The explosive growth of Bitcoin and other digital tokens has prompted natural curiosity. Is this the future? Will it just be a flash in the pan? A lot of people are asking these questions and seeking answers. While there are plenty of articles about cryptocurrencies, few explore their pros and cons. Let’s take a closer look at this new form of digital money and its implications for investors, businesses and society as a whole.
What Is Crypto Currency?
Crypto currencies are digital tokens that use encryption technology to secure transactions and control the creation of additional units. They use decentralized computer networks instead of a central authority such as a government or financial institution. Bitcoin was the first crypto currency, created in 2009. It’s now traded on exchanges around the world, with a total market cap of approximately $380 billion and a daily trading volume of about $30 billion. A crypto currency is not a type of company, product or service that you might otherwise see in an investment portfolio. But as a form of currency, it is traded and transacted like stocks, bonds and commodities.
How Does it Work?
Crypto tokens are created and traded on a decentralized computer network known as a “blockchain.” A blockchain is a public ledger that records digital transactions, enabling individuals and businesses to exchange and/or create digital tokens. Crypto tokens represent a unit of value and are issued on a blockchain network as a form of payment, like a digital dollar bill. The tokens are created and exchanged using “mining,” which is a collection of computing and data processing tasks that run on a blockchain network. The miners receive tokens as payment, in a process similar to how government-backed currencies are created by a central bank. Crypto tokens can be traded, bought and sold online or in person, like shares of stock or commodities. They can also be accepted as payment for goods and services.
Benefits of Crypto Currency
The benefits of crypto currency include low transaction costs, quick settlement times and privacy.
Decentralized: In this system, centralized intermediaries, such as banks and monetary institutions, are not needed to enforce trust and control transactions between two parties. Thus, a system with cryptocurrencies eliminates the possibility of a single point of failure, such as a large bank, triggering a series of crises around the world, such as the one in 2008 due to the failure of institutions in the United States.
Low transaction costs: Unlike traditional currencies, which are created and distributed by central banks, crypto tokens are created and traded by private corporations and individuals. Because they don’t require central bank printing and distribution costs, they have low transaction costs. The Bitcoin network, for example, charges a flat fee of about $0.10 per transaction. Credit card networks, by contrast, typically charge fees of 2% to 4% per transaction.
Quick settlement times: Crypto transactions are settled instantly, which is not the case for credit card transactions, bank wires or other types of money transfers. Hedge funds, for example, are increasingly accepting crypto tokens for investment. If an investor wants to sell his or her shares, the transaction is not only instantaneous but also borderless.
Privacy: Crypto transactions are typically anonymous, protecting the identity of the parties involved.
Disadvantages of Crypto Currency
While crypto currency has many benefits, it also has some significant limitations and challenges that need to be considered. Chief among them are high volatility, lack of regulation and security breaches.
High volatility: The value of crypto tokens fluctuates wildly, sometimes on a daily basis.
Lack of regulation: Crypto tokens are not currently regulated by any government, meaning that fraudsters can operate without much risk of being caught or punished. Much like the internet in its early days, crypto networks are not yet proven to be secure and reliable enough to be used by businesses and governments.
Security breaches: The distributed nature of blockchains means that the networks are very difficult to shut down. If a breach does occur, however, it is very difficult to track down the perpetrator or to shut down the network.
Scams: Since the beginning of 2018, the cryptocurrency market has been rife with scams and fraudulent activities. Some of these activities include Initial Coin Offerings (ICOs) that have turned out to be scams, Ponzi schemes, and phishing attacks. This has led to a decline in the trust of cryptocurrencies, and many investors have lost a significant amount of money.
In order to protect yourself from these scams, it is important to be aware of them and to understand how they work. This article will provide you with links to brief overviews of some of the most common cryptocurrency scams, so that you can be aware of them and avoid them in the future.
5. ICO Scams
Should You Buy and Hold?
As indicated above, crypto tokens are very volatile, meaning that their price can change significantly from one day to the next. It’s also a relatively new market with very little to no regulation and is rampant with scams. This can scare away the average stock investor. For those who believe in crypto though, and know how to stay safe in the space, they have made a great deal of money by holding the right tokens long term. Don’t fall for hype/shit coins, research projects heavily and invest in things you believe in. Its also important to stay aware of current market trends and timing, buy low sell high, and repeat. Make sure your portfolio is diversified. Never invest money your not willing to lose.
The Bottom Line
Crypto currency is a new form of digital money that can be traded, bought and sold like stocks or commodities. It is created and traded using blockchain technology, a decentralized computer network that is designed for privacy, security and reliability. Many enthusiasts claim it is the future. Crypto tokens have many benefits, including low transaction costs, quick settlement times and privacy. They also have some significant limitations and challenges, including high volatility, lack of regulation and security breaches. If you are safe it can be lucrative. Many are taking advantage of the opportunity crypto and web 3 is presenting to them and making fortunes. You should too. This is literally a new industry, soon the Facebooks and amazons of this industry will emerge. If you could go back and invest in Amazon in the early days would you? That is the opportunity your getting here, of course you have to pick the right company, easier said than done.
Getting Started In Crypto: All the Tools You Need
Now that you’ve read, “The Pros and Cons of Crypto Currency: What You Need to Know”, your ready for the next stop on your adventure. Which is gathering all the apps and websites you will need to be able to trade and hold crypto in the first place.
There’s so many different websites and tools out there, I could never mention them all. I will mention the most popular and the ones that I use.
Exchanges are where you can buy crypto, I use quite a few just in case I need to get a coin early before its listed on more popular exchanges, they all work essentially the same in functionality but you should research these exchanges heavily before you use them, just so you understand what they are about, where they are based and what laws they operate under.
https://www.kucoin.com/ – Exchange outside the US, doesn’t report to IRS.
https://www.coinbase.com/ – Popular exchange.
https://robinhood.com/ – A very simple app, easiest way to get started, but some controversy surrounding it, they froze trading on certain crypto/stocks for what they deemed “manipulation”, many in the space now are adamant against using the platform, I still do for smaller quicker plays.
Crypto.com – Popular Exchange.
https://www.binance.us/ – Big Exchange. Controversy surrounding it though.
https://www.bitmart.com/ – Nice Exchange Ive had to use a few times.
Wallets are where you will store your crypto currencies. Its good practice to NOT let your crypto live on exchanges, your going to want to transfer it to a separate dedicated wallet as it adds a layer of protection from attacks/hacks on exchanges. There’s two types of wallets, hot and cold wallets.
Hot Wallet: a dedicated crypto wallet, which is always connected to the internet to facilitate fast transfers.
Hot Wallet: Trust Wallet
Cold Wallet: a dedicated crypto wallet, which is kept offline and encrypted to facilitate maximum security from any crypto related threats.
Cold Wallet: Ledger Nano X
Analysis & Research Sites
CyberWorkz – Curated Dashboard of most popular analysis sites, widgets and resources. Including all the links found on this page.
https://www.investopedia.com/ – Learn about Investing and Technical Analysis.
Youtubers To Follow
https://www.youtube.com/c/MaxMaher – Max Maher, imho the best crypto creator you will find, incredibly honest, transparent, and has an awesome platform you can join to get his calls, check him out. He has great educational and topic discussion videos. Explore his past videos, search “technical analysis” and watch those videos.
https://www.youtube.com/c/MichaelWhitman – Michael Whitman, This guy is one of the first i stumbled upon, he has some good knowledge and helped me understand technical analysis.
https://www.youtube.com/c/AlexBeckersChannel – Alex Becker, I actually ran into this guy a long time ago for marketing and drop shipping, so it was crazy to see him after all this time in a new space, it was pretty cool. Also I like his whole style. Watch a few of his videos and you get what I mean lol.