There’s a 21st-century gold rush and its name is cryptocurrency.
Everyone is looking to strike it rich. Either by working hard or scamming those that are.
But before you load your wagon and head for the hills. You need to know the terrain.
Here I’m gonna give you an overview of what you need to know about this new frontier of the internet.
Crypto and Blockchain.
Crypto and Blockchain.
Crypto and Blockchain.
You hear those words together so often that you may think they’re synonymous. But that isn’t the case.
The progenitor of bitcoin and the blockchain was a person under the alias, Satoshi Nakamoto.
In 2008 Nakamoto published a peer-reviewed article outlining how to solve the double spending problem. Making peer-to-peer transactions possible.
A problem unique to digital currency is the double spending problem is when a person is able to spend it twice.
This is not possible with fiat currency as it is exchanged in person or runs through a centralized figure that authorizes transactions.
Through its mining system, the blockchain solves this problem.
The Blockchain is not one super space where all crypto and defi reside.
It is a digital ledger that makes information more efficient to transmit and easier to authorize.
It has a wide array of uses. From logistics to healthcare and of course De-finance.
But how does it work?
Here is a very basic breakdown to get the idea familiar in your head.
Let’s say fish caught on a boat is then transferred to the processing plant. That’s one transaction or “block. That block is then “chained” to the previous block. Once inputted the transaction cannot be altered. Any type of alteration would result in an additional block chained to the previous one.
Below is an original image from Nakamoto’s article.
In the crypto space, it works the same way. Each crypto transaction results in a new block. There are a few types of blockchains but crypto mainly runs on public ones.
Public blockchains are open for anyone to use. A key selling point of crypto.
What the hell is crypto?
As of writing this, there are over 12,000 cryptocurrencies.
Created by using cryptography, cryptocurrency is an extremely complicated code that acts as a decentralized currency.
This means no central authority has absolute power over it.
Compared to the US dollar, there is no crypto federal reserve that can depreciate it through the printing of money.
Cryptocurrency either has a finite amount or a limit on how much is generated each year.
For bitcoin specifically, there are 21 million that will ever exist.
Bitcoin is mainly used to send money over the internet.
As the first user of the blockchain, Bitcoin planted its flag early and has seen rapid growth along with rapid volatility. Rising from a few dollars to a peak of over 60,000$.
Currently over 350 Billion in market cap. It’s still the biggest coin; almost tripling #2 Ethereum
Think of Bitcoin as Ice. Rigid but serves a purpose.
Next, we have Ether, also called Ethereum because of its blockchain name.
If Bitcoin is ice then Ether is water.
Built in the solidity coding language, Vitalik Buterin created Ethereum with the goal of decentralizing the internet. To do this they needed a protocol that was flexible for all the demands people had for it. Not just sending money like bitcoin.
One such demand is decentralized apps(DAPPS). DAPPS run smart contracts that execute commands when qualifications are met.
These DAPPS are often called tokens.
A coin’s younger sibling is an NFT or non-fungible token.
If tokens are passengers on the bus, the coin belongs to the bus company.
They do not have their own blockchain and are often riding on top of their sibling coin.
These are more flexible in their uses. As coins are often built with a single use in mind.
Security and Mining
You may be asking:
If anyone can make transactions, who is verifying them?
That’s where crypto miners come in.
Here’s the gist.
- Crypto miners take the transactions that occurred in the last 10 minutes or so.
- Their computers attempt to solve a math problem that helps verify if the transactions were valid.
- The first miner(s) to solve it get a transaction fee paid by the users and are also given bitcoin from the system for their problems.
For Bitcoin, this number is ½ every 4 years
If you are thinking this is an easy way to make money. Think again. The system was designed to increase in difficulty the more miners there are.
As of right now, it takes massive amounts or time, electricity, and computer power to mine efficiently.
Though crypto miners are integral to the system. They can protect you from anything off of the blockchain.
There are a few things to look out for in this new wild west.
The snake oil salesmen are the rug pulls.
Rug pulls are when whales or developers of a token take the value out.
This can occur in a few different ways. Either taking liquidity, selling their share of coins, or removing the ability for others to sell.
Here’s how to spot a rug pull:
- If liquidity is locked for a short time or not at all. This gives the developers the opportunity to short the coin
- Few wallets have a large % of coins. Allows a few people to tank the price
- Little effort is put into its website, social media, or white paper. If the developers truly had a mission for their token they would put effort into it.
- Large influencers pushing tokens they didn’t put work into. Elon Musk, Reese Witherspoon, and Gweneth Paltrow were all paid to be talking heads for crypto.
The Bandits: Crypto Jackers
Crypto-jacking hijacks the CPU of victim computers to mine crypto. It often comes in the form of phishing emails or is delivered through advertisements on certain websites.
It does not take your crypto keys or other personal information. It’s simply a parasite sucking on your CPU.
This causes noticeably slower performance.
The Saloon Brawls: Volatility
This is a simple one but it still makes people emotional. Defi is a new market and like any market, it will face a lot of volatility. Regulation, scams coming to light, companies going out of business.
All of these and more will cause drastic changes in price.
Only invest what you can afford to lose
In a saloon brawl, you don’t want to be the one cowering in the corner, you want to be the one calmly kicking ass.
Buyers Best Practices
Now with your basic understanding of de-finace you’re looking to buy. You’re gonna need a crypto wallet.
Crypto wallets act as an identifier for a user on the blockchain. It doesn’t actually store the coins.
One type of crypto wallet is a software wallet. These trade security for convenience.
They can be:
With software wallets one click on a bad link and you could lose all your crypto.
The other type of crypto wallet is a hardware wallet. These are physical items that plug into the USB port in your computer. Allowing you to transact only when it’s plugged in.
They make you jump through a few more hoops but keep your crypto much safer.
They are not super expensive; the average is around 100$. And if you’re keeping thousands of dollars worth of crypto it’s worth the investment.
Number one rule of crypto: Don’t lose your identification password.
There is no resetting your password. You are simply shit out of luck.
It was extremely interesting doing the research for this post. I heard a lot of different opinions and saw the good, the bad, and the ugly of crypto.
As you continue to learn about this evolving ecosystem. Let me leave you with this.
- Know who you’re listening to.
- Know why they hold the beliefs they do.
- Look for disconfirming evidence.
It’s not a conversation if only one person is talking. Comment any of your crypto thoughts or questions. Good luck on your crypto journey.
Some Resources Before You Go.