CRYPTOCURRENCY : FACTS AND ARGUMENTS

A cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward.

Too many crypto enthusiasts there is only one valid cryptocurrency: bitcoin

Bitcoin maximalists” they call them. Who can blame them Bitcoin allows value to be sent from one person to another, anywhere, anytime, with no one who can stop it.

You would have to shut down the Whole internet to stop bitcoin. With quantum computing you could overwhelm the bitcoin blockchain, though the field is not yet advanced enough to do that.

That said, what you need to know is that a cryptocurrency relies on a blockchain, a special type of digital network. There are different blockchains like Ethereum, Cardano and Stellar. They work similarly, but have different features.

Bitcoin [BTC] is the most popular cryptocurrency. BTC transactions are processed and verified by people called miners. When miners process enough transactions, using specialized computers, they’re rewarded with some BTC. Essentially, the act of verifying transactions is what creates more BTC. So as long as miners want more cryptocurrency, the blockchain will function.

Blockchains use special apps, called protocols, that put your crypto to work. So in traditional finance you might have a savings account, but in crypto, you’d use a savings protocol. The language of crypto is rooted in computer science.

Ether the cryptocurrency of the Ethereum blockchain, which comes second only to bitcoin at the moment, is increasingly seen as a greater potential. But they are not really competitors.

In early June 2021, for instance, El Salvador announced it would make a law allowing bitcoin to be a Legal tender . Many other countries are likely exploring the possibilities as well. But that is not what they are thinking about when it comes to ether.

Bitcoin established itself as a credible alternative to traditional fiat currencies. So, Bitcoin is a pure cryptocurrency that focuses primarily as a medium of exchange and a store of value.

On the other hand, Ethereum is built as a platform to run programmatic contracts and applications via its own currency: “Ether is a blockchain platform that functions like the Apple store or Android app store. Bitcoin is a commodity like gold, or a store of value,” said Pat LaVecchia, chief executive officer of Oasis Pro Markets.

Bitcoin is far slower than Ethereum in two key metrics:

Now, why is Bitcoin so slow? Well, security is Bitcoin’s first priority, and it is secure due to its coding language. Bitcoin uses C++ programming and is restricted to only 70 specific commands. This limitation makes it more difficult to hack the blockchain within these set commands. Ethereum is an evolving platform that is still finding its identity. For example, Ethereum 2.0 is expected to release this summer and will have completely different rule sets.

#3: Finite Supply vs. Infinite Supply. Bitcoin has a finite supply of 21,000. Once the supply is exhausted, that’s it. That’s why investors consider bitcoin as a store of value and investment against inflation. Contrary to Bitcoin, Ethereum offers an unlimited number of Ether but does cap the amount released each year

Arguably, Ether could have a bigger upside with its DeFi platform — which is only limited by developers’ imagination. But the risk is higher.

Bitcoin is the leader of cryptocurrency, and billion-dollar corporations prefer to hold Bitcoin as a store of value. Because of its first-mover advantage and brand recognition, Bitcoin can be considered safer than Ether. But keep in mind, all cryptos historically are volatile.

Cornerstone Macro analysts wrote to their clients: “Given that there are diversification opportunities among digital coins themselves, we should consider a small basket of them, rather than just Bitcoin alone, when we assess whether some allocation to crypto assets can reduce portfolio volatility alongside traditional assets.”

Get a Crypto Wallet

You’ll need a place to store your crypto — a wallet. You can choose a software wallet — like an app, or a hardware wallet — an offline device sort of like a flash drive.

Since software wallets are online, they’re potential targets for hackers. Hardware wallets are offline and can’t be hacked, but they can be lost or stolen like a real wallet.

You can skip this step by downloading an exchange app like Coinbase, eToro, or Gemini, then connecting a debit card or bank account. This is the fastest way to start buying and trading crypto. Your assets will be stored in a wallet managed by the exchange, which adds some risk.

Think about it, if you’re a hacker trying to steal millions, your time is better spent hacking large exchanges to access thousands of wallets. Hacking a single software wallet is probably a waste of time.

Put Your Money To Work

If you only want to trade crypto, a wallet and exchange is all you need. But there are other ways to use crypto to make money.

Decentralized finance [DeFi] is a system of peer-to-peer finance tools that provide options like interest accounts, loans, and advanced trading for people with crypto. DeFi disrupts traditional finance by removing middlemen [bankers, lawyers, brokers] from finance processes. DeFi advocates say this makes finance faster, more affordable, more transparent, more democratic and eliminates in-person discrimination.

To use DeFi protocols, you’ll need access to the decentralized web [dWeb]. To learn more about DeFi protocols, their history, and how they work, check out Finematics on YouTube.

Finally, here are some scenarios to help understand money and crypto.

Instead of betting on one crypto asset, an investor can diversify its crypto portfolio with both Ether and Bitcoin.

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Professional digital marketer, Writer and Tech enthusiast

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Ayoola Ajila

Ayoola Ajila

Professional digital marketer, Writer and Tech enthusiast

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