What Is CryptoCurrency – Is This Really The Future Of Money?
Paco Ahlgren (award-winning financial journalist) says “This may be the purest form of democracy the world has ever known, and I – for one – am thrilled to be here to watch it unfold”
It is important to realize, that if Paco is correct, you could be in the right place at the right time…
At the same time, you may have noticed that over the last couple of years the world seems to have gone Crypto crazy and Bitcoin and Blockchain have constantly been in the news.
Generally speaking, some say it is the next world revolution and the greatest transfer of wealth man has ever known and others say it is a fraud and a total waste of time and energy.
All things considered the world seems to love it…
On the negative side, the governments and financial institutions seem to warn us against it?
So what is Cryptocurrency and why should we care?
What Is Cryptocurrency?
“If you care about liberty, the nonaggression principle, or economic freedom in general you should do everything you can to use Bitcoin as often as possible in your daily life.” – Roger Ver aka “Bitcoin Jesus” Voluntaryist
To begin with, in 2008 Satoshi Nakamoto announced Bitcoin as a peer-to-peer Electronic Cash system.
In the first place, he was looking for a system that could remove a lot of the problems in the banking system. Generally speaking, banking systems have been for years, inherently slow and expensive and also had restrictive hours of access. Ultimately, these are just a few of the problems that Nakamoto was trying to ‘fix’ with Bitcoin.
Second, it is a peer-to-peer system which means that ordinary people can send to each other directly using a network rather than using a central server or system.
So Nakamoto was hoping to create a system that would allow users to send money directly to each other using a network rather than traditional banking and money transfer systems.
In fact, the most important part of what Nakamoto was doing, was the creation of a decentralized cash system.
At ISR.UCI.EDU, it is explained that “A decentralized system is one which requires multiple parties to make their own independent decisions”
This means there is no one central authority that acts on behalf of all the different parties. Instead users can transact directly with each other without any third-party.
This was the birth of cryptocurrency
What is Cryptocurrency and What is The Big Big Problem?
Bitcoin and cryptocurrency, seemed to have solved a big problem, but there was a bigger problem that needed to be solved.
This problem was the reason that almost all other online peer-to-peer systems failed.
Here is the big big problem:
How do you prevent one person sending the same amount twice
or more at the same time?
Now in a centralized system, such as a bank or a credit card this is easy to control.
In a decentrliazed system, this is hard to control. To stop this happening you would need to issue an instantly updated list of transactions to everyone within the system.
Which obviously is not possible.
Also if anyone disagrees with the list, then the whole system stops and breaks down.
What you need is what is called ‘absolute consensus’.
Nonetheless Satoshi Nakamoto was the 1st person to make this happen. No one else actually believed it was possible.
Quote: “Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.” – Nassim Taleb
So What Is Cryptocurrency Exactly?
So it is a currency.
Crypto is online…
It is decentralized…
More importantly, no one can change or edit crypto.
It is a medium of exchange (just like money, gold or other money)
The Blockchain is the crypto record or ledger
How Does The Bank differ From Cryptocurrency?
A bank deposit record is made in a ledger (bank records).
When you transfer cryptocurrency is it also recorded on a ledger (The Blockchain).
The bank makes a daily transaction update.
An instant update of a cryptocurrency transaction is made.
The bank, using a fractional reserve system, increase the value of the deposits, creating debt and the possibility of a bank run or bankruptcy.
Cryptocurrency cannot be manipulated as it is controlled by strict protocols.
In a bank, it is possible to reverse transactions and even alter the ledger.
In a crypto system, it is impossible to reverse or alter a transaction making it incredibly safe.
What makes cryptocurrency unique?
1) It is irreversible. Once confirmed a transaction is irreversible. At the same time, this could be a good and bad thing. If you send it for legitimate purposes, the receiver will receive it no questions asked. In contrast, if you send it to someone who is not what they appear to be, the receiver will also receive it, no questions asked. With this in mind maintain caution. The receiver should be legitimate.
2) Anonymous. By anonymous, I mean you do not send to a named account. you send crypto to a 30 digit numbered account. It is possible to see which account the transaction goes to, but it is almost impossible to know who is behind the account. Again maintain caution. The system offers privacy in banking, which could be a good thing in some circumstances.
3) It is secure. A bitcoin address is very secure. Regular hacking of Bitcoin exchange happens. This is not the same as hacking a bitcoin address. You can store cryptocurrency on an exchange (which is basically an online bank) and if their security is not up to standards, then there is a risk. We do not advise you to store any bitcoin that you are not transferring or using at that specific moment on an exchange, but rather you store your crypto on an external hardware device such as a Nano
4) We Don’t Need A 3rd Party. This is one of the best parts of crypto for me. I don’t need to ask an expensive bank or transfer system for permission to transfer funds. Nor do I need to wait for them to be open. Using free software we can transfer funds using crypto anywhere, anytime, no permission needed. No expensive bank charges!
5) Fast, Global, Cheap. Crypto transactions take minutes if not seconds to complete. They are global. Crypto can be sent anywhere and time and costs fractions of a dollar (normally) to send.
6) It has no debt. Previously, gold backed money. No more. Money has no absolutely no backing now and every transaction (based on fractional reserve) creates debt. The very structure of crypto means you can never increase the total amount of bitcoin. In fact the total amount of bitcoin that will ever be available is 21 million coins. It is not possible to create more.
7) No Fractional Reserve. The bank creates debt using a fractional reserve system. Crypto has a controlled release of coins. Bitcoin, for example, will only ever have 21 million coins and these will be slowly released over time until the full release in about 2140. The controlled supply increases the coin value. The banks forgave keep decreasing the value of money by flooding the markets with more and more.
What Is The Future of Crypto Currency?
Crypto is a payment system. It is also a trading system. Moreover, it can also be used for long-term investments.
You can buy and sell crypto at exchanges or you can hold and wait for the price to go up.
You can send it to friends and family and they can transfer to cash. This is a safe way to transfer money to anyone around the world.
However, it is a volatile currency. This makes it an excellent tool for trading. you can literally buy it in one minute and the next minute the price has risen and you make more!
The same is true in reverse too. you can buy crypto and the next minute the price can fall and you lose.
It has very volatile risks, but if you know what you are doing, you can make a lot of money (or coin) over a short period of time.
Bitcoin is the most famous of all coins. It is The Lord of All Coins!
In 2017, the price was about $1000 a coin in February and by December it was over $19,000. you could have made a lot of money.
Then in June 2018 the price dropped to less than $6000 a coin. (It’s a great time to buy).
Resistance To Cryptocurrency and Bitcoin.
Based on what you know so far from this post, can you imagine the reaction of the banks and financial institutions?
With this in mind, if we can bypass their big money-making systems, can you understand why they may want to shut this down?
By the same token, you may often see very negative press reports. The big banks often warn users not to involve themselves in Bitcoin and cryptocurrency.
In Oct 2017 Jamie Dimon, CEO and Chairman of JPMorgan Chase said “if you’re stupid enough to buy bitcoin, you’ll pay the price one day”
After this report, the price of Bitcoin fell…
Then in November 2017, it was reported that JPMorgan chase bought over 9000 bitcoins
In this picture below, you can actually see the dip in price. The #68 represents the moment when Dimon made his announcement. See more in this article.
Why do you think the press issue these negative statements?
I would love to hear your comments below.
So What is Cryptocurrency – Review
First, cryptocurrency is a digital asset. Crypto works as a medium of exchange. Strong algorithms and cryptograph protect it.
Second, it has a decentralized control system and is a controlled supply.
No central authority is needed to operate and operates independent of banks and external financial systems.
It has a fast and cheap transfer model.
The blockchain records the transactions. They are permanent, anonymous and non-disputable.
I hope that this post has given you a basic understanding of What is Cryptocurrency.
This is however, just the beginning of the journey into increasing your wealth portfolio in Crypto.
Getting more help is easy. Contact Tim here
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