the currency you have. Secondly, the currency needs to have a store a value, implicating it is worth something palpable. Thirdly, it needs to have a unit of value, denoting that it has a representation of value to other currencies or tangible materials like gold. Lastly, the currency needs to have a standard of deferred payment, meaning that the currency has the ability to settle debts for products you buy.
When looking at cryptocurrencies and conventional currencies (FIAT), the fundamental values of money are both represented in each. So what’s the main difference? The difference between cryptocurrency and FIAT is in the way each are managed. Conventional currency like the US dollar is tracked and authorized for use by a central authority, meaning a single authority has complete control. Cryptocurrencies on the other hand, has no central authority and are controlled by the users of the currency. So how is it secure? In a centralized system, banks securely control your money. In a decentralized system, like Bitcoin, you have to take care of your own money. This is a positive and a negative. If anything goes wrong, no one can help you while you float strandedly. Though, on the plus side you have complete control, implicating that no one can publicly track you or can try to take money from you. Though most transactions seen, go through online cryptocurrency exchanges, like Coinbase, which keep your information secure at a cost of centralization.
As the term ‘cryptocurrency’ grows and expands to the general public and the world, what should you do as a investor? Before you put your life savings on the line, you should understand the biggest cryptocurrency, Bitcoin, and its key characteristics. Unlike other currencies like the US dollar, there is a limited supply of Bitcoin worldwide, 21 million units. Once the currency is completely found and taken in a process called ‘mining,’ it is almost guaranteed that your investment will pay off. If demand remains constant and the supply dwindles it will increase in price according to the economic law of supply & demand. As for Bitcoin, the supply is expected to be wiped by the mid 2100’s. If you are still unsure but interested about cryptocurrencies like Bitcoin, I would urge you to sign up at an exchange, like Coinbase, where you could invest small amounts and be involved in the market with practically no risk. If your looking to go big, I would recommend investing in a hardware wallet where you can keep unlimited amounts of cryptocurrencies completely safe without the government's watchful eye. Cryptocurrency is the truly global exchange of money that you can transact anywhere at any time. As Bitcoin and other cryptocurrencies keeps growing, where will you be in the ever developing financial world?