People are getting rich off this weird digital money thing called bitcoin. Think it’s too late to do the same? Think again! There’s still plenty of money to be made in cryptocurrency and I’m going to tell you what all the fuss is about.
Bitcoin was the first of over a thousand cryptocurrencies that currently exist today. A cryptocurrency is a digital currency (think of online banking) that uses cryptography (basically maths equations) to function, without a central bank managing transaction and keeping track of who owns how much. It cuts out the middleman (the banks) by using a type of database called a blockchain that prevents information being easily removed once it has been added.
A BIT OF HISTORY
In 2008, a person by the pseudonym of Satoshi Nakamoto published a whitepaper called Bitcoin: A Peer-to-Peer Electronic Cash System. The open source software was released online the next year. Satoshi has since disappeared and stepped back from all involvement with the currency. His identity is still unknown and it’s estimated that he ‘mined’ the first million coins. If he still even has a tenth of that today he’s a billionaire, so it makes sense if he’s trying to keep his head down.
At the beginning, bitcoin was very cheap, with people negotiating the value how they saw fit. Before it gained parity with the US dollar, someone swapped 10,000 BTC for two Papa John’s pizzas. If only they had known the future value, at the time of writing it would have been worth around £120 million (not to mention that Papa John’s is trash pizza).
HOW IT WORKS (BRIEFLY)
When you do a normal transfer of money the bank has to confirm that transaction by deducting the money from your account and crediting the account of the recipient; the blockchain removes the need for this and thus makes it decentralised. If your bank can’t process transactions then you can’t get paid, but a decentralised currency doesn’t have this problem. The bitcoin network basically manages itself meaning it can’t go down. The transactions are solved by people on the network solving hashing functions (called mining) on computers, who get paid in small amounts of the cryptocurrency for their efforts, this securely validates transactions for everyone on the network.
This mining also solves an issue called the double-spending problem. If I physically give you £10 then there’s no question of where that money is. If I send you that money via a bank transfer, the bank is the authority on who has that money. Until the blockchain was invented, a digital token could be spent more than once because it could be copied like an mp3.
“The moral of the story applies not only to crypto but to most things in life: if it sounds too good to be true then it probably is, dumbass.”
As the value of bitcoin increased, so did interest in the technology behind it. This has since spawned thousands of new usages for the blockchain and cryptocurrencies, with the latter being released on shiny unregulated trading sites. Some are great and some are atrocious scams, with the startup money coming from Initial Coin Offerings (ICOs).
ICOs essentially let people crowd-fund new cryptocurrencies/technologies in a coin pre-sale. They’re all the rage at the moment but are even riskier than putting money into a shitty Kickstarter. A company will make a fancy new product that will ‘revolutionise an industry’ with the blockchain and a new cryptocurrency. To raise the money they’ll let people buy some of their new cryptocurrency at a lower price. The company gets startup money and people get currency of a potentially great new technology before the value has exploded. ICOs have been used to fund some great projects but have also been used by trash like dentacoin. That’s right, a cryptocurrency for fucking dentists. People have realised that crypto is so hot that idiots will throw large amounts of money into it without doing any research, the perfect environment for scams. Many people buy huge amounts of tokens in ICOs without that company even has shown a prototype of their app/service.
It’s worth pointing out that most people don’t use the currency for what it’s intended for. Ether is meant to be used as a currency on the ethereum network, but I buy and sell it just like stock. I’ve never used an app using the network, but that’s not how you make all this money! However, coins like bitcoin, litecoin, ripple and many others were just intended to be used as a currency.
“Crypto is like stocks on steroids.”
Bitconnect was a perfect example of shitheads extracting idiots’ money. This service allowed people to buy bitconnect tokens (BCC) by depositing bitcoin and being guaranteed 91.25% profit each year with their trading algorithm. Many people pointed out that it resembled a standard pyramid-scheme, with huge incentives to refer friends and ridiculous amounts of potential profit with no risk. Turns out they were right and the whole thing was a big steaming pile of shit. When the news broke the value of the coin plummeted as crypto is only worth what another person is willing to buy it off you for. In this case, bullshit equals just around $4. It’s safe to assume the creators sold all their BCC and fucked off into the sunset. Hilariously in the days after its collapse, a lot of the top posts in the bitconnect subreddit were about legal action or suicide hotlines. My favourite had the title “Good luck trying to sue thin air retards” – brutal but makes a good point of how easy it is to scam idiots with crypto, there’s no regulation or bank to hold your hand!
The moral of the story applies not only to crypto but to most things in life: if it sounds too good to be true then it probably is, dumbass. If someone found a way of doubling an investment, why would they need you in the first place?
WHERE TO GO FROM HERE
Crypto is like stocks on steroids. It’s stressful and you end up checking charts 100 times a day. I’ve made a lot of money in long-term investments and day trading, but I’ve also lost a bit (luckily much less than I’ve gained). A lot of economic “experts” persist that it’s a bubble, all the while nerds across the globe are becoming millionaires. I’m not saying that it’s crash-proof, but for the next few years, I think there’s a fair bit of money to be made if you play it smart.
Hopefully, the prices will settle down eventually and stabilise, allowing the technology to be used properly. No one wants to be paid their salary in bitcoin, for example, imagine if your wages lost 30% of their value overnight!
The best advice I can give is to do your research, don’t panic buy, don’t panic sell and only risk money you’re ready to lose. If you don’t want to trade you can still learn more, go to coinmarketcap.com and check out all the new and interesting tech that’s about to shake up a lot of industries.
Oh, and don’t come blaming me if HSBC breaks your cunting legs because you blew all their money on stupid fucking dentacoin.