With all the hype surrounding Bitcoin and cryptocurrencies, it can be difficult to separate fact from fiction. It also doesn’t help that marketers have started releasing cryptocurrency investment guides, e-books, and programs in an effort to cash in on uninformed. In this article, we’ll give you a thorough introduction to the world of cryptocurrency.
Why Do People Care About Bitcoin
Here is a good analogy. Think of a payment network like VISA or PayPal. In order to maintain their network and facilitate all the data involved with it (transactions, customer data, balances, etc…), they have to invest in computer hardware. Because these companies earn a profit, they have an incentive to maintain the network and continue paying for the hardware. The downside to this is that power over the network is isolated to a single (and potentially corruptible) entity. VISA and PayPal can be seen as dictators that rule with an iron fist — and while they aren’t necessarily evil yet — there are many people asking the question: why wait until they are?
The genius of Bitcoin is that it does not have any entity overseeing or controlling it. This concept, known as decentralization, is why Bitcoin has gained so much traction in the mainstream. While Bitcoin has hundreds of proposed applications, the main one people are concerned with is its utility as a currency. Traditional fiat currency is entirely controlled by the government. If you are lucky enough to live in a country where the government is trustworthy, then you likely haven’t yet experienced some of the shortcomings of this system. Just look at the country of Argentina. Their federal government inflated their currency to the point of no return — robbing their citizens of their hard earned money.
Bitcoin removes the governments power over currency and puts it in the hand of its users.
What Is Mining
The concept of mining is very simple. Bitcoin, like any payment network, needs computing power. Since there is no overseeing authority that collects profit like PayPal or VISA, the computing power has to be sourced from somewhere — and no one works for free. Bitcoin solves this problem by providing an incentive to those who use their computers to support the network. By providing computing power, be it from your own computer or from a server farm, you receive Bitcoin. This is programmed into the Bitcoin protocol. When you mine, you’re essentially helping facilitate the transactions on the network (along with some other things, but this is the gist of it) and being rewarded for it.
What Are Alt-Coins
The vast majority of alt-coins are a complete waste of time and should be avoided by most people. They are best thought of as a game within a game. You are doubling down on speculation and potentially playing into a “pump and dump” type system. The volatility of alt-coins is often cited by cryptocurrency gurus as a way to turn a huge profit. The reality is that if these gurus were turning a huge profit, they wouldn’t be wasting their time selling e-books and courses. Alt-coin speculation requires ongoing daily monitoring and an extremely unconventional sense of “how things are done”. The most successful alt-coin traders are often ones that are involved with the development of them (or know the developers).
Consider this: alt-coins are never traded for cash. They are traded for Bitcoin which is then traded for cash. This alone should tell you that any guru selling you the idea of another Bitcoin is very wrong.
Should You Invest In Bitcoin
I am by no means qualified to provide anyone with financial or investment advice. With that being said, I have been in the Bitcoin industry since its inception in 2009. I’ve seen the trends, the patterns, the hype, the winners, and the losers. The current sentiment of Bitcoin being “done forever” or “dead” has been repeated ad nauseam.
Back in 2014, an investor by the name of Tim Draper bought 30,000 Bitcoin at an approximate price of $600 each. The price promptly proceeded to plummet and stayed at mid $200s for a very long time. He was an absolute laughing stock in the community. People were sure that he had forever blown his money.
Around the same time, a successful entrepreneur by the name of Barry Silbert stepped down as an executive from his successful software company (that was purchased by NASDAQ) and decided to pursue the Bitcoin branch of his company instead. Everyone was thinking the same thing, “Boy, did he make a mistake”. As the price of Bitcoin continued to tumble, he continued to silently tweet to himself as the rest of the world pitifully looked on.
Look at them now. They have made more than a 25,000% return.
The pattern is simple: the price increases, media attention is attracted, more people buy in, the hype fades, people sell, and the price maintains a new equilibrium until the next event. This pattern, without fail, has been repeated multiple times and played out the exact same way every single time. Despite all these claims of losing thousands or Bitcoin being too volatile, Bitcoin has yet to break from its upward trend over the long term.
How To Buy It
Discussion surrounding the purchasing and storage of Bitcoin can become pretty nuanced. The easiest way to get involved is to simply make an account on Coinbase and buy it from them.