Hi there!
Make no mistake. This will probably be the most important thing you read this month, year, decade, even lifetime.
Why should you bother to listen to me? I worked for a large bank during the global financial crisis, I know how bank executives think and operate. I have had a life long passion for information technology and to top it off I am completing a bachelor's degree in psychology. This combination of education and experience gives me a unique perspective in the crypto world, I will elaborate on why these three things are a great combination later.
For now, this article will give you an understanding on why crypto currencies and blockchain technology are as revolutionary to money as the internet was for communication.
Please note: You do not need to purchase anything off me, you do not have to sign up to anything with me. I am selling nothing. I trade crypto currencies myself and have turned 2.5k into 30k in the space of about 4 months and I am not stopping there. The opportunity you have right now is to be part of the biggest redistribution of wealth since capitalism.
By now, if you have not heard about bitcoin, you must have been living under a rock for at least the end of 2017. I only started looking into crypto currencies around July 2017 after realising that this thing called bitcoin that I had heard about a few years ago was all of a sudden worth a couple of thousand dollars. The last time I had checked it was around a hundred dollars and I had dismissed it as being a fad. Realising that particular missed opportunity I decided to investigate and see what all the fuss was about and boy was i surprised to learn what is actually going on in this space!
The short version is this: at the minimum, crypto currencies are disrupting the ENTIRE worldwide financial services industry. Do you understand what that means??? It means a 20 TRILLION dollar industry is up for grabs. That is 20 000 BILLION dollars compared to the tiny 700 billion dollars of value in the crypto world. This puts crypto currencies at 3.5% of what their potential market will be. And that is just one industry.
Do you think a 20 trillion dollar industry will just roll over and die? Of course not! Banks are already trying to cozy up to legislators in order to try to stop cryptos from being viable, but here is the thing... they CAN'T. The reason they can't is because of the underlying blockchain technology. In a nutshell, think of a bank's computer network. They will have a few main servers which run their transactions along with some backup servers. These computers keep a centralised ledger of transactions to make sure money is not double spent and everything is kept in order. Should these centralised servers be compromised, their entire financial record can be edited or lost entirely. Imagine then if instead of centrally run ledgers, banks kept an encrypted ledger that is distributed across the entire world on everyday people's computers. Imagine that each computer was constantly validating transactions and maintaining the exact same ledger. The system would be unhackable and would have zero downtime. Meaning as long as you have access to the internet, you have access to your money. Now imagine that instead of needing to transact via your bank whether in the branch or with internet banking, you simply log into your wallet and send money to a friends wallet, this is what we call peer to peer (p2p) transactions. No banks or governments can put holds on your account, take money from it or close it without your knowledge, nor can they tell you what you can or can not do with your money.
Are you beginning to see why that might be important? This is just the tip of the iceberg. As an analogy, I like to remind people that banks vs cryptos is almost exactly the same as Blockbuster vs Netflix.
"But won't that mean criminals will use this for illicit purposes? Won't someone think of the children?!?!" - yes, of course they would, just like they currently do with cash. Unlike cash, most crypto currencies are actually much more traceable than cash by virtue of the fact that every computer on the network holds the entire history of transactions on it. If you know a person's address (think of this like an account number) then you can see every amount they have sent and which address you have sent and received money from. Some cryptos have private ledgers though with other features such as stealth addresses, meaning they can not be tracked.
The first generation...
While Bitcoin was the first on the block (pun intended), it is actually rather useless by today's standards. It broke the mould and showed us what was possible, but it will not be the currency of the future. Bitcoin allowed users to own a wallet address with what is called a private key (a long convoluted password that would take our most powerful computers a stupid amount of millennia to hack). People could send and receive bitcoin, but first it had to be mined. Mining essentially is being rewarded coins for solving very complicated mathematical problems (video) and in doing so, securing the network and validating transactions as being authentic. Bigger and better coins were created off the same principles as Bitcoin, such as Dash (supposedly as anonymous as giving someone cash) but then there was a push toward making blockchains have even more capabilities.
Enter the second generation...
Ethereum brought about a new system that allowed for what is called "Smart contracts". That is to say being able to write a contract on the blockchain that executes as long as certain conditions are met that can be validated electronically from neutral sources. For example, if I wanted to pay employees for the distance they travel driving a promotional vehicle for my business, I could set up a smart contract that pays them a certain amount once they reach 50km driven. This smart contact can then be implemented to verify data from a business GPS and once that 50km mark is reached the smart contract executes without requiring any intervention and they get paid. On the surface that may not seem like a big deal until we learn about having the ability to create your own tokens.
Tokens are essentially placeholders you can create on the Ethereum blockchain (there are other platforms with smart contracts too) and you can then issue them out via smart contract based on requirements you set. This inadvertently lead to the formation of what is called Initial Coin Offerings (ICOs) which can be best understood as a mishmash of crowdfunding and floating a company on the stock exchange with an IPO. What this means is, lets say I wanted to start a company and needed revenue. I can create a platform that has a token economy that makes people want to buy and spend the token. I then run an ICO with a smart contract that says for every Ethereum you send me, you get 1000 tokens. Lots of people buy the tokens with Ethereum which I can then use or sell for capital and continue forth with the project. You can probably imagine this can be a rather dangerous territory since it is unregulated, however if you know what to look for you can stand to make an awful lot of profit from these as demand is usually high and the supply is usually very limited, especially if there are large swathes of investors who are not allowed to participate due to local laws such as US citizens. Because they will have to buy off exchanges when the token is eventually listed, the price has a tendency to jump quite high if the project is solid. I will have more information on another post to help you to understand ICO opportunities, what to look for and what to avoid, but for now just consider them to be high risk, high reward and usually require a little bit of knowledge about how smart contracts work. More on this later though.
Enter the third generation...
Now we are talking! This is where the real fun begins. The problem with projects like Ethereum is that the blockchain has already been deployed, it is very difficult to make edits to protocols on something that can not be paused. For this reason we have projects like Cardano (ADA), which is one of my favourites. The structure of Cardano is more complicated than I would like for a beginners guide to cryptos, but essentially it plans to make a range of processes that will make integration of its currency into the corporate world seemless while maintaining the vision of providing a way for people anywhere with internet access to be their own bank. It is also the first cryptocurrency to implement a peer review process for all their research, this fact alone gives them credibility above all other teams.
So what does the future hold?
First and foremost, a lot of teething problems. These platforms were mostly designed by IT cryptography geniuses, not necessarily business experts, so expect a lot more development to occur linking these technologies with every day business use. Expect some banks and other financial services giants to try and stop cryptos (they cant), watch other smarter banks try and adapt to the flourishing technology and save themselves from the fate of those that don't. Expect entire countries to struggle figuring out how to handle taxation and securities regulations. Some may go as far as attempt to ban them (they can't really for the savvy investor), others may go all out in embracing them such as Estonia. Hell, even Venezuela has issued their own crypto in order to save the country from its downward economic spiral.
Expect GROWTH you have not seen before as cryptos become mainstream and demand shoots through the roof.
Expect exchanges to not be able to cope with demand as more people jump on board this gravy train (it has already happened with a few exchanges) so even if you do not feel now is the right time to enter the market, do yourself a favour and at least sign up to the exchanges below, it costs you nothing and it is better having it there ready to go than being ready later on and having to wait 2 weeks for account validation. Believe me, I have seen what that struggle looks like.
Coinspot: Fiat gateway to be able to buy cryptos with Australian dollars
Cryptopia: Fiat gateway for New Zealand dollars
Kucoin: No fiat gateway yet, but a great site for setting buy and sell orders as well as seeing trading charts
Remember, these are just the early days, this is disrupting the entire economic system we have known for generations. Best to get in now while you still can.
Stay tuned for the next instalment! Happy trading :)
Regards,
The Pantheon