Bitcoin has been on the rise since the pandemic. Recently, Potato Media also emerged in Taiwan, using CFO payments as an incentive to spend time on the platform. Most people must have heard of cryptocurrency but a lot are afraid to join the market and could not understand what blockchain is. There are so many questions to be answered.
Personally, I'm not an expert but Ares has crammed a lot of information into me and I also buy Bitcoin so I understand the basic idea. Because of that, I know that while experts give very professional explantations and insights, most people remain confused because they are so professional they sometimes seem to be speaking an alien language. So I wanted to use regular human terms that even my mom understood to introduce crypto before you take the next step and do more research.
What is block chain?
Block chain is what cryptocurrencies are based on. The following is a very simply analogy that you can quickly understand. Ares came up with the original version of this analogy when I was first exposed to crypto, this is a modified version.
Let's look at physical possessions first, since this is something that everyone already understands. Use properties for example. You and the government each have a document proving that this property belongs to you. Theoretically, if someone were to change or steal these two documents, no one can prove that it belongs to you. Also, the reason why the government's word counts is because they have authority over the matter. At the same time, this means that if they decide to take your property away, there's not much you can do about it.
The purpose of the block chain is the decentralization of wealth, so that no central authority like the government or banks have power over the distribution of your wealth.
Now, imagine that cryptocurrency is the same as property. Imagine that everyone who owns houses and lands have a document that proves the ownership of every single property. And whenever there is a transaction, all of these documents would be updated at the same time. Without a centralized authority, no one can force everyone to change the ownership of something all at the same time. This means that no one else have power over your wealth.
This doesn't mean that everyone who owns bitcoin knows how much Bitcoin each person has. On the block chain, each person is just a public key (like a serial number that's the address of your wallet. Think of it as an email address). And no one knows who is behind each public key. Plus, most people who have Bitcoin and keep them on trading platforms like Gemini and Maicoin don't OWN their Bitcoin. Ever heard of "not your keys, not your coin"? Yeah. Technically, the trading platforms are the owners of the Bitcoin. The platform is simply letting you have some of it. Kind of like a contract between you and the platform. This compromises the purpose of decentralization which is why a lot of people would keep their Bitcoin in a private wallet and only use platforms to trade. But using a platform is a lot more convenient, so if you can find a trustworthy platform, that's the compromise you have to make choosing between safety and convenience. Everything is the same, the more trouble, the safer; the more convenient, the more dangerous. Just find your own balance.
Is it safe against hackers?
Let's continue with the analogy: if someone would like to rob you of your property, they would have to rob every single person and change themself to the owner on all of the documents.
If a hacker wants to steal your cryptocurrency, they have to hack every Bitcoin holder to update the information on the block chain. Even with the most advanced super computers that exist, like the ones that companies use to create algorithms and enable search engines, it would take years. Which means that it's virtually impossible for a hacker to attack the block chain and steal your cryptocurrency.
But I still have to remind everyone, even thought the block chain is safe, it doesn't mean that your cryptocurrency is completely safe because there are a lot of human factors involved. It's a typical situation where the technology doesn't make mistakes but people do. The cases of Bitcoin being stolen mainly surrounds weak passwords and personal information leaks.
The device or platform that you keep your cryptocurrency on could have weaknesses. If you keep your cryptocurrency in your computer and your computer has a virus then your public and private keys could be stolen, it's like having your account and password stolen, them your cryptocurrency is in danger. No matter if you own cryptocurrency or not, if you have classified documents in your computer or not, setting up your computer with an anti-virus is the first step you take to protect yourself when you get a new computer.
If the password to your account on the trading platform yo use isn't strong enough, that's dangerous, too. Currently, the safest way to store cryptocurrency is to download it on to a thumb-drive, engrave the keys on two pieces of metal and put them in two separate safes that are far apart and hard to find. But regular are would not and do not need to do that. I personally keep my cryptocurrency on a trading platform, too. And here are some things I do to keep them as safe as possible. (Also, I'm not rich enough to be robbed...)
The most basic safety measure is of course not to use the same password as any other platform and not let your browser or device remember it. Next, your password should be long enough with special characters. Ares instructed me to use a different email for the platform specifically for this purpose. I never give that email address to anyone else and I would recommend a safer email service like hotmail that doesn't gather, steal, and sell your information all the time. Finally, set up the 2 factor authentication on the platform. After completing these steps, your cryptocurrency should be safe and sound as long as you don't give other people your personal information or get scammed out of it.
What is mining?
Let's just look at the operation of Bitcoin in order to explain this. It's the pioneer of the blockchain anyway.
As aforementioned, currently, there isn't a single computer that is powerful enough to update the block chain. So how is the block chain updated when Bitcoin transactions happen? Mining. Ever miner is simply contributing their computers' operating power to help update the blockchain. In return, they get the Bitcoin that is created when transactions happen. The new Bitcoin created will be evenly distributed among the miners according to the operating power they contributed. The more miners, the less reward, which would lead to less miners, which leads to more rewards, then leads to more miners. So it's a system that balances itself.
However, to make sure that Bitcoin isn't like the US dollars–being excessively printed all the time–the Bitcoin that is created every year is halved. And only a total of 21 million Bitcoin will ever be created. This is to ensure its value. When someone loses their Bitcoin (losing the thumb drive or device they kept it on) or forgets their keys, though these Bitcoin technically still exist on the blockchain, they can never be accessed, used, or traded again. That means the Bitcoin disappears forever. The scarcity is one of the reasons why the price of Bitcoin continues to grow.
Risk
I've said a lot of nice things about Bitcoin and cryptocurrency so far, now I still have to mention the risks. The biggest drawbacks of cryptocurrency right now is that it isn't widely accepted as payment yet and it is very volatile. Unless you have a lot of capital and a unique eye or extremely good luck, don't expect to quickly become a millionaire through crypto trading.
My personal take (NOT an expert)
If you want a short-term investment or like to day trade, Bitcoin is not a great option. Some smaller cryptocurrency is much more volatile and could make you 5–10 times within a short period of time. Like dogecoin which went viral because of Elon Musk. It was literally a coin created as a joke based on a meme but it quickly skyrocketed then fell back. People who got on the train early may have made a lot of money. But do you think you are lucky enough or good enough to spot it? That's the risk you have to evaluate.
As for Bitcoin, from a long-term perspective it is stably increasing but still highlight volatile when you look at it short-term. In comparison, if you are not a genius holding it for a long period time and trading it occasionally is probably a better option. The second biggest cryptocurrency Ethereum seems to be doing pretty well, too.
Personally, what I do is that I buy a certain amount of Bitcoin every month after I received my salary without looking at the price. It's a boring way of investing but it's also low-risk and proven to be equally profitable. If the price crashed that month, I would buy more because I think it would recover. If it goes up in a parabolic manner, I might choose to sell some and buy back the same amount when it comes back down.
Mindset
Finally, this is how I adjust my mindset. When I make any investment, I would always thing: with investments comes risks. Even though the possibility of it crashing to zero is virtually none, I would pretend that it would. So when I am making investments, I would think of it as spending money. I would also categorize it as an expense when I balance my accounts at the end of each month. Which is why I would never put all of my savings or money that I cannot afford to spend in Bitcoin or any investment for that matter. I might not be able to make as much money as people who are more ballsy but this helps me keep my peace of mind. The price of Bitcoin is shown in real-time on my cellphone home screen, but because of this mindset, I literally feel nothing when I see the price go up and down.
I hope my explanation helped everyone understand cryptocurrency and blockchain a little bit more–and of course, Bitcoin, probably what everyone cares about the most. Finally, I hope we can all get rich together. And if you get rich, don't forget to give me a call. I need a sugardaddy or mommy that doesn't want any sugar from me. (Um so basically rich parents?).
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Cherie Aria🧜🏻♀️ 艾雪莉
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