Back as early as 2009 we started to hear about a digital currency called Bitcoin. While most wrote it off as a monetary experiment destined to fail, Cryptocurrency has started to creep into our lives: in media, at coffee shops, on-line checkouts, and sneaking its way into day-to-day conversations. But what is Crypto and how will it change our lives?
Depending on what angle you look at it, Crypto can be described as digital money, a new asset class, the Internet of tomorrow, a secure database, or a trust-free transaction. These all would be correct, but to start to understand Crypto, we need to understand the technology foundation that supports it…The Blockchain.
A Blockchain at its core is a public ledger of information in which there is no centralised control or point of failure. In its purest form, it is entirely decentralised and transparent. In the case of Bitcoin, transactions are confirmed by a Proof-of-Work algorithm, through a process commonly known as mining. It is this type of verification that has many concerned about the required computing power and power required to perform transactions. With Proof-of-Work, the blockchain is deliberately slowed down to ensure its security and continuity. Mining pools compete to solve complex problems to add the latest block of transactions to the Blockchain. In succeeding, they are rewarded with a sum of Cryptocurrency and the new block is added to the public ledger or Blockchain. That said, Proof-of-Work is only one of a number of algorithm types used. Others, like Proof-of-Stake and newer technologies like Hashgraph, and Tangle networks, provide faster and more efficient transactions.
Essentially, once a transaction has been fully confirmed within a Blockchain, the information is permanently recorded for all time, eliminating problems associated with double-spend issues, conflict of ownership, event timing, and data loss or corruption. In the case of Crypto like Ethereum, other criteria can be coded into the Blockchain, commonly referred to as ‘smart contracts’ that will further take issues of trust out of the equation. These type of smart contracts and self executing contracts are being used currently to build new systems that will be part of our lives in the future.
Crypto and Blockchain have already started to evolve core areas of our lives and society. In fact, this technology is quickly growing to rival many of our go-to Apps & tools.
As more and more decentralised systems are being built up to rival the existing ones, truth, honesty, security, and personal control can be realised through new applications. With every growing issue within our current web-based lives, many are looking to regain control of their personal information, freedom of speech, privacy, as well as honest monetising. Consider the current situations with social media giants Facebook & YouTube. Many have started to question the safety of personal information by Facebook and likewise, content creators on Youtube are questioning the logic of censorship & advertising revenue. These are centralised platforms that decentralised replacements are already being launched. Further, search engine providers like Google are suspected of gathering personal information that could be used in ways that we, as individuals, may not approve of. Consider the targeted advertisements received while on-line. For just about every application we currently use, there are decentralised versions coming available: Google → Brave, Dropbox → Storj, Windows/iOS → Ethereum/EOS, YouTube → Steemit, Facebook → Akasha, etc.
With Crypto starting to make its way into the spotlight, new terms and phrases are being used to describe the experience of Crypto trading and investing. If you hang around Crypto enthusiasts, you may have heard some of following phases:
Cryptonaut – A Crypto trader/investor who effectively navigates the Cryptosphere
Coiner/Non-coiner – Someone who owns Crypto verses someone who does not
FUD – Fear, Uncertainty, and Doubt
FOMO – Fear of Missing Out
HODL – Hold On for Dear Life
Mooning – Huge returns, usually in a short period of time
ICO – Initial Coin Offering
Hard Fork – An update or splitting of a Blockchain creating two separate chains
Soft Fork – An update to a Blockchain that changes the coding but does not split
Airdrop – New tokens given to holders of a certain coin/token (Hard Fork result)
Paper Wallet – Easily created wallet for cold storage (off-chain) of your Crypto assets
Hardware Wallet – Electronic wallet encrypted for security (Also off-chain storage)
As a quickly developing market, Cryptos are experiencing an explosion in interest and attention, both positive and negative. This combination has led to high volatility and risk, but presents huge opportunities for investors. Assuming you’re willing to take responsibility of your own interests and security, there are many ways that one can get involved in Crypto.
- The simplest would be to create an account on an exchange like Coinbase or QuadrigaCX where mainstream Crypto such as Bitcoin, Ethereum, and Litecoin can be purchased directly with credit cards or bank transfers. These Cryptos can be bought and sold without any further efforts but there are risks associated with exchange-held assets (hacks).
- For those who wish to invest and trade platform-based Crypto tokens such as Veritasium, OmiseGo, or Pillar, one can transfer their Crypto assets to an exchange where they can be traded peer-to-peer or within a pool. Again, there are some risks that need to be understood when using a trading exchange.
- In addition to exchange-traded Crypto, many new Cryptos will offer a pre-traded offering called an ICO (Initial Coin Offering). This is essentially crowd-funding in the Cryptosphere. Those wishing to participate can send Bitcoin, Ethereum (or other accepted Crypto) to a smart contract address to receive the new token, usually at a discounted price as an early adopter. These can present high risk and high reward.
While the Crypto rabbit hole goes deep, these are the basics, and my hope is that you have a better understanding of Crypto. That said, it shouldn’t be taken as any advice. But I would suggest further research into Cryptos and the ecosystem that they operate in; they will most likely be part of our lives in the near future. Think of Crypto like the Internet of the ’90s with all its growing pains and conveniences. And for those who are looking to make their fortune in Crpyto… do your research, and don’t expect to be cashing out for the Lambo on your first trade!
Ignore all the FUD, don’t bend to FOMO, and always HODL strong!