Coined: Intro to Crypto

 Bitcoin has broken $3700 USD in worth and is expected to climb further. It is not just through the roof but it is reaching the moon. This currency has turned people into millionaires since its inception around 2008-2009. Yet, not many people know what Bitcoin really is. And frankly, I wouldn't blame them. A lot of information online is very confusing and complex. The following is an ELI5 (Explain Like I'm 5) version of Cryptocurrencies (mainly focusing on Bitcoin).


WHAT IS A CRYPTOCURRENCY?

Cryptocurrencies are digital cash that are encrypted, allowing for online transactions without involving banks. Essentially, your money will not enter your bank account unless you choose to sell your coin in an exchange.

HOW DOES BITCOIN WORK?

The Block Chain is a public ledger that stores all confirmed transactions with its integrity confirmed by stringent cryptography.

Private Key is a special string of information that each wallet's user has as a signature that approves a trade between wallets. This signature also prevents people from altering the details of the transaction once it is in the Block Chain.

So, when a person starts a transaction with another person, the value is exchanged after authorization by the Private Key and it is put into The Block Chain through a complex process called Mining. 
 

WHAT ARE THE ADVANTAGES OF BITCOIN?

It can be used as money by anyone

In the near future, cryptocurrencies like Bitcoin can be used to buy anything you want, from tech to even your groceries. On the small scale, apps like Wechat have implemented  the WeChat Wallet with vendors in China accepting their version of cryptocurrency. However, with Bitcoin, you can expect this on a global scale as a Bitcoin (or any fraction of it) can be used as a means of trade as long as both parties have a wallet and they don't even need to have the same type of wallet. For example, I personally store my coins in Electrum but someone with Exodus can still trade with me. This is because they both use similar systems. Furthermore, you don't have to know any fancy code to trade, you just need the right QR codes to scan. Hence, this will be the future of mobile payments.

Security

An online currency sounds really unsafe with all the hackings that happen nowadays. However, in the case of Bitcoin, it is encrypted with military grade code and identity theft is an impossibility. Disclaimer: Your coins are safe unless you literally throw them away or give people your info.

Fast International Payments

Most banking systems require some time before your transaction is fully settled. However, with Bitcoin, it is almost instantaneous. Of Course, with faster transaction, the transactional fee will increase but due to the small nature of the fee, it isn't too relevant and you only have to pay a fee when sending (not when receiving).

Identity Protection

There is no credit card number that someone can steal to pretend to be you and steal your money. You are responsible for all your own coins and unless you send out your coins, your coins will stay with you. Furthermore, you can even send money without showing off your identity.

Business Benefits

If you are starting off a business and accept Bitcoin as a valid currency, you are opening yourself up to a larger market that your Fiat-based competitors are not tapping into. Furthermore, bitcoin offers the highest accounting transparency as it is possible to see your transactions. If you are non-profit, you can show your supporters the amount of donations received in real time.

As an investment vehicle

Right now, Bitcoin is still in its infancy. It has plenty of room to grow as the world adopts the currency. If you are looking for an investment that grows really quickly, Bitcoin would be a way to go. Of course, there are still risks to investing, especially with such a volatile currency. However, due to the deflationary nature of the coin, it is expected for the value to continually increase.


RISKS OF BITCOIN

Wallet security

Like in real life, you cannot leave your wallet on the sidewalk and expect no one to steal it. If you openly share sensitive information like your private key, your Bitcoins may be at risk.


Volatile Prices

As with any young market, the prices are extremely volatile. Thus, you should only store money you are willing to lose in your Bitcoin wallet.


Anonymous but not really

Your transactions can be tracked because of the public ledger but the identity of the persons involved remain anonymous. So, unless you disclose your identity, you will remain anonymous.


Irreversible Payments

Any Bitcoin you spend will be sent over and you can't request a refund unless they send you your money back willingly. Thus, if someone scams you out of your money, you can't get it back.


It's still very young

Due to the experimental nature of Bitcoin, the system may be unstable or may have changes in the coming times. However, this doesn't mean that the system is flimsy and can crash at any moment. This means that as more adoption comes, there may be some slight challenges that may need to be addressed.

HOW TO GET STARTED?

Step 1: Choose a Wallet 


There are many wallets out there. There are even hardware wallets which allow you to store your coins physically. It is important to do your own research on which wallet you prefer. 99Bitcoins has made a wonderful list reviewing all the different types of wallets. Personally, I use Electrum but each person has their own favoured coin wallet.

Step 2: Buying Coin

You can buy your coin from a coin exchange. Like wallets, there are many out there. However, I found the most convenient one in Malaysia is Luno. Luno is so easy to access, you can even sign in with your Facebook. In order to buy Bitcoin from Luno, you only need to deposit money into Luno's account. Then, when the transaction is confirmed, Luno will place the respective amount of Bitcoin into the Luno web wallet. Due to my paranoia, instead of leaving it on a web wallet like Luno, I transferred the coin over to my main wallet (Electrum).


Step 3: Selling Coin

You may use your Bitcoins as a means of trade but if you want to turn them back into physical cash, all you have to do is go back to the exchange and buy cash to be deposited into your account. Luno can deposit straight into your bank account should you sell your Bitcoins there.


You may sign up with Luno through my invite link and if you deposit RM250, we both get RM 5 worth of Bitcoin. Click here: https://www.luno.com/invite/EHQT7
 

If you have any further questions about Bitcoin, please leave comments down below. In the future, I will post up more in-depth information about cryptocurrencies.