The purpose of this series is to introduce the vast world of cryptocurrency and like digital assets to the newcomer or novice. Each section presents digestible content that develops the reader’s understanding of the crypto market and underlying technology.
What is Crypto?
At Coinbusters we like to refer to cryptocurrency and all the similar technologies and assets collectively as “crypto”. Crypto can also be referred to as a digital asset. The most famous example of crypto is Bitcoin and the BTC token. When investing in Bitcoin, investors are not only investing in blockchain technology, but in the concept of a network effect rather than a company. The Bitcoin network is estimated to have over 10,000 validators or miners that bring the Bitcoin into existence through computer-based transactions. What makes this idea so powerful is that no single owner of a Bank or large company can control the direction of the network and its community effect.
Bitcoin is the largest network in crypto today. Since Bitcoin is unable to be controlled, it brings value to the community through decentralization. Bitcoin has created a worldwide monetary system that is trustless, and immutable. Since Bitcoin can be sent peer to peer, and no bank checks need to be completed prior to the transaction, Bitcoin is considered trustless. Bitcoin is immutable because the ledger created with each transaction cannot be modified, and it can only print forward, never backward. It is this blockchain technology that makes Bitcoin so powerful, proof of ownership can be expressed on chain for all to see, this is why crypto hackers are almost always caught, investigators can see the permanent history of Bitcoin at any time.
Bitcoin is just one crypto asset. What started with Bitcoin has evolved into a much larger market with thousands of assets and networks, each with their own take on the technology. Ethereum for instance has a similar network effect, but its purpose is to bring about the third iteration of the internet. Ethereum can be viewed as the gasoline of the new internet, ETH will be needed for transactions on new age applications and beyond. Ethereum is powerful because it has a history of security, similar immutability to Bitcoin, trustless features, and more.
Ethereum investors can relate this investment to investing in a technology company that has become a network and community through decentralization. Ethereum has thousands of validators much like Bitcoin, these validators double check transactions for sending/receiving funds, participating in decentralized finance, gaming, proof of ownership and many other contracts.
With the two main networks explained in brief, why has crypto become so popular? Crypto is the first opportunity for communities to be part of a network that provides value to all parties. Imagine your neighborhood has a bank that is run by each community member as a democracy. Certainly, borrowed funds would have an attractive APR, credit would not be predatory, and the greater good would be the focus. Issues that arise would be voted on during town hall, and everyone would have their voice heard. This is crypto.
Crypto takes the Google, Amazon, Facebook, Bank of America, and other large, greedy companies and provides the superior technology with none of the hassle. If you want to send money to your relative across seas you need to pay a large fee, possibly wait for a week for the funds to get to the account, and possibly face frozen accounts, inflation price changes, and other difficulties. Crypto users today can send funds between crypto wallets with none of this hassle, nearly instantly. This process alone brings value to Bitcoin and Ethereum.
With the latest integration adding the lightning network and Bitcoin to twitter, users can send their native currency to family and friends from all nations. The lightning network uses Bitcoin as the intermediary, in a feeless manner, and then allows the receiver to withdraw in their own respective currency. For example, I could send 100$ of USD as BTC to my friend in the UK, he could then withdraw it for 100 USD of Euros on the other side of the world.
Crypto aims to bring this concept of community, rewarding the network, and governance to all areas of life. Crypto has jumped into borrowing and lending through decentralized finance. Crypto has invaded the gaming market bringing communities together for a gamified future where users have a voice. It has brought about network effects for internet connections (Helium Network), on chain betting for sports (Polygon Network), immutable storage of history and news (Arweave Network) and beyond.
Easiest Way to get Exposure
If any of the above piques your interest, you are probably wondering how to get involved. It is simple, many exchanges offer crypto assets for investors. In America we have Coinbase, Gemini, Binance US, Blockfi, Kraken and more. Signing up for these exchanges is just like signing up for Vanguard, Robinhood, or Ameritrade. They will ask for some basic information to verify you are who you say you are (this is standard), and then its off to the races. At Coinbusters we are not financial advisors, we aim to provide crypto education and research/analytics. We do believe the easiest way to get started involves Bitcoin and or Ethereum, since they are the two most likely to continue to succeed for years to come. Our research suggests that both assets will vastly outperform the stock market average returns. Therefore, it is likely that investors who have some exposure will do quite well. Please check out our other articles for more information on all that is crypto. If you want to get involved but are hesitant, fill out our crypto managed accounts form for support. Part II of the series is located [right here]. Thank you for reading.
1 – https://www.newyorkfed.org/medialibrary/Microsites/fxc/files/2021/octfxsurvey2021.pdf
*Note some of the research presented here was taken from some great discussion/threads on social media