Cryptocurrency, what's all the hype?
Cryptocurrency.
Something we’ve all heard about. It’s pretty new and exciting. It’s also confusing.
Some people say it’s the future of money and finance. Real millionaires have been created in the past 5 years thanks to Bitcoin and other cryptocurrencies. Depending on who you talk to though, Bitcoin is either shooting to the moon, or is a Ponzi scheme and a scam. Even a bubble that is going to burst.
So what exactly is cryptocurrency? How do you invest? How do you get started and how can you make sure it’s secure?
In this post I am going to cover it all. Side note, I am no expert in crypto, but I am a hustler. Meaning I'm all about learning and growing my wealth. Financial freedom is my end goal, so you’ll see me dabble into crypto and continue to create content along the way. So here we go:
What is cryptocurrency?
A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the U.S. Dollar or the Euro, there is no authority, there are no third parties. In other words, nobody has control over what you do. Since the beginning of the Internet, users have been trying to create a digital and decentralized currency that no longer relies on banks and states.
It’s a form of digital payment that can be sent anywhere in the world over the internet. You can buy goods and services, or trade them for profit. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. You may be familiar with the most popular versions, Bitcoin and Ethereum, but there are more than 5,000 different cryptocurrencies in circulation. You can sell crypto to convert it back into fiat currencies, like US dollars or Euros. This can be interesting if you’re trying to take your profits, or simply need the cash. Several options exist to sell your crypto, with the most common one being exchanges.
Bitcoin may be the world’s most famous digital currency, but it is far from the only coin. Even Facebook launched a cryptocurrency project in 2019, then called Libra, but almost immediately drew regulatory blowback. The association behind the project has now changed its name to Diem.
Why crypto?
Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.
You are probably wondering why not just pay for goods with your Mastercard or Visa? Most financial institutions offer a false sense of freedom, from transaction processing fees to the allocation process to to be a card holder, etc.
Crypto IS DIFFERENT, anyone can use it (it’s an open platform) and it’s free. You can take full control over your assets—and reap the rewards that come with doing so. Not only that, but it’s a hotbed of innovation. I like to compare this to the internet -- in the 80s. People were baffled, but eventually we saw freedom from the internet built companies like Amazon, Facebook and Google. In the same way, cryptocurrency can build in a new generation of platforms in financial services. For example, money transfers that are faster and cheaper than bank wires and Western Union or new services that are not possible with traditional payment networks.
How does it work?
Think of the entire crypto network as a really big poker game with millions of people. Some are exchanging money, but lots of volunteers are keeping ledgers, or miners. So when you want to send or receive money, you have to announce it to everyone at the table, so the people keeping track can update their ledgers. So for every transaction, you’re announcing a couple of things to the network:
Your account number
The account number of the person your sending it to
How many you want to send
Having a bunch of people track your transactions seems like a pretty good security measure, but if all it takes to send out bitcoin is a couple of account numbers, that's a huge security problem. Side note, it's already a huge problem with regular money (think of all the stolen credit cards out there).
When you buy coins online on an exchange, what’s happening?
You have an account on the exchange to get access to your coins and to manage your assets. This account is protected by your login and a password like any other website.
THINGS TO NOTE:
A public key = your public address = the address you can share to receive funds.
A private key to prove that you are the owner of your Bitcoin.
This private key enables you to “sign” transactions when you want to send your coins
But where is this private key?
Your private key is stored on the exchange = you can access it through the exchange but you don’t really own it. YOU ARE NOT IN CONTROL.
What is a hardware wallet?
That's why when you own crypto, security and ownership are BOTH very important. A hardware wallet is a cryptocurrency wallet which stores the user's private keys (critical piece of information used to authorize outgoing transactions on the blockchain network) in a secure hardware device. The reason for a hardware wallet is to provide full isolation between the private keys and your easy-to-hack computer or smartphone.
How do I protect myself?
Having money DOES NOT mean owning money. When you store your assets with banks, custodians, and hedge funds, they’re the ones who own them— not you. Ledger is trying to change that to give you full control over your crypto. The company has created a solution that enables you to secure and control this key and therefore your crypto: the hardware wallet combined with the Ledger Live Application. On Ledger Live you can buy, sell, exchange, earn and manage your crypto. All-in-one place.
With Ledger hardware wallets, your private key remains offline protected in a certified secure chip. Your private key never leaves the device - no one can access it. Every action you’ll do will need to be validated on the device to assure maximum security.
How Can You Use Cryptocurrency?
A handful of online retailers like Overstock.com accept Bitcoin. Also, payments giant PayPal recently announced the launch of a new service that will allow customers to buy, hold and sell cryptocurrency from their PayPal accounts. This makes me feel like it’s not going anywhere, anytime soon.
Shout out to Ledger for sponsoring this post.