Should we let cryptocurrency be the one that got away?
What is cryptocurrency? The game changer is the Bitcoin technology for handling money and transactions. But with everyone watching the price rise and fall in order to make money, people forget about the underlying technology of Bitcoin. When most people hear about Bitcoin, chances are they were being told “If you were to buy a single bitcoin worth around R14,000 in January 2017 and wait until around Christmas 2017, that same bitcoin would be worth R300,000.
Bitcoin’s skyrocket in price in 2017 has shone a limelight on cryptocurrencies. Early adopters have become millionaires and even billionaires. Latecomers, however, have seen quite the opposite. In December, the price of bitcoin peaked over R300,000, before dropping to below R100,000 in January. While the value of cryptocurrency may be interesting, the real question should be what is cryptocurrency?
The word “crypto” stems from the word “cryptography”. Cryptocurrency uses encryption techniques in order to maintain anonymity on the network while also keeping all transactions recorded on a public record, unable to be altered.
Bitcoin transactions work without a third party. Meaning, if I wanted to send bitcoin to a family member in Lagos, all I would need is her bitcoin address and I’d be able to send funds from my wallet directly to theirs. This transaction will then be recorded on the blockchain publicly, although there is no way of knowing who or where this transaction originated from as it is encrypted.
Sending South African Rand over to Lagos would require a foreign exchange transaction, cross-border payment intermediaries, SWIFT, as well as fees for everyone involved in the transaction. Oh yeah, don’t forget up to a week waiting time for the transaction to be processed. Although cryptocurrencies have transaction fees as well, they are often far lower, and the payments are processed quicker in certain situations (such as this one).
What is cryptocurrency?
Since the end of 2017, the words ‘Cryptocurrency’, ‘Blockchain’ and ‘Bitcoin’ have been circulating all over mainstream media. While they definitely peak interest in a conversation, what does any of it really mean?
Let’s start in 2010. Bitcoin is the first cryptocurrency to the surface, created by the elusive Satoshi Nakamoto in 2010. When it was first released, bitcoin had little to no value. For example, back in 2010 two pizzas cost 10,000 bitcoins. At present, 10,000 BTC is worth around R1 billion.
Cryptocurrencies are a form of digital cash, allowing you to transfer funds anywhere in the world without a third party. To do this, cryptocurrencies use blockchain technology, paired with a network of people who verify transactions by mining. Mining cryptocurrencies require specialized computers that use large amounts of energy and processing power in order to solve complex mathematical problems.
With the rise of bitcoin, comes – altcoins. Altcoins are cryptocurrencies that aren’t bitcoin. Currently, there are over 2800 cryptocurrencies in circulation, but interestingly, not all of them are currencies.
With new companies being formed on blockchain technology, new coins are created in order to raise funds in a process called an Initial Coin Offering (ICO). ICOs are used for a multitude of different cases, ranging from applications that deal with healthcare, gaming, online identity and more, all on the blockchain.
The fashion industry recently adopted its first cryptocurrency named Fashion Coin. This aims to decentralize the fashion industry by linking the customer directly to the designer. An anti-animal cruelty cosmetic company named Lush has also started to accept bitcoin as payment via its online UK store. In light of this, it seems as though blockchain technology could be good to combat counterfeit goods.
Blockchain, the technology behind cryptocurrencies, is "definitely an opportunity" in the long term for businesses, says UBS Group CEO Sergio Ermotti. #CNBCCrypto https://t.co/7CxpoEkNbF pic.twitter.com/xA634MRYNL
— CNBC (@CNBC) October 8, 2018
Thousands of computers connect to the blockchain, each with a copy of the blockchain history record. It’s hard to explain what is cryptocurrency as the technology behind is complicated, with huge computing calculations. There is no official copy, and all computers on the network are equal, mutually verifying the ledger. As a result, there is no centralized authority (Such as a bank or a government). This is one of the most revolutionary aspects of the technology.
Unfortunately, if you’re not trading cryptocurrencies you’re probably not using the blockchain. However, one way you can use blockchain technology in an interactive way is to buy your very own digital cat! Meet CryptoKitties – a site where you can buy your own collectable, tradeable cat that is digitally unique.
CryptoKitties provides a fun and interactive way to learn about blockchain technology. Something that may very well become a big part of our everyday lives.
Explaining what is cryptocurrency goes hand to hand with scams. Yes, whenever there is money involved, there are people trying to scam other people! Of course, with enough good things coming out of a single entity (Blockchain technology) some bad has to come with it as well, as I said. With cryptocurrencies becoming more mainstream, and even the less tech-savvy people getting in on it. Consequently, scam artists are becoming opportunists.
Newcomers will find it far harder to differentiate a scam from an authentic business opportunity. But with experience, it will become extremely easy. Some warning signs of a scam can include:
- Guaranteed returns on investment
- 100% success rates
- Promises of higher returns if you get your friends to invest
- Simply being too good to be true
If you are able to recognize an old school Ponzi scheme, this should be familiar terrain. Most people who fall victim to these scams are often the uninformed and those who don’t even have the money to lose.
People often buy in and believe in fraudulent business models as they market by telling stories about people who have made large amounts of money, consequently ‘changing their lives’. To someone who could really do with a life-changing investment, sense often goes out the window, making it easy for them to fall victim to these scams.
Where do I start with cryptocurrency?
Get rich quick schemes do not exist
If you feel as though you’ll be able to manoeuvre through the cryptocurrency world, dodging any fraudulent obstacles in your way, it may be time to start. The first rule when entering this realm is that “get rich quick” schemes do not exist. Investing in crypto is often high risk as they are volatile assets sitting in a regulatory grey area. Thus, if something were to go wrong, no one will be able to assist you.
In South Africa, you are able to use our exchange to buy your crypto assets. We offer a wide range of coins, such as; Bitcoin, Ethereum, Litecoin, Monero and many more. Do some independent research on what crypto asset is in high demand, wait for a good time to purchase it, sell it at a good price and repeat. Also, it is wise to learn what not to do, for example buying cryptocurrency using a method like PayPal.
Is Blockchain technology truly revolutionary?
Cryptocurrencies, paired with blockchain technology, and to be able to explain what is cryptocurrency, we need to dive a bit more into this technology. Blockchain technology has the potential to revolutionize the world of finance as we know it. Many big banking industries are fearful of what the technology could mean for them if it becomes as big as people expect it to become. As a result, blockchain advocates have their feet planted firmly, unmoved by the volatility in price, nor the negative headlines that plague newsfeeds.
People often compare current blockchain technology to the early days of the internet, back in the 90s. In those days, people had no idea what to even use the internet for, and imagining social media and mobile payments was unheard of. Who would have guessed the internet would become so important, that it needs to be on our phones 24/7.
Bitcoin and cryptocurrency in its current state are still very new. It’s impossible to conceive all of the new technology and uses that could sprout from this technology, but we know it’s going to be amazing.
Did all of this explain to you what cryptocurrency is? Probably Not! It’s a deep ocean that requires years of learning and constantly exploring what is cryptocurrency. It is simple, and it’s also that complex.