I received feedback that y’all wanted a brief recap on cryptocurrency. We've talked about cryptocurrency as a form of money, and types of cryptocurrencies like bitcoin and Ethereum. This post will dig into cryptocurrencies generally. And. Mea culpa. I attempted more frequent posts, and I failed. I'll continue to commit to monthly. Shout if you want more or less!
TL;DR:
Cryptocurrency's use a blockchain (not a bank or government) to track and verify transactions safely and securely. Users pay a small fee to use these services.
Cryptocurrency's have value because of computing resources it takes to access the currency. Most cryptocurrency's have a max amount that will ever be available to keep it valuable over time. Bitcoin and Ethereum are the two most common cryptocurrencies.
Traditional finance can learn a thing or two from crypto communities - namely education, community building, and ownership.
What is Cryptocurrency & How Does Cryptocurrency Work?
Cryptocurrencies are a type of currency.
Think of cryptocurrency like gold (this analogy is common for a reason). Cryptocurrency must be "mined" (by computers) in order to be used. These miners are paid a fee for their service. When you transact with cryptocurrencies, you also pay a fee ("gas"). The fee pays for the computing power needed to track your transaction safely and securely on the blockchain (ie "decentralized ledger"). Remember - in order to confirm a transaction, you need to buy enough computing power to check every transaction on every network computer. There's only so many cryptocurrency in the world so as to maintain it's value.
When I first checked out cryptocurrencies in 2014, I felt like I was exploring the deep depths of the dark web. I was fully expecting my money to be gone forever. Now, apps like Cash App and Coinbase make it simple and fun. Gone is the pit in my stomach before every transaction.
Today, there's an entire ecosystem to make cryptocurrencies easier to invest, buy, sell, and trade. Exchanges like Binance help users buy and sell cryptocurrency. Stablecoins help governments get in on the action. Digital wallets make it easy to use cryptocurrencies across the internet.
Why Does Cryptocurreny Matter?
Cryptocurrencies are the tip of the decentralized finance iceberg. Regardless of what you think about decentralization, there's a few things we can all learn from the community:
Education - Coinbase Rewards is financial literacy at its finest. Learn about a new cryptocurrency, earn that cryptocurrency as a reward. The purest example of ownership driving wealth. Crypto has had to educate users due to its relative newness. With limited regulation, communities are able to rethink ownership and rewards.
Community - Contribute to crypto projects and make money for the work you've completed. Like we talked about with NFTs, creators are rewarded for the work they do on projects they build.
Money - Let's be real. A lot of you read this because you want to learn how to make money. If you invested in Bitcoin 5 years ago, you would have a 50X return. Going back to the gold analogy, the total value of all bitcoin ("market cap") could be similar to gold - about $12T. Bitcoins current total value is $600B. There's still room to go.
Additional (somewhat) Related Reading:
NFTs
Great post! We want to see more posts, too!