Chances are, at least one if not several of your buddies get instant hard-ons and are triggered into an unsolicited and unintelligible rant when they hear terms like Bitcoin, Cryptocurrency, Miner, or Blockchain.
We get it; Bitcoin won 2017. Bitcoin and the hackers who cashed out when it hit 20K. Those nerds with ‘fuck you money’ are are currently sitting with umbrella drinks and having Instagram models rub in their 120 SPF sunscreen. While we remain here, for the most part, still poor.
Alas, our envy of their success is not what this article is about, nor is it about the uncertainty of Bitcoins’ future. This article was written by a friend of the website and Curtis Roberts, JD, as a quick and dirty explanation of what cryptocurrency/Bitcoin is and how the average Chad can get into the game and quickly lose what little savings he has.
What follows is a short diatribe from a big fan of crypto for the long term and one who is excited and a bit nervous about the short term (if you haven’t heard of the classic tulip bulb bubble in the 1600s, give this a read). It will also give you a few resources and a place to start if you are feeling overwhelmed.
Why should I give a shit about made up internet money?
Because, as it turns out, “made up internet money” is about as real as the money you pay back your student debts with. And thus, is very likely the future of money. Cryptocurrency will probably be all your grandchildren will ever know.
But it’s still not real
The definition of money changes depending on who ask, but characteristics of good money don’t. Money has to be durable, divisible, portable, uniform, and limited in supply. Cryptocurrency is better or at least has the potential to be better, than dollars in every way. However, cryptocurrency is currently struggling with one key feature. It is tough to buy the stuff you love with it (unless that stuff is black tar heroin). This is known as the principle of acceptability. I don’t know about you, but my favorite coffee shop and landlord don’t accept my Bitcoin yet.
Let’s start with some basic definitions for those of you that we’re too busy blacking out at [insert mid-tier state school football team] while these nerds made up the future of money
Cryptocurrency: Blanket term for all digital currency using encryption for verifying and conducting transactions.
Bitcoin: The first viable cryptocurrency to be used at scale; it is the (current) market-cap leader and most popular form of cryptocurrency.
Blockchain: Distributed online ledger where transactions are managed.
Exchanges: Places where you can buy and sell cryptocurrencies.
We know this sounds complicated, and we’re using a lot of big words, but stay with us here. This is why Bitcoin is blowing up right now:
- Cryptocurrency is different from any past currency because it exists in a decentralized system outside of the government. This is a big deal because the group of people who transact in the currency determines the value rather than a centralized single entity.
- Like gold, cryptocurrency is its own currency and, the price depends on the supply and demand. If you never took Macroeconomics 101, we don’t have enough time to explain it to you further than that. Look it up here.
- Limited supply means a high demand – there is a maximum of 21 million Bitcoins that will ever be available. With a limited supply and huge demand from speculators, this partially explains it recent massive rise in value.
So when do we get to the part where get rich without working?
The crypto world can be daunting. Aside from its anarchist origins and associations with dark web drug deals on the Silk Road, there are practical difficulties of actually buying or trading. Like where do I get it and how do I keep it? What’s the difference between an exchange and a wallet? Financial jargon is thrown around (think basis and order types) alongside a cadre of strange new terms like ICO, HODL, and air-gapped cold storage.
Go to where the trolls reside: Reddit
If you want a foothold in the space the best/ worst place to start for learning about crypto, it is without a doubt Reddit. Spend some time lurking on r/bitcoin, and r/cryptocurrency, and you’ll be a pro in no time. If Reddit scares you, you can also check out content from Coindesk or Cointelegraph. Or for those who are looking for a bit of an edge and don’t mind paying for it check out Hacked.
“Now that I’m woke af, where do I go next?”
Next step is to set up a wallet, and this is a bit more technical than your velcro Volcom wallet. Wallet in crypto jargon is a software program where cryptocurrencies are held. For me, and every other novice investor, there is the San Francisco startup unicorn Coinbase. Coinbase allows you to link your bank account and trade in your real American dollars for whatever major cryptocurrency you want.
If you wanna take this shit to the next level, it’s on to the exchanges to buy to trade and buy some altcoins like Ripple or EOS. As far as exchanges go there is Coinbase’s trading product GDAX which I use, but which only lists a limited number of coins. Bittrex has been gaining steam in the online community. Or there is US-based Poloniex.
Not my money, not my problem
At the end of the day, putting money into crypto is the Wild West. Don’t put anything you aren’t willing to lose. Your ‘investment’ could drop in the 80 – 90% range.
It is online poker and penny stocks. Fortunes are made and lost. Some real and some on paper. It’s easy to put money in, and it’s questionable whether you’ll get it back.
So, ready, set, go! Blow your holiday bonus, invest all your savings, do the riskiest shit possible for a massive return or lose everything.
Disclaimer from the author: Even though I am a lawyer and have worked at an investment bank, none of this is intended as financial or legal advice. If you need anything to underpin that above disclaimer, when I worked at the Securities and Exchange Commission I told everyone who would listen that I wouldn’t buy Bitcoin, then at $250 a coin. Although I am a long-time believer in crypto, I have only recently dabbled in buying and trading coins. I have small positions in Ethereum and Litecoin, but as of the date of this article, have sold all my Bitcoin.