Quickstart Guide: Cryptocurrency and Bitcoin 2021

Everyone has heard of Blockchain.

Blockchain is a type of distributed ledger of transactions across a peer-to-peer network.

And cryptocurrencies — Bitcoin, Ripple, DogeCoin (Yes, Elon Musk), Tether, Litecoin — are run by the Blockchain technology.

In 2016, the whole cryptocurrency market was valued at US$9 billion.

Today, the cryptocurrency market is worth US$1.4 trillion.

The amount of cryptocurrency traded daily? US$13 billion.

This is massive volume for something that started only recently.

To put things in perspective, the total value of stocks listed on the New York Stock Exchange is US$24.4 trillion. With a daily traded value of S$169 Billion.

Before I share what is cryptocurrency, I’ll explain first about the concept of money.

The concept of money and cryptocurrency

Money has value because someone is willing to accept it as a medium of exchange when they are buying and selling stuff.

Money is a fiat currency.

And a fiat currency is “legal tender”.

This means a currency is backed by the full faith and credit of the government.

For example, you use the Singapore Dollars to buy your daily essentials. And it’s because our Singapore government says it’s legitimate.

Today, money is simply recorded on a ledger, a number on the bank’s books.

Now, cryptocurrency, is not backed by the government, or anything.

But people think its valuable because people simply believed in it.

Cryptocurrency is one type of digital currency.

But the difference between cryptocurrency and other types of digital currency is that cryptocurrency is secured by cryptography.

You see, cryptography is a technology used to secure information.

And this makes it hard for a fake cryptocurrency to be produced.

Different cryptocurrencies use different cryptography technology. And thus cryptocurrencies have different governance systems.

These systems affect their underlying value.

And with market cycle and economics, it makes it hard for interested parties to evaluate cryptocurrencies’ true worth.

What’s the big deal with cryptocurrency?

If cryptocurrency is not backed by anything, why would people want to use it?

The thing is, one of the biggest value propositions for cryptocurrency is it removes the middle person— People can transact directly with one another.

When you make an online payment, there’s typically a middle person — a bank — that processes the payment. The middle man takes a fee.

But with cryptocurrency, you perform transactions without the middle person.

This reduces the cost of doing business. Makes it easier for consumers too.

And that’s what’s happening today. 

You can send cryptocurrency to your friend without going through anyone.

For instance, you wish to send cryptocurrency ABC to your friend in another country.

When you send money to your friend, you typically go through a money changer, or via online platforms such as Transferwise and Revolut.

But, with cryptocurrency, you send the money directly to your friend as long as they have a “crypto wallet address”.

Imagine this: Using cryptocurrency is like sending a postcard straight to your friend’s home address.

Without ever going through a post office.

Here’s the other thing.

Cryptocurrency provides millions of people with mobile internet access but no bank accounts or traditional systems of banking. giving these people access to some form of money or value.

In other words, these people now have access to credit. They can easily borrow money or use money to do many things, including getting a house.

Essentially, cryptocurrency helps some people to move one step closer to financial inclusion.

The last, and probably more ‘contentious’ benefit is privacy.

At its infancy, cryptocurrencies’ nature is pseudonymity — people can hide behind fake names.

This is dangerous to some people who live in authoritarian states where their identities are at risk of getting exposed.

As the world progress, there is now a subset of cryptocurrencies that provide complete anonymity.

And this comes at a price as it facilitates money laundering or terrorism funding.

This is especially prevalent in certain countries which are experiencing a lot of political instability.

The next question then is, what is Bitcoin, and how is it different from all the other cryptocurrencies?

I’ll share more with you soon

Any questions? Feel free to drop me a comment below.

Fun fact: There are cryptocurrencies created just for fun or as a meme. You might have heard of the (in)famous Dogecoin which got Elon Musk all excited!

Jenny Goh