What is Cryptocurrency?

What is Cryptocurrency?

“Isn’t that stuff like some sort of magic internet money??”

Cryptocurrency is complex, advanced, and extensive. Numerous books have been written covering just small segments of this new technology. This article will give you a basic idea of what Cryptocurrency is, why people value it, and what it is used for.

Nothing in this article is financial advice, and you should always do your own research when investing.

So, what is Cryptocurrency?

Cryptocurrencies are alternative digital currencies.

Bitcoin, Ethereum, Dogecoin... the list of cryptocurrencies is virtually endless nowadays. There are thousands of different cryptocurrencies, and they come with variations/differences. However, almost all of them follow a few key components:

Blockchain Technology: Crypto currencies are powered by blockchain technology. They follow a code, and can never break that code. This makes it very secure. Blockchains have public ledgers that everyone can access. This guarantees transparency, and allows malicious actors to be tracked and pursued. (This also allows anyone to view every one of your transactions... so act in a transparent manner). Transactions are fast, irreversible, and impossible to fake or duplicate.

“A blockchain is a digitally distributed, decentralized, public ledger that exists across a network.” - Investopedia

Limited Supply: Cryptocurrencies are deflationary. There is a maximum supply of tokens/coins - guaranteeing scarcity (Note that some cryptocurrencies actually have unlimited supplies). Supply never increases - and as tokens are misplaced, or burned, supply will decrease. No more constant printing causing inflation year over year & shrinking the value of currency.

“The Bitcoin supply is limited to 21 million. In other words, it is deflationary by nature.  As a result, not more than 21 million Bitcoins can ever be mined or be in circulation at any given moment. - Liquid”

Anonymous: Individuals or groups using cryptocurrency can remain completely anonymous. Transactions are tracked to a wallet address - not any person. With this in mind, it is still often possible to deduce real identity by following transactions to personal credit cards or bank accounts used to purchase or withdraw currency.

“Transactions are tied to a random sequence of characters and not to the owners identity - Conotoxia”

Decentralized: No single entity or person controls cryptocurrency. If changes need to be made, coin or token holders vote on proposed solutions to be implemented. This lack of overseeing entities leads to less fees, and less restrictions. Corruption of top leadership is non-existent.

“In a decentralized blockchain network, no one has to know or trust anyone else. Each member in the network has a copy of the exact same data in the form of a distributed ledger. If a member’s ledger is altered or corrupted in any way, it will be rejected by the majority of the members in the network. - AWS”

New and Volatile: Cryptocurrencies are a new commodity, and their prices swing up and down drastically. Brand new coins and tokens pop up every day and it can be hard to draw the line between investing and gambling in these spaces. With that said, please consider the possibility of losing your investments in this space.

Summary: Cryptocurrency is a profound topic that I have only scratched the surface of in this article. Crypto is alternative digital currency that uses blockchain technology, typically has a limited supply, allows users to remain anonymous, is decentralized, and is a new and volatile asset. Crypto is a new space for everyone, from the wealthy to the impoverished, to explore, learn about, and hopefully help grow their freedom and wealth.

View my accompanying video: https://youtu.be/FknMcfRVLwg