CryptoCurrency Simplified: Is it worth the hype?

Introduction

Crypto this, blockchain that… What does it all really mean? It seems that day by day, the world of Cryptocurrency is growing rapidly, from being the name on top of huge sports stadiums, or simply an advertisement between our youtube videos. As a beginner to investing, it may be hard to grasp the true concept of what exactly Cryptocurrency is, but by the end of the article, you’ll know what cryptocurrency is, how it works, and why it’s becoming so popular.

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What is Crypto, and How Does it Work?

When people say “cryptocurrency” they are referring to forms of digital currency that can only be acquired online, not through paper or coins like national currencies. A word used often when describing the nature of Cryptocurrency is “decentralized”, which means that instead of being controlled by a government or bank, the currency is powered by a technology known as The Blockchain. Simply put, cryptocurrency is just a form of currency that is traded only through digital means.

The Blockchain is a term synonymous with Cryptocurrency, but what is it? Think of the blockchain like a notebook, where every time you make a transaction that transaction is recorded inside the notebook. Now, imagine every person had the exact same notebook, and they also recorded their own transactions. Every time you make a transaction with cryptocurrency, it’s recorded in this global online notebook, which is called the blockchain. What it allows people to do is make transactions with no intermediary entity.

Think of it this way: If we can contact anyone we want through online methods without having to use a middle man because of the advanced technology we have today, why do I still have to use a third party, such as banks and payment processors, when completing a financial transaction? This is the very essence of the existence of Cryptocurrency and Blockchain, giving people financial individuality. 

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The Different Types of Crypto

When looking at Cryptocurrency, it may seem like trying to navigate through a maze of all the different types that can be traded, but here is a general overview of the different types of Cryptocurrency:

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Bitcoins: The quintessence of Cryptocurrency. It was the first ever form of cryptocurrency, and was created with the goal of replacing everyday methods of financial transactions. 

Key Features: Decentralized, widely accepted as form of currency

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Altcoins: These are any type of Crypto that isn’t Bitcoin, and they are often created with an external purpose deeper than Bitcoins. Ripple, for example, is designed for fast, low-cost international money transfers between banks. Because of this, Ripple’s connections with financial institutions are much stronger than Bitcoins. There are hundreds of Altcoins out there, and they are all created with the mindset to change how we spend our money.

Key Features:  Faster block generation, lower transaction fees, Smart contracts, decentralized applications, a large developer community, etc.

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Tokens: These are just the digital representation of real world and online assets. Most tokens are built on existing blockchain platforms, such as Ethereum, which support the creation of tokens through smart contracts. In the world of tokens however, there are different categories, such as Non Fungible Tokens(NFT’s like Bathing Ape!), which are used to give ownership to digital assets and make them unique. Another example are Security Tokens, which represent ownership of real-world assets, like shares in a company or real estate, and can be subject to trading laws. This allows you to trade stocks and bonds through cryptocurrency.

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Benefits and Risks

Wow, cool right! It may be easy to see all this and be ready to dive straight into Cryptocurrency, but when doing so you must be aware of the effects, both the good and the bad. 

Benefits:

• Cutting out the middleman: When you make online payments with a credit card for example, there’s always somebody taking a piece of the pie, be it a bank or a digital card processor. In crypto however, there is no third party, giving you complete control. Additionally, the spread of crypto to areas where citizens have little to no access to banks helps solve the wealth disparity that is increasing rapidly. Surprisingly, more people have access to phones than banks!
• Your money, your choice: While it may seem at times that the government is trustworthy when it comes to how money is used, putting all your trust into an external entity, you are subject to the consequences of their corruption. Think about it, at any time, the government can freeze all your assets and you're powerless in seconds!
• Reducing Inflation: When an excess of paper money is printed, the value of each bill drops, resulting in the phenomenon of inflation. Most cryptocurrencies are created with a limited supply, meaning the value will not be subject to inflation the way traditional currency is.

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Risks:

• The Crypto Hype Train: Some people see crypto and think of it as a get rich quick scheme, when in reality it is just another way of growing your wealth passively, similar to traditional stock investing. Terms like “FOMO(fear of missing out” and “BTFD(buy the f*#@ing dip)” used by Crypto geeks represent the risk people face when they dive headfirst into crypto with no real rhyme or reason

• Cybersecurity Risk: Just like all things you can do on the internet, trading Crypto comes with the inherent risk of facing scams, hackers, and digital fraud. One example includes people online who offer to pay you in bitcoin by pretending to be an influencer. 

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How Do I Get Involved?

As a highschooler, young professional, or someone just looking to diversify their portfolio, there are hundreds of resources online you can find online to help you invest in Crypto. The challenge is finding out which ones are good and how you can start:

• Baby Steps: Allocate a reasonable amount to begin, and then begin by using a beginner-friendly Crypto platform. Some good places to start would be Coinbase or Binance, apps that you can use from the comfort of your phone. Even if you don’t want to use real money, you can use crypto paper trading platforms such as TradingView, which basically lets you invest fake money to get a feel for your strategy when it comes to Crypto.
• Talk to people: Find other people who invest and trade crypto, whether that be through online forums or your personal circle. Just like anything else in life, Crypto can be practiced, and having a mentor figure will make the process much easier.
• Stay Calm, Do your Research: With the emergence of meme coins and just the overall environment of Cryptocurrency, it’s easy to throw money at whatever seems to be popular. However, when investing in Crypto, keep in mind that you're simply trying to grow the wealth you already have: not get rich quick. By being aware of the landscape of Cryptocurrency, you can make the best decisions for yourself. 

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Conclusion

Cryptocurrency might seem complicated at first, but it’s really just a new kind of money that lives online. As the world becomes more digital, understanding cryptocurrency will become more important. Whether you’re interested in using it, investing in it, or just learning about it, cryptocurrency is an exciting topic worth exploring.

My hope is that after reading this, Cryptocurrency isn’t just some mysterious buzzword you hear online, and that you take a further look into it for yourself. 

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Thank You for Reading

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