Cryptocurrency as an Investment, What is it?
Recently you may have seen the news, or heard someone mention Bitcoin, blockchain, crytocurrency, alt-coins, etc. You may have also heard them referring to the new class of Crypto-Millionaires and their affinity for purchasing lamborghinis and wondered to yourself, are these viable investments? To make matters more complicated you may have seen the various public opinions on Bitcoin and the like by notable investors including Bill Miller (who proclaimed his fund was more than 50% invested in Bitcoin during the rampant rise which ended December 2017), and on the opposite end Warren Buffet who has proclaimed Bitcoin will almost certainly end badly.
What is Cryptocurrency?
A cryptocurrency is a digital asset designed to work as a currency or medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Bitcoin is the most well known cryptocurrency and the one which originated the current cryptocurrency movement. The founder of Bitcoin is unknown at this point (although certain individuals have previously claimed to be the notorious Satoshi Nakamoto. Cryptocurrencies were believed to have been designed to take away the centralized control of the banking system and came about originally during the last big financial crash (where many thought financial institutions had caused the disaster through reckless and overextended practices aimed at profit making). The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database, functioning as a distributed ledger. This allows transactions to happen without a so called middle man processing the transaction.
Bitcoin was first created in 2009 and since its creation has been joined by hundreds of others which are called alternative or alt-coins. Some of the notable examples of these include Ethereum, Litecoin, Ripple (XRP), and Tron (TRX). Miners are used to process underlying transactions of Bitcoins and alt coins, using computers to process complicated mathematical problems and receiving a small fee for doing so. This financial incentive has continued to bring interest for miners of Bitcoin and other alternative currencies at this time.
What is Blockchain?
Blockchain is the underlying technology which provides validity to each crypto currency and its transactions. A blockchain is an ongoing/growing list of records (blocks) which are linked and secured using secure cryptography. The transactions are permanently recorded as they happen for all to see.Blockchain technology has recently been given much praise by various governmental players around the globe (even those who do not believe in or advocate investing in cryptocurrencies as a form of investment).
What is a Digital Wallet?
A cryptocurrency wallet is a digital wallet (essentially an online wallet as opposed to a traditional physical one) stores the public and private “keys” or “addresses” which can be used to receive or spend the cryptocurrency. It is imperative that you retain and not lose your keys or addresses and store them in a secure place so that you do not lose access to your digital wallet and thus lose your cryptocurrency. In the news, there have been several notable stories of those losing millions in Bitcoin (which they discovered during its meteoric rise in December of 2017 or so).
Is Cryptocurrency a Viable Investment?
This is an individual decision each individual must make for him/herself. However, there are clearly many who believe this will become a more popular trend going forward and is now only in the beginning stages (thus presenting an incredible opportunity to get in on the early stages). There are also many who believe people will eventually lose interest and cryptocurrencies will crash in spectacular fashion. At this point in time, the news reports indicate much interest from speculative hedge funds and the cryptocurrency community which has accepted this and its underlying technology. Additionally, recently the news has reported notable indications from JP Morgan CEO Jamie Dimon, admitting that cryptocurrency causes a concern to their underlying business as they are not properly set up to capitalize on this opportunity. Bank of America is also reported to have indicated a similar concern. This is telling in the sense that these large financial institutions do have an interest in making a profit, and have not been set up in advance of many others to capitalize upon the cryptocurrency market (and to be fair, also likely feel that doing so would potentially cause them great liability and may not be the right thing to do as they may feel it is an extremely speculative investment which unlike a company with underlying assets/profits, has no underlying value should interest in them subside).
How Can I Buy Cryptocurrency?
Just like stocks, there are exchanges which allow for the buying and selling of cryptocurrency. Some of the notable ones include Binance, and Bittrex. These exchanges are extremely popular for trading Bitcoin, and alternative currencies. Additionally, one can purchase Bitcoin, and a few other notable cryptocurrencies from an exchange such as Coinbase (which has rapidly become one of the most popular places to do so). After purchasing Bitcoin or another cryptocurrency from Coinbase, one may transfer the digital currency to an exchange (which lists/trades countless other pairings of cryptocurrency) and exchange from Bitcoin to another such as Tron (TRX) which at this time is becoming a very popular alt-coin (which trades around $.05 at the time of publication of this article). Its founder Justin Sun (Forbes 30 under 30 in a prior year) is a young entrepreneur with connection to Jack Ma, a well known billionaire in China. He has an impressive track record at a young age including the founding and running of Peiwoo an online application with over 10 million users. Overall, it is recommended to never invest/speculate with money you need/cannot afford to lose. This seems to be a good adage when it comes to cryptocurrencies at this point in time, although that being said, it is still an enticing investment in my opinion.