When I initially put forward the idea of writing about cryptocurrency, I thought my research would fall under the same umbrella as my NFT and Web 3.0 blog. Incentivizing readers to dig a little deeper and get a good understanding of what the future is shaping into. However, the more I read about cryptocurrency, the more I noticed this space is much more understood.
This article is timely as a recent documentary on Netflix, “Trust No One” showcases the loss of a collapsing cryptocurrency exchange and where a near quarter of a billion dollars are lost. It also brings up some fundamental questions such as, how can money in blockchain and cryptocurrency become lost? The whole point of using blockchain technology is that everything is traceable. No spoilers in this article but join me as we deep dive into cryptocurrency. What it is and why you should care.
What is Cryptocurrency
Cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
The first decentralized cryptocurrency, Bitcoin, was released in 2009. To put that into perspective that was the same year Lady Gaga released her first single “Poker Face” or when Steve Jobs released the first iPad.
In March 2018, Merriam-Webster Dictionary published the official definition of what makes a cryptocurrency. Explaining the 6 necessary rules needed for it to be considered. Bitcoin meets these rules. Anything that is NOT a Bitcoin is considered an “alt coin” or an “alternative coin.” Altcoins can come with different advantages in comparison to bitcoins, from speed to processing to allow the use of “Ethereum” which is another host of blockchains for faster processing. When discussed, both Bitcoin and Ethereum are sometimes considered equals.
Using blockchain technology, put simply, bitcoin is a cryptocurrency that is decentralized meaning it is not monitored and only utilized through blockchain technologies. Utilizing blockchain allows so continuous readings and records of where the money is located, invested, and by who. Think of a computer talking to a multitude of computers. Similar to the NFT, as it also uses blockchain, it allows the advantage of it always being trackable.
Getting Your Hands on Bitcoins
From my research, the classic hosts for Bitcoins are Coinbase and Gemini. When you purchase this currency, you will be able to use a secure wallet to store your bitcoins or transfer them to someone else. However, remembering bitcoin is through blockchain so traceable. It can be a little complicated to navigate around, but once you have invested in a few, practice does make perfect.
However, this is changing as Bitcoins are becoming more and more accessible.
What is Bitcoin Mining and Do I Need a Pickaxe?
If you are like me, you may be thinking gold rush circa 1849. Well, you are surprisingly not far off the track. Mining is the process where new Bitcoins are entered into circulation. Similar to finding that new piece of unfound gold! However, put away your tools because in crypto land it is a bit more complicated.
The actual process of mining is using super-sophisticated hardware that solves computational math problems. According to Investopedia, “The first computer to find the solution to the problem receives the next block of bitcoins and the process begins again.”
Because people are rewarded through new crypto tokens it is an incentive to continue to find the new. But the process is painstaking, costly, and not a consistent reward scheme.
PayPal Now Using Crypto
Switching gears, we are in Aug 2021 and PayPal make, in my opinion, a power move and bring crypto into public trading. With PayPal having a nearly 403 million user base, allowing easy access to this number of people to buy and sell bitcoin will change things, but why is this important? Making bitcoin more acceptable to the public domain increases the field and accessibility to who can play in this area. But are they confusing what bitcoin is? Can I purchase my groceries with it? The long answer is probably yes, but why would you want to? Yes, some companies such as Microsoft and Tesla have begun taking payments in cryptocurrency. From my understanding Bitcoins are considered more of investment pieces, a bit like stocks and shares in a different format. Diversifying your portfolio.
What Does This Mean for Businesses Going Forward?
As mentioned previously, as the same with any new technology, an element of risk and gambling is involved. Please do your research before large investments. Experts recommend investing no more than 5% of your portfolio in crypto at all. Saying that cryptocurrency is here to stay so how can businesses utilize this technology going forward. More and more millionaires are coming from the crypto/bitcoin game. With more people investing to earn their best or “have a piece of the pie” like PayPal has it will be interesting to see how allowing crypto currently to be used more publicly how changes the forward trajectory of this space. I believe for gaming, NFTs, the dark web, and online currency exchange it has their place.
2021 was the year for bitcoin and with more attention and publicity, you have more eyes on the market than ever before. In November 2021, Time reports a $1.2 trillion bipartisan infrastructure bill was issued in the United States including crypto tax reporting. This will have a natural impact on the technology and how it will change with the IRS wanting more regulation efforts.
As mentioned previously crypto is becoming more public-facing and with the inclusion of ETF allowing to join accounts such as Fidelity or Vanguard, it adds to the public efforts for all to get involved.
Like anything new, please leave with the advisory to prepare to lose whatever you put in from a personal level. And from a business level, open-up the conversation about where this currency could fit into your strategy to diversify your market’s opportunity for spending.
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