Welcome to the 2021 Guide to Cryptocurrencies! If you’ve ever wondered what cryptocurrencies are all about, you’ve come to the right place!
This guide is perfect for just about anyone. In fact, you could be a seasoned crypto investor, a new investor to the space, or just someone who wants to learn more. No matter how you got here, this guide is built for you.
I’ve taken topics that are key to learning more about cryptocurrencies and blockchain. Then I’ve combed through every article I’ve written for INO.com over the past few months. Out of that pool of articles, I’ve selected just the right mix that are ideal for the topics you need to know about.
But before we get started, a quick word of caution. If you’re going to invest in cryptocurrencies – and there are good reasons why everyone should own a little – remember that the entire space is risky, highly volatile, and unpredictable. So, if you’re going to take the plunge, don’t devote more than 1% to 2% of your portfolio. And ask yourself if you’d be comfortable losing that 1% to 2% because you just might.
Now, with that out of the way, let’s get to the 2021 Guide to Cryptocurrencies!
What is Blockchain?
Fact is, this fundamental question is often the most confusing. And that’s because there’s a lot of jargon surrounding blockchain: Cryptography, distributed ledgers, mining, tokens, cold storage, wallet. And that’s just the beginning.
Forget about all that stuff for a minute. To understand blockchain, you simply need to understand a list.
Yep, that’s it. Blockchain, at its most basic, is simply a list of instructions for a computer to do. And those instructions could be financial transactions, items to do to fulfill a contract, a digital copy of a work of art, or the process of closing on a home.
But here’s what makes blockchain so fascinating: When you create your list of instructions, everyone who is a member of the blockchain where the list is housed gets the same list of instructions. And once the instructions are completed, every blockchain member must sign off on what’s happened and verify that the list was completed properly. If they do, the list is closed, and the transaction is added to the blockchain.
If you notice, when you completed your list of instructions, you didn’t need a third party – like a bank or a real estate company – to get involved and approve the transaction. Instead, all you had to deal with were the people you were doing business with and members of the blockchain. This lack of central authority is another fascinating part of the blockchain.
And since all the blockchain members have the same list sitting on a wide array of sophisticated computers using cryptography, the process is very secure. This is another big plus.
Learn more: Here's Why Cryptocurrency Is So Important!
What is Cryptocurrency?
Even if you don’t own any cryptocurrency, chances are you own a distant cousin.
Here’s what I mean...
Pretty much without exception, most money these days is digital currency. When you check your bank balance online, you’re looking at digital currency. When you use your debit or credit card, you’re using digital currency. When you send money to a relative, you’re using digital currency.
Just like these, a cryptocurrency is a form of digital currency. It has a life because it sits in a digital form on a computer.
But unlike your bank account, cryptocurrencies don’t need a bank – or other third parties - to approve and sign off on transactions. Provided everyone on the blockchain approves the transaction, the transaction takes place without the need of a third party.
Imagine doing business with someone else without the need of a Big Brother looking over your shoulder. Or without some other third party – like a closing agent or lawyer – making sure everyone did what they were supposed to do.
When you think about it, this is pretty big.
Learn more: What Is Cryptocurrency Anyway?
Should you own Cryptocurrencies?
Without a doubt, everyone should own a little cryptocurrency (keeping in mind our disclaimer above!)
And that’s because cryptocurrencies and the blockchain are going to revolutionize the way we live and do business, unlike any technology we’ve seen before. (Remember, if you can make a list of instructions, you can make a blockchain.) In fact, this transformation is already underway.
And beyond that, cryptocurrencies – particularly those with a limited supply like Bitcoin (BTC) – are an excellent store of value. Why? Because unlike fiat currencies like the dollar, they can’t be over-supplied or manipulated by central banks. And like gold, relative scarcity makes Bitcoin and similar cryptocurrencies inherently valuable.
Sure, cryptocurrencies like Bitcoin are volatile and unpredictable. But as adoption continues to increase, that volatility will likely subside to a degree. And don’t forget: We look at gold as valuable, but it too has its own fair share of volatility.
Learn more: Should You Own Cryptocurrency?
The 2021 Guide to Cryptocurrencies Continues!
Next week, I’ll bring you the second installment of The 2021 Guide to Cryptocurrencies. We’ll dig deeper into Bitcoin, cryptocurrency exchanges, and other essential cryptocurrency topics.
So, stay tuned!
Disclosure: This contributor may own cryptocurrencies mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.