About two years ago, I was introduced into the spooky world of cryptocurrencies.
This was back in August 2016 and for the past two years, I have been trying to figure out what exactly cryptos are and how they work. I know, I’m a bit slow to catch up. These are just my personal opinions of cryptos and the way forward for these digital coins. Stay with me! Nah, don’t just stay, I want you to actually use your brains here and leave a question, or educate me in the comments section on these alien-ish currencies in-case I misrepresented anything in this post.
What are cryptocurrencies?
According to Uncle G, these are virtual currencies(you know, like e-money or internet money. Now, there are about 1638 cryptocurrencies out there, with some of the popular ones you may or may not have heard of or used such as: Bitcoin, Ethereum, Litecoin, Dashcoin, etc. If you have not heard of any of these terms before, then it’s time for you to introduce me to the rock you’ve been living under. Come out of the closet, Stone Age man! Kidding!
What is a Bitcoin?
I’ll only focus on Bitcoin, only because that is the very first cryptocurrency in the world, the most popular and most used of all these alternative currencies. Usually called Bitcoin or represented by the symbol – BTC.
Who created Bitcoin and Why?
Well, the pseudonymous name of the person who created bitcoin is known as ‘Satoshi Nakamoto(sounds Japanese but I could be wrong). The records of his first ever email introducing his fellow cypherpunks(those who are interested in computer encryption) to an alternative form of currency is dated back to 31st October 2008(which means that it has been 10 years since the inception of Bitcoin). In the email, he referred to bitcoin as a Peer-to-Peer (P2P) digital currency that is independent of a trusted third party(like the government or bank).
The whole reason Satoshi developed bitcoin was simply because he wanted everyone to literally have control over their money without the involvement of a central body(bank).
What are the benefits of Bitcoins?
Usually, when it comes to fiat currency (Dollar, Naira, Euro, GBP, etc), you provide a certain service and get paid with whatever fiat currency used as a form of payment. If you need to exchange your fiat currency to another, all you have to do is walk into a traditional bank or a money exchange point, and get your fiat currency exchanged for any other fiat currency you want. If you own a credit card or debit card, then you can use that to make online purchases or transfers, which of course is connected to a bank account. Easy right? Right! But there are also downsides to it.
- Your fiat currency can be counterfeited and you necessarily won’t know the difference until it may be too late. Amouting to losing lots of money.
- The high cost of transaction fees involved. It may not seem like a lot but compounded over time and if large sums are involved then you would notice how unnecessarily high the transaction/exchange fees are.
- There is always a third party in the equation. This could either be the bank or some institution or even the government. In most cases, you have to declare where you got the money from and where it is going and a whole bunch of bureaucracy in the mix that sometimes causes delays in getting the money to the other end and in time for usage.
- It is not always available. Unfortunately, banks do not work 24 hours a day, 7 days a week, and even if they did, you would still be faced with point 2 and 3. They also go on holidays or some, inevitably close down or some shit always comes up causing again another delay in transfer of funds.
Whereas, Bitcoins are decentralized meaning nobody is at the center, controlling and/or monitoring how you decide to transfer your money and when it should get to the other end. No taxes on your money, no government can freeze or claim your digital money.
With Bitcoins, the low cost of transaction fees makes it possible to make transactions with your digital coins, while paying next to nothing in service charge compared to what you would pay during credit card or debit card purchase or transfer.
Bitcoin runs on a decentralized system so you don’t have to worry about the traditional service hours of the bank, meaning that you can make transfers from any time zone on any day from any place without having to worry about significant transfer delays. You can typically do this using crypto exchange apps from your smartphone.
In as much as there are good reasons why bitcoin is good and colorful and such a better option to fiat currencies, there are however downsides to using Bitcoins or other alternative coins such as:
- Exposure to scams. The use of cryptos are relatively new, compared to fiat and this creates room for loopholes used by hackers to scam and eventually relieve you of your coins. Not good.
- No refunds or chargebacks. There is no place you can report the theft of your digital wallet to and in most cases, if the hackers are not apprehended, you may never be able to recover your money. If you misplace your digital key or cannot access your account, or mistakenly transferred money to the wrong account, then honey boo boo, say goodbye to your coins because there is no way of making chargeback or getting your money back to you. Just so you know.
- Price volatility. The rapid changes in crypto prices makes it easy to lure quick money makers into investing their bucks and gaining quick cash but this can be the cause of huge loses too. In April 2017, BTC was worth $1000, eight months later in December 2017, the price of BTC surged to about $20,000 -pretty impressive huh? Well, as of January 2018, that impressive price plummeted by 50% and as of today, that price is holding for dear life at $4000. This may not be scary for smart investors but for regular users, the price may mean a lot today but shit tomorrow.
- Environmental harm due to Bitcoin mining. There are a lot of claims to this, however, I cannot attest to it.
How do you own a Bitcoin?
So, from what I know, you can own a Bitcoin by mining one. Ta-ra! What is mining you ask? Well, we all know that traditional money aka fiat currency is created through central banks, but bitcoins are a bit different. They are “mined” by Bitcoin miners who are network participants that perform extra tasks and get rewarded through Bitcoins.
You can also mine other coins and exchange them for Bitcoins through cryptocurrency exchanges. If you are not a miner, then you can own a coin by buying one on a cryptocurrency exchange.
I like the idea of having absolute control over the money I spend. I like the idea of not going through the hassle of bank politics just to send money across borders. I really like the idea of not being charged lots of percentages while spending, transferring or wiping my ass with my money. I sure as hell love the fact that no central body or government is monitoring the movement of my money.
Having said that, I know that as a new and an emerging technology, there are underlying flaws. In fact, the flaws sometimes can even outweigh the positives but seeing that the original intent of cryptocurrencies was to make sure that the 98% of us who aren’t the government are freed from the shackles of centralists, then I say we give it a chance.
It will take a while for Bitcoins and other cryptocurrencies to be implemented and used globally but until we get to that point, there is a lot of work and improvement to be done by the creators of these coins. It will make a lot of things easier when it comes to transactions and eventually eliminates counterfeiting and hopefully theft.
Did I leave anything out? Write it in the comments below. Also, let me know what your thoughts are on the practicality of cryptos.