An introduction to Blockchain and Cryptocurrency
We cannot discuss cryptocurrency without understanding blockchain as blockchain is the basis for all cryptocurrencies and much more.
Blockchain, often also referred to a distributed ledger, is a secure method of storing transactions. These transactions are stored and recorded millions of times all over the world and to be guaranteed as true and trusted, all of these millions of computers must agree with each other on the content of each transaction.
If someone wanted to falsify a record, they would have to change every one of these millions of ledgers which is clearly impossible. This is what backs up every cryptocurrency and the means of enabling and recording these transactions is what make different cryptocurrencies function and become valuable.
Decentralization is very important. This ensures that no-one, not even the creator, can control the system, therefore no-one can change the system in their favour or against your interests, such as governments regularly do with our national currencies. For this reason alone, it is most likely Crypto will continue to increase while fiat currencies continue to be watered down by our governments
Bitcoin was the first cryptocurrency and remains the largest. As usual, when a new technology emerges, the first mover remains very important, but very quickly, other instances of the technology emerge with improved functions. It is no different with cryptocurrencies and there are now thousands of different cytopcurrencies out there.
Many people struggle to come to terms with this very phrase, 'Out there' They realise that cryptocurrencies are 'out there', but where? Can I hold one? Is it a physical thing? Where are they? What are they.
Imagine you go into a casino. You cannot go to the table and hand over cash, it's not allowed for security reasons. You have to change your 'cash' into casino chips. Now, these casino chips are absolutely no use to you outside the casino. If you have a big win, you cannot take these chips to the grocery store and buy food. The only reason you would consider holding these chips is that you trust the casino owners to convert any chips you hold at the end of the night, back into cash.
Crypto is the same. It is becoming possible to use it in the normal world, but largely, they only have value in the system and you use an exchange when you want to convert it back to 'normal money'. It is quite feasible that at some point in the future though, that Crypto will be the acceptable method of holding 'cash'.
The next question would be 'Is it safe?' That depends on the cryptocurrency. Would you feel safer holding your life savings in British Pounds or in Venezuela Bolivars? Cryptocurrency is no different. You need to come to a decision on which cryptos you trust and are happy to hold.
Once you decide which cryptos you would like to buy, you then have to decide how to buy them and where to store them. If you want to have some British Pounds, you may decide to go to an ATM, get the notes by using your plastic card and then when you get them, you put them securely in your wallet or your purse. You wouldn't leave your wallet lying around, you protect it to the best of your ability.
To obtain crypto, you have to go to an exchange and they will generally accept payment from a card, although on your first transaction, they may want to go through some security routines for your safety. Once you have bought some crypto, the exchange will be happy for you to leave it in their care, in your very own personal wallet and that is an option available to you.
The main thing to understand is that although the exchange grants you a wallet to keep your crypto in, they do not give you the keys to that wallet. It's all very well keeping a few hundred Pounds in your wallet in your pocket for going shopping, but you wouldn't walk around with a few million pounds of notes in your pocket, it would be very foolish and dangerous.
Crypto is no different. It's OK keeping some funds in your exchange account, but if you have larger long term holdings it is far more prudent to hold them in a more secure location. There are many options for this, including many which are completely free, but the safest is considered to be a hardware wallet such as a Ledger or a Trezor. These wallets do not hold your crypto as many people believe they do. They hold the keys to your wallet, without no-one can remove any of your funds.
This is just a very brief introduction to Cryptocurrencies and there are much more lessons and instructions you need to know before you start buying some Crypto of your own. Here is a summary again of what you would need to do.
1. Set up an account with an exchange
2. Go through the security procedure of the exchange
3. Exchange some British pounds for a common Cryptocurrency
4. You may have to carry out a secondary exchange to your desired Crypto.
5. Move any Crypto not immediately required to a secure wallet
We do offer a service to talk you through how to buy some Crypto. We can hold your hand in this procedure. We do make a charge for this and are happy to be paid in British Pounds or in Crypto (Bitcoin, Etherum, Tezos or Radix only)
Compiled by James G Whitelaw of Swackie Technology