“I bought R200 worth of Bitcoin in December, it is now worth R55.
I bought R300 worth of Ethereum like 2 weeks ago, it is now worth R131.
This is why it is best that I avoid gambling.”
– Facebook Friend
Funny, huh? But if cryptocurrency is the future of finance, as one popular blog suggests, you’d better get to know it. Here’s the next of our Finance 101 series. These are the top ten words for talking Bitcoin, Ethereum, Ripple and other currencies you can’t see…
Wait, what is cryptocurrency?
It’s digital money. Its ‘coins’ are secured by cryptography (code). You access it online but, because it’s virtual, it is not located in any one place. Nobody controls it, and nobody can hack it, so there’s no fraud and no inflation. You can easily and securely buy and sell cryptocurrency on mobile apps like Luno. The transaction charges are cheap, even if the currency itself is not. Cryptocurrency value rises and falls a lot which makes it quite controversial. Those who like a little danger, love its unstable ways.
A bit of (recent) history
You’ve probably heard of Bitcoin. Bitcoin is the poster child for cryptocurrency. It’s worth much, MUCH more than it was when it was launched in 2010. About twenty thousand times more (at the time of writing). It hit its highest-ever value in December 2017, rose and fell in a steady decline in January 2018 and then slumped beginning of February. Since then, the internet has been kinda quiet about it. Get Ethereum instead, ripple the hushed voices of the crypto choir. But there’s a host of others to choose from, too. What to do?
Know the nature of the beast
Being a high-risk investment, cryptocurrency also promises potentially high returns. The commodity itself is 100% verified and so has an integrity that “real” money lacks. Real money is – ironically – often based on gold reserves that don’t exist.
Virtual, with real proof
As there are no bars of gold in a vault to guarantee it, cryptocurrency operates on Proof of Work(PoW). When computers ‘mine’, they process transactions (blocks) using complicated algorithms. Validated blocks are ‘coins’, the units of the currency. Proof of Work is when a computer’s capacity is verified against its finds to ensure it is correct and unique, in other words, that the find is real. This means that when a computer finds a coin and you buy it (or part of it) you are guaranteed to get what you pay for. No double-spend. No false finds. No faulty mines.
Pain in the eco blockchain
It’s also deeply unsexy. Why? Have a look at the mining rig in the picture above. Mining rigs need to have major capacity and you need LOTS of energy to run such strong computers. Humanity’s electricity is still largely provided by fossil fuels and rich fools. Iceland is threatening its own version of day zero because Bitcoin mining uses more energy than all the country’s households do. The worst part of this is that the power they’d be turning off is renewable energy (the kind we want and that we don’t have enough of). Burstcoin is a brilliant, eco-friendly alternative cryptocurrency with much less carbon karma than other cryptocurrencies. It works through a calculation once – not multiple times – meaning it takes much, MUCH less energy to mine (see “blockchain” below).
A new beginning
So now you know a little more, but before you go back to basics and start trading like your life (or at least, your savings) depend on it, remember that even virtual economies must evolve. Crypto is to traditional currency what Facebook was to snail mail – it is the disruptor, but not (necessarily) the enemy or the answer. The saying still stands in this new economic era: invest your excess and protect your profits.
Here are the top ten words you need to know before you join the new kids on the blockch-… yeah, okay. Enough of the puns for today.
ABC of Bitcoin in ten terms
A glossary for non-geeks
Got it? Good. Now go impress everyone at the next dinner party. And remember the advice of an ordinary guy whose tipsy typo made him famous,
“traders can only take your money if you sell.”
Eco-friendly cryptocurrency: Burstcoin
Looking for your wallet?
Luno wallet– an SA favourite.
Buy Bitcoin at these exchanges.
Buy a coin based on a meme star.
Buy a coin that is actually a digital cat.
Reuters covers crypto in detail.
Laugh a Bitcoin. Sorry.