Are you Crypto confused? Fear not, you’re in good company!

A Crypto Journey

Does a day go past when you don’t hear the words ‘crypto’, ‘blockchain’ or ‘NFT’? Do you want to know more, but do not have time to learn more? When you do make the effort to learn more, are you left more confused than ever? If you have answered yes to any of these questions, then like me, you have become officially confused about the world of crypto!

Despite this frustrating feeling, I want to learn more about this phenomenon, and am desperate to understand what everyone is talking about. I do not have a financial background of any sort and have never been interested in stocks and shares or investment opportunities — but cryptocurrency seems different somehow. I keep reading and hearing how the world will soon become bankless, with crypto taking over the traditional forms of currency and banking. Just hearing this alone makes me feel excited and worried at the same time — with genuine fear of missing out. I have always been one of these people who is late for the party when it comes to new and exciting opportunities. By the time I get there, that party is fizzling out and that boat filled with opportunity has sailed into the distance. I have missed out.

This time however, I am determined not to miss out on this new opportunity. I want to be knowledgeable and involved in the crypto world. I want to invest in the currencies wisely, but most importantly understand the opportunities that they can create for us — and how it can improve our lives, with our income and wealth being maximized to our full potential. Over the last few weeks I have therefore begun a journey into the crypto world and acquired some knowledge, which I would like to share with those wanting to learn more about this industry.

My goal is to explain what I have learnt in simple terms. When researching cryptocurrency, blockchain and NFT’s, I stumbled across articles, blogs and videos from ‘experts’ in the field. While I value and respect their content, many are computer engineers and financial investors who talk in a specific language. Being totally frank, I have little clue on what they are talking about! I therefore want to explain what I have learnt on my journey so far, in the easiest way possible.

What is cryptocurrency?

Cryptocurrency is digital money that can be used to buy goods and services, as well as exchanged between people and businesses, without it going through an authority such as a government or bank — therefore being a decentralized financial institution. Many use cryptocurrency as purely an investment opportunity and will buy a currency in the hope that it will increase in value over time. Some cryptocurrencies will refer to their coins as a ‘token’ which acts as a tangible asset which can be used as an investment or economic opportunity. Cryptocurrency will be stored in a secure digital ‘wallet’. The coins or tokens do not physically exist and the wallets are mainly digital, though some can be printed off in paper form as a ‘public’ address is required in order to make some transactions.

Why do we have cryptocurrency?

Many view cryptocurrency as a response to the 2008 financial crisis and subsequent recession which followed. In a nutshell, people are sick and tired of having no control over the value and supply of money. Banks are taking too much of the profits and the very same people, who got the world into recession, are rewarding themselves with hefty bonuses each year. Simply put, it’s an unfair system which is set up to protect the elite financial institutions and their top executives. The rest of us however, have to play by their rules, their interest rates and have to take the punishment of high fees and charges if there are late payments or go into the red.

Even in the advanced world we live in, opening a bank account for some is not a possibility due to government bureaucracy and issues over identification etc. It can be a painful experience, especially as once we find ourselves in this financial system our information and credit history is shared with the world. We have little privacy.

Further to this we are constantly reminded about the staggering statistics which confirm capitalist elitism and extreme inequality — such as the richest 1% owning 82% of the world’s wealth, while 20% of Africa remain unbanked.

Cryptocurrency therefore, challenges this unfair financial system. It allows cheaper and easier access to money, without the need of providing identification and signing a ton of paperwork to open an account. Through electronic wallets, our money will be more secure as it will be regulated through computers and mathematics — not governments and its people. There will also be greater transparency and security through blockchain, which will record all transactions within a digital ledger.

What is blockchain?

When first hearing of this revolutionary technology called ‘blockchain’ I thought I would either need a PHD in Economics or be a computer engineer to understand it. This is not the case. Blockchain is actually quite simple to understand as it’s simply the digital ledger system in the crypto world. It’s a very transparent system as one can go on the blockchain via the website and visibly see every transaction ever made. It shares the same concept as a traditional leger that has been used for hundreds of years to record accounting transactions and information of incoming and outgoing exchanges. The key difference with blockchain however, is that the information is stored into groups, known as blocks which hold all the transaction information. As new data comes in, the block will fill, so a new block will be created and will be chained to the previous block. The blocks will be chained together in chronological order.

Security on blockchain will be tighter than a traditional ledger system as data is generated and documented purely by computers without the need of a third party. Further to this, all the historical information, which includes every transaction, will be available for public viewing. It cannot be lost or destroyed.

What are the different cryptocurrencies available?

There are currently over 6,000 different cryptocurrencies, which seems a scary number. Many have not and will not take off. Personally, I concentrate on the reputable coins — the coins which have websites attached, a white paper or a solid business plan and vision for the future.

Bitcoin is still considered the daddy of cryptocurrency, and this is reflected in its value and demand. It’s the founding father of digital currency and is first generation. A peer-to-peer system was created through Bitcoin where people could send digital currency to each other instantly, without going through a bank or other third parties such as PayPal or Western Union. Litecoin operates under a very similar model to Bitcoin, and prioritized making improvements to speed of transactions.

Subsequent coins were then created which cloned certain aspects of Bitcoin, but made innovative software changes to improve performance, speed and security. Ethereum was the founder of second generation cryptocurrency, as it introduced smart contracts to the blockchain. Through these smart contracts, people can tokenize real things, such as houses, and put them on a blockchain — selling them to another person through a smart contract which will cut out any third party involvement. Smart contracts are an extremely exciting feature of Ethereum, and lots of decentralized applications have been and are being currently created, which is under the Ethereum blockchain.

Solana has adopted a similar model to Ethereum, but has made improvements when it comes to the speed of transactions. It operates much quicker and the transaction fees are lower. Ethereum on the other hand is better for security.

Cardano is a third generation cryptocurrency aiming to improve on first and second generation coins, working under a more flexible and sustainable smart contract model — in the hope new decentralized applications being created using its tokens. I will look forward to seeing its progress in 2022.

Are there any warning signs to look out for?

Unfortunately, when there is an exciting opportunity to develop revolutionary change, as well as advance in business and equality, there will always be those who will exploit this opportunity to take advantage to scam people. This article is in no shape or form intended to give any sort of advice, but if there are any takeaways from it, then please let it be around research. One must thoroughly research the cryptocurrency they are going to invest in, and it’s always a good place to start on the company website, looking at the history of the coin and its vision of the future. It’s also worth reading the white paper attached with the coin, and what their intention was for its original implementation.

When I went on platforms such as YouTube to review a specific currency, I would get several videos from those advertising a low value coin with the promise that the value will rise rapidly within weeks or even days, with hefty profits being almost a certainty. These types of videos are classic ‘pump-and-dump’ schemes aimed at manipulating investors to buy their coin, which will in turn raise the price of that coin. Once the price hits its maximum and there is no more demand, the scammer will sell their coins in return for huge profits, which will ultimately drive the price of the coin right down — often below the price the investor initially bought it at. They are left with big losses.

It is important to emphasize that cryptocurrency can be misconstrued as a ‘get rich quick’ scheme, and once again many scammers will try and convince you of this. Cryptocurrency should be viewed as a long term investment, as simple as that. There is huge volatility in the crypto market, and while it should not be ignored it is also seen as best practice not to overly analyze and scrutinize the trends on a daily basis. It’s not a market for day traders or tourists.

What is an NFT?

A Non-Fungible Token (NFT) is the ownership of a digital image. It’s a digital asset which can be bought and sold like any other piece of property, but there is no physical or tangable element of the piece of property. Under the Ethereum model, second generation, the digital asset is tokenized which creates a digital certificate of ownership. This is then recorded on the blockchain.

Anybody can therefore tokenize their work and sell it as an NFT. There are currently many exciting projects being created, and if you have a creative mind then this is certainly an area worth exploring. The NFT could be digital artwork, a photo, a trading card or a sample of music. Again, there is a huge opportunity here and under the Metaverse I can only see the NFT market growing rapidly.

What is the future of the Crypto world?

There is a huge opportunity in this new crypto world. Whether it’s from NFT’s or new business opportunities in the form of DAO’s (Decentralized Autonomous Organizations), or simply cryptocurrency investment, there are many ways to take advantage of this revolutionary new world.

There will certainly be some setbacks along the way, and cryptocurrency may need to go backwards at times before it can move forward, but I do believe digital currency is something we should all take a serious look at. It is still early days, which I think is the most exciting part — we are seeing history being made. We are ahead of the game and not missing out.

There are some serious questions and issues to ponder. It will be fascinating to see if there will be any sort of stabilization in cryptocurrency as the market price is currently so unpredictable. Also, I want to explore further how cryptocurrency can seriously help the unbanked. Due to the volatility I am concerned that without the correct knowledge, those who are perhaps in more of a desperate position, will invest poorly and make hasty decisions. Along with social inclusion I would hope this new financial stream will also bring a social responsibility.

I am certainly looking forward to this continued journey. I will let you know how it goes.