Cryptocurrencies made easy: is like a joke to me. Mean, why does anyone need to have explanations about cryptocurrencies. It is self explanatory. Still, every time I try to explain to a human the terms: cryptocurrency, blockchain, virtual currencies, bitcoin, their first reaction is: You lost me. It is a bit disappointing.
So, I decided to give you some ideas about what a cryptocurrency is actually, how does it work and if you should use it.
First comes first. A simple definition
A cryptocurrency is a digital born currency. Crypto can be used to buy goods and services. Sometimes crypto is used as an investment tool.
It is decentralised and not regulated by governments, politicians, and organisations. Its price and worth are as much as the users define by usage of each crypto.
If you want to start investing in crypto, a good place is coinbase. Try this link, sign up and earn a nice amount of free bitcoins. By this, you will support me too!
The users of each cryptocurrency determine its value, by using it in transactions or just as an investment tool.
If you are wandering what is the main difference between crypto and common currency, the answer is simple. A digital currency is using blockchain technology, which is a decentralized technology. It means that different computers are managing and recording part of the same transaction in blocks. When you put those blocks together, you have a block chain. The blockchain offers unique security and the assurance that the outcome of the blockchain is unique and cannot be copied by anyone.
It is like in analogue currency, where a banknote has its unique serial number. The difference with blockchain technology is that you can not reproduce this “serial number”. It is unique. In contrary, analogue currency can be reproduced – even as a false one.
Another way to understand in a more simple way the meaning of cryptocurrency is as follows. You can compare it with arcade or casino tokens. There, you pay in dollars or Euros or what ever analogue currency and receive a certain amount of tokens. The equivalent is defined by the casino. In crypto tokens, the equivalent is defined by the market. Request vs offer.
Cryptocurrencies made easy: Growth of market.
Nowadays, there must be out there more than 10.000 different cryptos. How many of them are worth our attention? Not more than 200. Their market value is close to $US 2 trillion depending on the time and date of setting the question. F.e. in April 2021 it was $US 1,2 trillion but a month later it was $US 1,7 trillion.
The factors of changing the growth of the market are hundreds. The first of course is the trend, which is defined by opinion leaders such as Mr. Elon Musk. We all know what happened to bitcoin and dogecoin after the 2021 announcements of Mr. Tesla SpaceX.
Beside the trends and fashion, investors trade in cryptocurrencies because they trust them as the future of currencies. They believe that central banks and governments will not be able for long to manage the money supply. As blockchain technology is more secure than the traditional payment systems.
Coming to main question: Is for humans a promising investment?
You all know “the greater fool theory”. Someone must want to pay more than you did for buying something. It is a valid theory in hundreds of business fields of humans’ world. Stock exchange, real estate, used cars, are just examples. Some humans believe that real and professionally managed businesses are depended on the greater fool theory, since the value of something is growing because it is managed and creates not just profitability but also real measurable value.
Still, in 2021, not only values but also measures are changing rapidly. So, the key is to follow the trends, to watch human and social behaviour be alert.
By buying a blue-chip on New York’s stock market you never now what really is going to happen. The other day a …kinky information is spread out and the stock loses 20% of its value in seconds. Or you have invested in bitcoins and Mr. Musk makes a negative announcement, after which your investment is eliminated.
Split the risk! This is the only suggestion you must have in mind as leitmotiv. Invest in well established brands, cryptos or whatever but also take the risk to invest in new and small start-ups. Have as example dogecoin. There are investors out there, which become millionaires overnight. Stay tuned, it will be fun!
Disclaimer: I am not a qualified investment consultant and all the above reflects just my digital opinion, without any responsibility for loss or profit.
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