This guide is designed to get you right into crypto, using the easiest options that fit the needs of most people. Naturally, there are so many other ways to buy, spend and get crypto.
You can use it to buy things online, and you can send it instantly to other users anywhere in the world, at very low cost, needing nothing more than a smartphone and an internet connection.
To answer that question we need to take a short trip back in time and trace the evolution of money.
By understanding why we started using money we can strip it back to its fundamental characteristics and discover a concept called sound money.
The characteristics of sound money give us a template against which to measure the money we use right now, and the improvements cryptocurrency promises to deliver.
When our ancestors stopped being nomadic, and developed specialist skills, they were able to exchange their surpluses. On a small scale, a village for example, they could keep a mental note of who owed what - a credit or trust based system - and what a fair exchange rate was - how much wheat in exchange for a cow.
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VisitA key property of gold is that it is almost impossible to destroy (durable) but can be melted down into smaller units (divisible), which are relatively easy to transport (portable) and when divided, each unit has identical properties (fungible).
It is also very recognisable, which isn't surprising as it has intrinsic value due to its colour and shine.
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VisitGold cannot be manufactured, you can only get more of it by digging it out of the ground, but because of the difficulties in mining it, the stock of gold tends to change at a very predictable rate - this gives it the important property of scarcity. So sound money, effective as a medium of exchange or store of value, has these properties:
Of course we now know that this breaks one of our golden rules of sound money - scarcity. The new system instead requires us to simply trust our governments to decide how much money should be created and for what purpose. This is known as Fiat Money, which literally means - this is money because the government says its money.
Before we jump down the Bitcoin rabbit hole, let’s make a distinction: Bitcoin (with capital B) refers to its money system - whereas bitcoin (lowercase b) refers to its units - the money itself.
Bitcoin was the first cryptocurrency to find a successful solution that ticks all the boxes of sound money with none of the risks of a single controlling authority. Let’s explore how it achieves those two things.
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VisitShort, simple and straight forward answers to basic questions about how crypto works and why it has value.
Cryptocurrencies are new types of digital assets with multiple uses, including, and mainly, as a form of currency or money.
A really simple way to view cryptocurrency is to examine the descriptive word prefixed to "currency".
The word "crypto" refers to cryptography, the use of a type of computer code to encrypt information for security. In this way, computers use secure communication techniques that only allow the sender and intended recipient to view the contents of a message. It comes from the Greek word kryptos which means hidden.
Bitcoin was the first ever cryptocurrency. Its creator is anonymous, using an alias Satoshi Nakomoto. In October 2008 he/she/they published an outline called a white paper of how Bitcoin can work as a form of digital money that one person can send to another without going through some central authority.
In early 2009, Bitcoin went live. At first it was treated as an experiment, but over time more people have started to recognise that as well functioning as an alternative type of digital money, Bitcoin functions like a digital gold what is known as a store of value.
For something to be usable as money, it must have certain characteristics that give it the properties of money. Bitcoin fits many criteria of money including:
- It is scarce there will only ever be 21 million.
- You cannot copy, or create fake Bitcoin.
- It is almost impossible to fake Bitcoin transactions.
- It follows rules not rulers as there is no one person/entity in charge to manipulate it.
Cryptocurrencies use modern technologies such as cryptography and uniquely in money, something called blockchain technology. This allows for a unique and secure type of ledger or accounting system that didn’t need a central authority -- very different from regular money.
This is crucial as it represents the latest step in the evolution of money, brought on by the discovery of new technology enabling high levels of security and decentralisation. Without a central authority, cryptocurrencies are more transparent, less prone to manipulation, and if used properly, a very secure way of transacting money.
A diverse group of people and entities use Bitcoin and other cryptocurrencies. Bitcoin is accessible to anyone with internet and a smartphone or computer.
All over the world, people are using Bitcoin to buy, sell, or exchange goods and services. Bitcoin solves a lot of problems for people who are locked out of international financial systems, or whose local currencies can't store value well.
Companies and corporations are also using Bitcoin as an investment, believing in its security and ability to appreciate over time.
Cryptocurrencies are real money, recognised by many countries especially in the developing world!
And yes, you can also exchange cryptocurrency for other types of local currencies. Services called exchanges will sell crypto to you or buy crypto from you in exchange for your local currency.
Individuals all over the world also exchange cryptocurrency for regular money. This is referred to as peer-to-peer trading, in the spirit of Bitcoin as a peer-to-peer electronic cash.
As with any kind of investment, there is always an attached risk.
Bitcoin represents the most mature of all the cryptocurrencies out there, and in our opinion, is a viable investment over the long term. But all cryptocurrencies are volatile in price, owing to the relatively young markets. Inexperienced investors can find cryptocurrency wildly unpredictable.
It is always best to equip yourself with knowledge of a new technology until you yourself are confident enough to make your own decisions. This is the aim of Learn Crypto: to provide you with all the knowledge there is about cryptocurrency so you are informed enough to make confident decisions for yourself.