No really, what is crypto?

The world of cryptocurrency is considered volatile. When reading articles about cryptocurrency, it is almost always complicated. There is talk about crypto assets being an economic sideshow that continues to rank poorly in equity drawdowns, with questionable diversification options. Which, according to large institutions, reduces the benefits of diversifying into crypto.

This article is not technical. Instead, it aims to explain to the "US" of the world just what cryptocurrency is and the simple ways we can use it. It requires that we think differently about money and financial institutions and unlearn our dependency on centralised finance. Cryptocurrency is a complete shift from what we have previously been taught about money.

Cryptocurrency is set to become how our children will use money, even though investors do not define it as money yet. The generations before us who used fiat, which means regular money, also have to adapt to the age of digital money.

Although in countries such as the United States, Canada, Australia, and the United Kingdom, cryptocurrency is a commodity like stock trading and real estate, in many countries, it remains unregulated, is considered an intangible asset, or is restricted and not available for use.

Misinformation around cryptocurrency is rife. We need to understand cryptocurrency and how we can use it.

Social media influence such as tweets from billionaires and institutional backing from venture capitalists and banks has driven the price of Bitcoin and Ethereum into volatile swings up and down, with seemingly no clear answer in sight.

It is exciting though! It means that people are taking notice! Perhaps we could buy low and sell high. We could show banks, regulators, and haters that we can all be crypto billionaires, right?

Actually, the answer is quite dull and mundane. It means that cryptocurrency is digital money that can be used to buy things, trade with, earn interest from, and invest in long-term and short-term.

We need to be aware of the ramifications. It means that if a transaction takes three days to complete, we can't rant about it because the network determines this, and they do not have a call centre.

It also means that we can require our governments to make government-related CAPEX expenditure using blockchain technology, using Decentralised Finance so that we can scrutinise where and how the money gets spent.

Cryptocurrency is not a conspiracy. It is not a scam. It is not a get-rich-quick gimmick. It is digital money. It is already taxed as an asset. And, if you aim to have it and use it and teach your children how to use it, then keep reading.

The simplicity of this complicated ledger-based blockchain technology is accessible and fast becoming more and more usable in daily life. It is evolving, and we would be remiss to think that we are not the drivers of this change. We have an opportunity to think about and have a say in this form of finance, how it gets used, and the associated best practice.

We need to get busy understanding what cryptocurrency is, the blockchain technology that it is built on, why it exists and how best to use it.

We are a generation that needs to create our financial access based on self-reliance and agency. This will cause a butterfly effect on the growth and expectation around cryptocurrency.

The institutions are right; cryptocurrency is volatile, so we need to learn to use it. Electricity is also volatile, but it is used today both safely and, to an extent, nonchalantly. My aim is to create a nonchalance about crypto and ease of use so common that it is regular but remains unregulated.

The big question now is, how do we do this? How do we get some crypto? I want some crypto! You want some crypto! Everybody wants crypto! Where can I get crypto to have and pay for my life? To use it to save and invest? Where can I get Bitcoin and Ethereum, and how do I use them?

When you are not a billionaire or an institution, where and how do you get cryptocurrency...? From a wallet, of course.

A wallet? What is a wallet? I have a wallet, and there isn’t any crypto in my wallet? No, not that wallet. Rather a digital wallet.

Some are non-custodial encrypted accounts that even the wallet provider cannot access and is often referred to as cold storage, and some are custodial, which means that they operate similar to traditional bank accounts. Many platforms offer wallets and allow you to own cryptocurrency to buy and sell, save and invest and trade cryptocurrency. We will explore wallets, their use, and what we can do to get some crypto, use some crypto, and make cryptocurrency work for us.

What is cryptocurrency?

Cryptocurrencies are digital assets which means you will never hold it in your hand. In pandemic times, this is a good thing. Essentially, it is decentralised digital money based on blockchain technology. Now I have said two things in the previous statement which require an explanation.

Decentralised Finance or DeFi simply means that it is not regulated or governed by a central authority. Instead, banks, governments, and intermediaries are cancelled.

Blockchain technology is a massive, robust interconnected network of databases. This particular type of database allows many users to access the information within the network. It is a system for recording data, and it is either very difficult or impossible to change, hack or cheat.

Information gets stored in groups, commonly known as blocks. They can also only hold so much information, as the blocks fill up. New information gets compiled in a new block, and these blocks are linked together like suburban neighbours to form a blockchain.

A blockchain makes data irreversible on its data timeline. No deletes, no takebacks, and no cancels. This system of recording information is unalterable. It creates the decentralised aspect of cryptocurrency because once it is recorded on a timeline, it cannot be changed.

When you think about all the scams and misinformation around cryptocurrency, you can see why the centralised authorities do not care for this form of finance, because there is no way to hide transactions in this system. You can even see a scam transaction on the network, even if it is unalterable and there is no way to recover the funds. It is, so far, the most transparent way to record a transaction.

I will outline for you how a transaction works. The way a transaction is validated influences your understanding and use of a wallet because it is connected to the explanation of DeFi and blockchain.

Let us assume that you want to buy some crypto. A new transaction for this purchase gets entered onto the blockchain. This transaction is broadcast to a network of peer-to-peer computers located in various places across the world. These computers solve an equation to confirm the validity of the transaction and completes it. The blocks containing these transactions are filled and chained together to create a history of all transactions, which is unalterable.

Once validated as a legitimate transaction, a cluster of blocks is created that are referred to as nodes. Nodes communicate with each other to transfer information about new transactions and new blocks in a peer-to-peer protocol.

There are some popular and frequently used cryptocurrencies. The star of the show is Bitcoin. Bitcoin was created by the famously anonymous Satoshi Nakamoto, who released a white paper outlining the Bitcoin protocol. He defined Bitcoin as an electronic cash system that is fully peer-to-peer with no trusted third-party involvement.

With cryptocurrency, usage equals value. There are well over eighteen thousand cryptocurrencies at present, and not all of these have intrinsic value, which is the value based on users and market flow.

The other most popular cryptocurrency is Ethereum. It came after Bitcoin and is a souped-up version of the Bitcoin protocol.

Ethereum, like Bitcoin, is both a cryptocurrency and a Blockchain that is an open-source decentralised platform. The Ethereum network enables Smart Contracts and Distributed Applications and is built to run without downtime. It has built-in fraud control and also steers clear of third-party support. It is, perhaps this cryptocurrency that has powered the movement, accessibility, and ease of use of the crypto industry.

Ok, but what is Ethereum? How does it work? The better question to ask is how does it serve you? Because the Ethereum network was designed to serve you. Ethereum leverages the Bitcoin protocol by harnessing code that allows it to be used in the global supply chain and financial systems. Ethereum is a DeFi currency and a network, which savagely cuts out middlemen to ensure that it is a platform that can be used for sharing information globally.

Again, Ethereum is both a cryptocurrency and a Blockchain. And it can be used to create other cryptocurrencies. These are called ERC-20 tokens, which stand for Ethereum Request for Comment, and the 20 is the proposal identifier, a commonly used standard when creating a token on the Ethereum blockchain. There are many other ERC Standards each designed to add value to the Blockchain ecosystem. Some widely used ERC-20 tokens are Tether - USDT or USD Coin – USDC. These cryptocurrencies are referred to as stablecoins because they are pegged to the United States Dollar. Therefore, one USDC or USDT equals one dollar.

The reason I outline this is that we need to understand that crypto is used as currency. Fiat currency is the money we use in day-to-day life, that one hundred dollars note or the credit card. Cryptocurrency is funds programmed on a particular blockchain network such as Bitcoin or Ethereum. It can be bought and sold, sent, and received, and most importantly, it is not controlled by the governments and banking intermediaries of the world, which gives it transparency that fiat does not have.