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Nowadays, there is a new hype in the investment market; cryptocurrency. Some say it is a new hype and a bubble which will burst soon. Well, the world is already diving into this new investment. What is cryptocurrency? People who has never heard of cryptocurrency or has a little investment has at least heard of Bitcoin. Just like me few years ago; heard of only Bitcoin, Ethereum and Litecoin.
Bitcoin is a digital currency which is completely digital, it is an online version of cash which can be used to buy products and services; even though many companies don’t accept it but it is slowly been accepted with its ongoing popularity. Recently, Tesla is accepting Bitcoin as payment and will only use only internal and open source through which Bitcoin is paid to the company; it will retain as Bitcoin and will not convert it into a fiat currency (US Dollar, Euro, Yen and etc.).
How does Bitcoin work?
It is a network that runs on a protocol which is known as blockchain. On 2008, a person named Satoshi Nakamoto who is anonymous. The blockchain has evolved into separate concepts with similar cryptographic techniques, it can be sometimes very confusing and often mistaken for other blockchains like Ethereum and etc.
The basics of the blockchain is straightforward as explained by many crypto scientists, every blockchain consists of a single chain of discrete blocks of information which is arranged chronologically and this information can be used in any sting of 1’s and 0’s which means it could include emails and contracts. In theory, the contract between the two parties can be established on a blockchain as long as both parties agree on the contract, and this takes away the need of a third party like banks or any other financial products like savings, checking account or any other bank.
The ease of transaction has caught the eyes of different individuals and corporations and many analysts believe that the blockchain technology will impact the cryptocurrency hype. Bitcoin’s current goal is used as a value and a payment system, on the contrary, Ethereum which is another cryptocurrency and the project is used to have smart contracts which creates a world of decentralized financial products without the need of middlemen and the required fees, in addition no potential data that can be breached. Below is a simple way of explaining how a blockchain works.
As mentioned earlier, Bitcoin is a digital currency, so how is it created? There is a process called mining and it is maintained by the trustless public ledger. To strengthen the process, the network of Bitcoin users who trade Bitcoin among themselves are known as network of miners who record these transactions on the blockchain. The process can be time consuming and very expensive, the amount of energy (electricity) used is very high. Similarly, Ethereum, which is known as the number #2 best cryptocurrency has a high miner fees, so the price is high, on the other hand, cryptocurrency like Dogecoin, which is $0.56 is cheaper to mine. Note: there is no physical Bitcoin or any other cryptocurrency, Any physical version seen is just a novelty and has no value or codes on it.
Below, how a Bitcoin mining takes place.
How transactions are done?
There is a digital wallet one has of different cryptocurrencies and sends it to another person’s or company’s wallet. The cryptocurrency is now deducted from person A’s wallet and is added to person B’s wallet, and the transaction can take within minutes depending on the cryptocurrency. This is exactly, how a transaction in different bank accounts are done.
For example, that 15N3yGu8hikUFHeyUNdzQ5sS3aRFRzu5AePNZ wallet sent 14.98017374 DAI (Stablecoin) to 5rHG2qjdk5Khiq7X5xQrr1wfigepJKLK75t on April 22, 2021 between 23:20 and 23:30 and the transaction was completed on April 22, 2021 by 23:38. The long strings of numbers and letters are wallet addresses and can be hard to link individuals to transactions.
Source: Faisal Photography
Some of the top cryptocurrency in 2021
As mentioned earlier, Bitcoin, Ethereum and Litecoin are popular cryptocurrency and recently Dogecoin which has got popular but there are many cryptocurrencies with different prices:
The list goes on different platforms. Below is an example of other cryptocurrencies on Coinbase platform
Where to buy/Trade cryptocurrency?
- Robinhood (free transactions but only has Bitcoin, Dogecoin, Ethereum, Bitcoin Cash, Litecoin and Ethereum Classic)
- Coinbase- There is a transaction fee on every trade. (Offers reward for stacking and learning about other cryptocurrency)
- Gemini (There is a transaction fee for every trade). Also has stacking reward
- Celcius (Might not work in many US states)
- Binance US (Might not work in many US States)
In conclusion, back in 2000 when I was in High School, I remember Internet getting popular and emails and other messengers getting popular and my parents used to say it is another hype and might not last for a long time but now everything can be done digitally from booking tickets to calling a cab and ordering food. Then there was a Dotcom bubble crash, but internet hasn’t gone anywhere but expanded; and people has cashed on internet. Similar thoughts are conveyed by people nowadays but there is money to be made in it. I made almost $12,000 in 4 months by only investing $1000; not the best but still learning the crypto world. Similarly, anyone invested in Amazon shares on 1999, just buying 100 shares ($18/ share), holding them during the splits making it 1200 shares. The same Amazon share is now $3467/ share which is now worth $4,160,400. Therefore, an initial investment of $1800 is now $4,160,400. As they say history repeats itself so this is the time to create the history. According to Yahoo Finance, only 14% Americans have invested in Crypto and almost 100 million people around the world. This is just the beginning of the market, maybe in future, the population will not be paid in US Dollars, Euro, Yen and etc. but in Bitcoin and Ethereum.