Back again I see. That’s awfully brave of you. I have to say, I adore openly curious minds. We are the minds that change the world my friend. Here’s part two of my WTF is Crypto intro series. Otherwise known as; how to talk to people without scaring them away. Hopefully. If you missed the first part, you can find it here.
If people are rude or combative, don't worry. Just blow it off. You have to remember throughout history there have been those that fight and complain about changing technology. I mean, they said the internet was just a fad and here we are.
We ended the last blog post with me geeking out about security and hacks in the world of crypto. I hope you remember most compromises are user created. So be careful out there, pay attention to what you are doing, and don’t try to get free stuffs. That being said, let's talk about one of the next topics that likes to get thrown at our heads by those skeptical of crypto currencies. “Only criminals and shadowy supercoders use cryptocurrencies!” They might use mostly instead of only if they’re feeling nice. The thing is, that’s just not the case.
When it comes to criminal activities it is true that recent ransom demands made by hackers often involve some kind of cryptocurrency. While the cryptocurrency these hackers demand is often bitcoin they almost always exchange that bitcoin for a privacy oriented cryptocurrency like monero as soon as they can. This is because bitcoin, and most other cryptocurrencies, have publicly viewable transactions and wallet balances. This makes bitcoin transactions very easy to trace by authorities. Even more than regular currencies so it makes no sense for criminals to actively use and hold a currency that's so easily tracked. Cryptocurrencies like Monero are completely private, and even the US Government can't crack its encryption. Which is seriously impressive if you think about it. So the overwhelming majority of cryptocurrencies are not used for criminal purposes. There are just a handful of cryptocurrencies that are actively used by criminals. Let’s also remember the banking system has been proven to be actively used by criminals as well as banks themselves exhibiting criminal behavior.
The next biggest risk, beyond your security, relates to investing. All investments carry risk and reward. Investing in crypto can become extremely dangerous when you push your luck with something called leverage trading, which basically uses borrowed money. That's why you should always remember, only invest what you can reasonably lose without hurting your finances. Not financial advice of course. Please understand there is no way of knowing this without having a strict budget in place for your overall finances. Try using a year, and a five year plan when doing so. I’m going to talk about crypto specifically in this blog post, but this can be applied to any type of investing. Investing in crypto is much like Forex with the exception that cryptocurrencies are extremely volatile, meaning their prices can go up or down drastically in a day.
Typically, the next questions/comments that will land in your lap will be along the lines of; “I just don’t understand Bitcoin.” or “What gives cryptocurrencies value to begin with?”
Here's my counter; “Explain how your fiat system works.” or “What gives the money in your wallet or in your bank any value?”
You can leave the conversation at that and just leave them thinking. Remember, you don’t have to answer every question. You can ask them to read about it and direct them to a topic they showed interest in. As a personal rule, if they aren’t asking specific questions or they are being combative, I don’t engage as I normally would. My interaction is limited. That’s just me. I’m not here to change people’s minds or teach people that aren’t interested. It’s just more fun to talk with people that genuinely are curious to learn.
Now, back to fiat currencies, or fiat. Once upon a time it was backed by gold but that changed. Since then, all state issued currencies around the world have been losing value. Take the Dollar and the Euro for example. The only thing that backs Dollars and Euros is ultimately the trust we have in the governments that issue those currencies, and that trust has been eroding for decades. Not only that, but governments have been actively printing and manipulating their currencies to benefit themselves and the corporations that fund them at the expense of the average person. This has caused record levels of inflation that incentivizes spending over saving. Which leads to over consumption and causes the sort of environmental catastrophes they claim to want to stop.
I’m thinking of making a post that dives into the fiat ponzi scheme but that might end up being more of a rant. lol I like to use the term ponzi scheme here because well - it’s used correctly - but also because that’s the media buzzword used for crypto and people will like to throw it at you. Plus, it tickles me. I’m a little spiteful, you can avoid that if you’d rather. /rant
After that rant, I usually go on to address the actual question. Cryptocurrencies are valuable because of what they do. Obviously this value changes depending on which cryptocurrency we're talking about. You will often hear people say “Bitcoin is a store of value” or compare it to investing in gold. What they usually mean is that Bitcoin has value because it has an economic profile similar to gold. Meaning it has a maximum supply and only a small amount of BTC is created each day. That amount is cut in half every four years. Assuming demand for Bitcoin stays the same over time, this would lead to a doubling of Bitcoin's price every four years. However, demand for Bitcoin has increased over time. This has been due to many things ranging from FOMO to those who realize how weak regular currencies can be. This awareness has been enhanced by the pandemic. As basic economics dictate; when something has a limited supply but the demand for it continues to increase, prices inevitably rise. Many investors also see Bitcoin as a safe place to park capital outside of the current financial system.
One important thing to note is that most other cryptocurrencies are highly correlated to Bitcoin. Meaning their prices are reliant on what BTC does. Even though that's the case some cryptocurrencies, such as Ethereum, have insane value due to the utility they provide.
The Ethereum network can be used to create cryptocurrency tokens. You can even create decentralized applications and websites that, as of now, can't be censored or shut down. All transactions related to creating and moving tokens and interacting with these applications require Ether to pay for gas fees. This means the demand for ETH rises as the Ethereum network gains adoption. Ethereum has seen some serious adoption. Visa is testing payments on the Ethereum network using USDC, and the European Central Bank even issued a bond on the Ethereum blockchain.
Ok, ok, ok… “But why does the value of BTC, ETH, and every other cryptocurrency fluctuate so much” you ask? Basically because nobody knows what these technologies are actually worth. The prices of stocks and gold, and even regular currencies, fluctuate every day for the same reason.
Cryptocurrencies are much more volatile because what they do is revolutionary. Cryptocurrency networks make it possible to lend, save, and borrow without an identity credit score or bank. Credit scores weren’t in use until 1989. We can absolutely do business without them. They are increasingly being used as weapons due to the fact that the same institutions that establish and utilize them stand to make the most money the lower your credit score is. Overdraft fees started in the 1990, and are utilized as weapons to leverage more banking profits. Cryptocurrencies give the ability to spend and move money digitally to those that have been blocked by traditional banking systems. They can participate without the heavy fees put on them by the very institutions they are trying to utilize.
They make it possible for communities to pool their funds together and vote on how they should be spent. Which could eventually cut out the needs for governments and their crooked politicians. That being said, people need to work together. Sometimes that can be difficult.
I’m just touching on the possibilities, I’m not predicting the future here, nor am I going into extreme detail or touching every utilization.
Cryptocurrencies are a powerful technology that threatens the dominance of the powers that be. Now this potential makes some crypto investors very emotional. So the slightest possibility of a clampdown on crypto can result in a market crash, and the most outlandish rumor can lead
to a massive market pump. In the longer term, if you’re paying attention, you can see that crypto is growing and that growth is unlikely to stop anytime soon.
Now by this point in time you've probably more or less convinced your friend that crypto is pretty awesome and that means there's only one question they have left to ask you. “Which cryptocurrencies should I buy?”
In order to be a true friend; before you answer that question, you must remember to emphasize that having a budget is paramount to starting an investment journey of any kind. You might want to also make clear; nothing you tell them is financial or investment advice. Otherwise, you could end up in court if their crypto investments go south. Even if you're legally covered they might want to beat your ass if your guidance directs their greed to a financial shit show.
Honestly I never, ever tell anyone what to invest in, or how to spend their money. Ever. Each and every person has different goals, dreams, and an individual amount of what type of risk they can handle. At this question I always tell them to read. Read. Read. Read. And stay tf off of YouTube. Read about ways to get involved in the industry. Please be a real friend and let them find their own passion.
Which cryptocurrencies you decide to purchase depends on what you want to do in this space. And if you are just investing, that boils down to your timeline and risk tolerance. As a general rule of thumb, if you’re reading about investing and they are giving you amounts you can make and dates things will happen by, run. Find something else to read. Learn about concepts and why people make these decisions, and then make them for yourself. Always remember; the biggest risk when it comes to crypto, is you.
There are so many options when it comes to platforms to get started purchasing cryptocurrencies. Coinbase, for example, has an entire ecosystem of services that allow a user the opportunity to learn how to use exchanges and both custody, and non-custodial wallets. It's a great platform for learning. I do need to say, if you use my Coinbase link to sign up, we both get $10 in $BTC when you buy or sell $100 of $BTC after setting up your account. Not to mention they will pay you in crypto to learn about crypto. Yep, I said free crypto.
As I've said, this is just the beginning of my crypto ramblings, so make sure to check back for more. Not only do I love to talk about it, I love to learn about it too. So make sure to come follow me on Twitter so we can geek out together. If you’ve found me here via my personal account, you already know where to find Her Highness. If you don’t know, I have to warn you, we are crazy af there. I shitpost on the regular. If you’re looking for a more professional account please think about following my Design Studio RBF Grafix. I post pretty much not daily. Please feel free to leave any comments or questions below. I'd love to hear from you. I'm just a baby when it comes to the blogging game, so go easy on me.