I created the below presentation to try and explain the basics of Bitcoin and Cryptos to a family friend who knows pretty much nothing about Crypto-currency but is interested in it as an investment. I tried to make it as balanced and informative as possible without being overly persuasive... it's his own money at the end of the day.
Here's me !
A SHORT INTRODUCTION TO CRYPTOCURRENCY FOR THE ABSOLUTE BEGINNER
Now, I have oversimplified some aspects to make the presentation accessible to an absolute beginner. But I would love to hear back from the community any ways i could make the presentation more accurate without sacrificing accessibility. I'd love to hear anyway i could improve this presentation.
( Also check out my website! i make psychedelic collage art https://atticustoomuchstat.wixsite.com/mysite-2 .. Here is a sample of my work )
AN INTRODUCTION TO CRYPTOCURRENCY.
Hello. I am making you this presentation because you have expressed interest in Bitcoin. The primary reason I want to tell you about it is not for any personal gain but because I hate seeing such an amazing opportunity go to waste. I think that Bitcoin and the technology behind it will be the backbone of how the economy and internet of the future is run.. I think that an investment in blockchain technology is the single greatest way that a normal person can take control of their assests and build for the future in a way that was previously only an option for the top 1% of earners who have tens of thousands to invest in the stock market... this is my personal emotional bias.. but i will do my utmost to present to you a fair and balanced rundown of the technology, it's past, the potential risks and future prospects for bitcoin and similar platforms.
WHAT IS BITCOIN?
If asked this question by the uninitiated, what it really translates to is "What is the Blockchain." Bitcoin has become the poster-coin of blockchain technology, it was the first block-chain currency and it's most successful and renowned proponent - which is why it has become more-or-less synonymous with the technology. But what is it?
To describe Blockchain in a sentence - it is the internet of transactions. Money is only one of it's potential uses but It is the natural next step in the progression of money for the internet era.
Below I will attempt to explain the technology as consisely as i can. However, it took me a while to fully understand it and I will link a video for you to watch that could explain it better through visual aid. This will be the most technical part of the presentation so don't worry if you want to return to it later after you learn more about the product it'self.
Blockcain is essentially a decentralised form of record keeping for each payment. When you make a payment on paypal or through bank-transfer each payment must go through the "Middle-man" of the centralised institutions who posses a ledger of every payment that goes through them. Not only do these institutions take a cut, but we also must put absolute trust into them with our money... somtimes unwisely as banks have often betrayed their customers through "double spending". Bitcoin and other blockchain currencies cut out these middle men! This is done through The Block Chain. Every bitcoin payment in existance holds data, a unique fingerprint that leaves a mark for every transaction that it has been through in a serious of chronological "blocks". The ledger recording every payment is not held by a centralised body but within an open network that is accessable to all. When somone makes a payment it must be approved by a network of computer "nodes".. anyone can lend their computer as a node if they want to and there are financial benefits to allowing your computer to power to these essential processes (A person who does this is called a Bitcoin-Miner). Every payment is sent through the network of millions of node-computers, analysising the data in a process of collective book-keeping through the internet cloudspace. This book keeping data is distributed across in a single digital ledger - this ledger is "The blockchain". On the Basis of pioneering mathematical and technological principals all transactions are similtaniusly and automatically agreed by every node in the network. If anyone tries to corrupt a transaction the nodes will not arrive at a consensus and will refuse to incorporate the transaction in the blockchain. So all transactions are public and everyone of the millions of nodes can confirm that a transaction has occured on date x at time Y. It is almost like there is a notory present at every transaction... in fact millions of noteries. The block-chain is a shared single source of truth that cannot be corrupted at a single point... either through the greed of any central authority or through the crimes of an opportunist, as the entire network would immediately shut down the threat
BITCOIN VS TRADITIONAL CURRENCY. PROS AND CONS
PROS
INFLATION
WITH traditional currency there is the issue of inflation. Governments irresponsibly print more and more money to help deal with their countries debt. Bitcoin is a finite commodity like gold meaning there will only ever be a certain amount of it in the circulation ever... why? Because it is designed to resist inflation and increase in value, rather then decrease. There are only 21 Million bitcoins that will ever be in existence. When bitcoin reaches the point of scarcity the price will undoubtedly go up... some say by a great deal.
CONTROL AND LENDING
Keeping your money in a traditional bank you are consenting to your own money being used in lending and investment schemes by the bank and you do not profit from your own money being used in this way. Often times the bank will not even hold your actual money and simply rely on the assumption that they hold enough and hope that too many of their clients wont ask for a withdrawal all at once . With bitcoin if you do choose to consent to your money being lent to other parties, you can do so on your own terms and profit from it through peer to peer lending schemes on the blockchain. This is a great way of having access to your funds without having to withdraw money from your investment.
CONS.
Unpredictable - Although traditional currency is decreasing in value...at least it is consistent! Bitcoin may be steadily on the way up but can leap up and down by 1% or 2% everyday. The future is an unwritten book for bitcoin and who knows what could happen... 1 BTC could be worth millions or it could be worth nothing. That is why it is important to have a good exit strategy and withdraw income at good exit points... It is important to watch the value of your investment daily as a devastating loss can only feasibly occur through negligence... this is because, although in the realm of traditional investment, bitcoin would be considered volitile... it has matured passed its early stages of extreme volatility and is supported by a 31 Billion dollar market-cap and massive daily volume. When ever the value of bitcoin decreases its price is propped back up by new investors who see a lower price as a bargain and a good entry point - resulting in the steady climb we have seen in in recent. years.
Will Government Sanctions Damage Bitcoin?
Governments do not officially recognize Bitcoin as a currency... and why would they? it undermines the system that is already in place. The truth is that it is undeniably a more efficient financial system then traditional currency ... no one is denying this. But how will governments respond? Will they try and take it down through control? It is a possibility, but what we are already seeing is two things. Government backed banks are already jumping into bed with crypto currencies and even developing their own competing crypto currency. Many people within Amercan government also vocally support Bitcoin. Bitcoin would be incredibly difficult to ban-outright due to the decentralized nature of the blockchain. Sanctions could well hinder the ascent of BTC, people could get scared by threats resulting in a lower value. We don't know what could happen, but it looks like the current tactic being implemented by dominant financial leaders of the world is to compete with BTC rather then destroy it. Bitcoin will undoubtedly encounter adversary if it is to become ubiquitous currency, but this is something investors accept as a necessary hurdle for the technology to prove it's strength
Is Bitcoin in a Bubble?
You could say Bitcoin has been in several bubbles ... which means it's not really in a bubble seeing as everytime the bubble "pops" (a steep decline in value) it bounces back with increased value. This has happened several times, however every time this has happened the decline has gotten less and less due to increased volume. This is not something to ignore. Currently we are at a point of extreme growth so it would be an educated assumption to believe that a pull back will occur at some point in the coming months.
WHY INVEST IN BITCOIN?
Blockchain is the natural progression of money for the internet era. But will bitcoin be the king of this new frontier? perhaps, perhaps not... it could well be overtaken by better technology, tech that already exists. But currently it is by far the most widely used and closest to mass adoption. What I would say is that there is a great deal of growth for it on the horizon even if it doesn't pan out 20-30 years from now. 12 months ago 1 btc was worth $500 today it is worth $4200. In the past month alone it has gone up from 2500 to $4200 and raising steadily by the day. But is the value going up too quickly? is this a bubble that will burst? THere are arguments for this and there are also way you can protect yourself in the event of a crash. Even if this is a bubble that will eventually crash , there is still a great deal of money to be made from price increase before it eventually pulls back. THere are also experts who deny that the bubble analogy would apply for bitcoin. For a start a bubble forms grows quickly and does not have the healthy growth and pullbacks that can be seen in the bitcoin price charts. Some notable experts are John McCaffee who believes that Bitcoin will be worth 500 000 by 2020 and Bill Gates says it will eventually be worth 200 times more than gold, Richard Branson has spoken in support of the currency and will be accepting BTC for Virgin Galactic. However some notables such a warren buffet "does not believe it to be currency" and Elon Musk believes it to interesting technology but does not currently own any. Mark Cuban also began as a crypto-skeptic but is now working to launch his own crypto currency.
INVESTMENT STRATEGY.
"Buy When there is blood in the streets" is the old motto. in other words "Buy Low, Sell High"... Bitcoin periodically goes through healthy pullbacks and then climbs up even further. If you want to invest in bitcoin then keeping an eye on the price is the best way to go and buy when everyone else is selling it off for cheap. Bitcoin no longer has dramatic crashes like it did three or four years ago as other people prop up it's value by buying at the cheaper price. It could be a good option to wait for a larger dip, However, at the moment there are some key events on the horizon which will increase the value of bitcoin as a short term investment.. THe calculation one must make is...will i get it for cheaper later? if i invest now, could my value go down before it bounces back up? Spreading out your investment could be a good way to prepare for all eventualities. For example If you put 25% of your overall investment in now and the price keeps going up and only marginally pulling back later down the line then at least you secured SOME of your investment at the lower price at that wouldn't be available in the future. There are array of different options that i could go over with you to keep all bases covered. However if a pull back happens in the near future YOU MUST ACT QUICKLY as such a buying opportunity wont last more than a day or so.
It is also important that, during the climate of such bullish growth that you are prepared for a large pullback... potentially even a crash. THis is why it is important to check the charts daily... i already do so I'm happy to keep you up to date with the latest news and prices. Having a good exit strategy is crucial when you start to see a pullback happening and alerts can be sent to your phone automatically warning you that you need to bail out to minimize any loss. If you do this then even an historical crash can be seen through with minimal loss and overall net gain. This being said, as a long term invester, i would say it is more advisable to ride out any dips and drops as in the past we have seen many dips in price whilst on a macro scale we have seen a level of growth unparalleled by any traditional stocks/shares investment. In reality, A pullback is really just an opportunity to buy more bitcoin at a cheaper price as historically this has shown to be a profitable move.
OTHER CRYPTOCURRENCIES AND DIVERSIFICATION.
As i said earlier, Bitcoin may be king of the hill now... but will it be overtaken by some of it's many competitors? There are THOUSANDS of different cryptocurrency on the market. Many of these tokens seek to improve on bitcoins design and many use blockchain to accomplish new goals and solve different problems. Out of all of the cyrptocurrencies, bitcoin is the most tried and tested and has shown the most sustainable rate of growth aswell as tenacious recovery ability. However, bitcoin has been around for 7 years. Ethereum (the second largest cryptocurrency) has only been around for 2 years, and it has shown outstanding growth in this time. Investing in Ethereum now could well be the equivalent to investing in bitcoin five years ago. I will now go through a few of the leading cryptocurrencies and then explain why most investers still recommend still adding bitcoin to your portofolio, despite it's price.
ETHEREUM.
The second most adopted cryptocurrency.. Ethereum's value is growing steadily. It had a crash last year but is now nearing a return to it's all-time highes. THe pullback has been attributed to the fact that people got too excited about it and it grew too fast too quickly, and after an iinvestment grows as quickly as it did then this sort of pullback would be expected. Currently Etheriums growth is far more sustainable and due to it's large market-cap and rate of adoption i would put it as the second most reliable investment with gains potentially greater then that of bitcoin. The techonology behind ethereum is really what make it special. Ethereum takes blockchain technology one step further then bitcoin. Wheras bitcoin uses blockchain for currency, Ethereum's team discovered you can create blockchains of data/information and interaction. Decentralised apps can be built on ethereum and "Ether" contains "gas" which powers computing power to run programming and applications through a decentralised blockcahin network
LITECOIN
Litecoin is marketed as the silver to bitcoin's gold however, it actually has superior technology. It is a blockchain currency like bitcoin but has cheaper transaction fees and much faster. Litcoin can also handle more volume then the bitcoin network. It is more viable for smaller transaction. It has been around since 2011 and shown steady growth so has potential as a long term investment do to it's staying power and brand recognition.
DASH
Dash - short for Digital Cash - is much like bitcoin however has a privacy option and Instintatinous transactions . It started in 2014 and is growing i popularity . It was one of the few cryptocurrencies to survive the 2014 era (an era riddled with failures and scam coins). It has become the fastest growing alt-coin and is the most talked coin on "bitcoinTalk" - the largest crypto community social media page.
MONERO
Monero is a private and untraceable cryptocurrency. It has dealt with the scaling issues of block sizes that have effected bitcoin and is thus scalable for growth. It has recently had an excellent month for growth .
IOTA .
Is a relatively new cryptocurrency and has only recently got mass attention after being put on the mass market through Bitfinex exchange. In the short time it has been in the public eye it has already grown to be one of the top 10 cryptocurrencies on the market. It's team, marketing and it's support all show the makings of a currency with a bright future ahead. Then again , things are more volatile at earlyer stages. However it is currently priced at under a dollar and the potential for growth is extraordinary, especially considering its developments to blockchain technology. Iota has fast transactions and is the only currency with ZERO fees. It does not actually use the block-chain. it has developed its own similar system called "The Tangle" . THis is like the blockchain but instead of outside nodes verifying transactions, for every transaction you send you also verify two more.
NEM. 7th largest. low transaction fees and speedy transactions. it uses a slightly different blockchain to BTC and similar to Dash. no inflation and all coins are already in circualtion meaning 0 inflation and stability. it is also incredibly energy efficient. Also it is somewhat community lead and people with a larger stake in Nem have a greater voice in decision making for the currency. launched in 2015 . traceable. use cases to replace visa and paypal. price :
RIPPLE:
Ripple is a permissioned block chain that allows trusted third parties to move assets onto the blockchain.Banks join the ripple network to transfer funds. Ripple is different from other cryptos in that it is private, run by the banks and centralised. if first appeared in 2012.
THANKS FOR READING. Please let me know of any inaccuracies of improvements you might suggest...I'd greatly appreciate this. Also, please note that this was written a month or two ago, so references to Segwit etc are a bit dated. It's hard to keep up in a market as fast moving as this - but i did my best to cover the key issues for an absolute beginner.