I first heard about cryptocurrency from a guy named Greg. He and his parter April had invited me to join them for a meal. We were staying in the same hostel, which had a kitchen where they had prepared a meal from local vegetables. I had been hanging out looking for something to do while waiting for another group of friends that evening. I don’t remember what year it was but it was around 2011.
In (what I imagine was) 2011, cryptocurrencies were new. Then as now, Bitcoin dominated the market. But other cryptocurrencies were starting to emerge on the scene.
So my new friend Greg started going on about cryptocurrencies. I am a curious person so I respectfully entertained what I thought was absolute nonsense. I asked questions and learned more. It sounded interesting, but wicked fake.
I eventually tired of trying to understand this complex world of crypto, bitcoins, blockchains, networks, etc. There was a lot of language to learn and the concept did not sound plausible.
He was talking about earning millions over night but also risking losing it all. As we talked, his account got shut down. As I understand it, this was common at this point in the history of cryptocurrencies.
Since they are unregulated, cryptocurrencies are considered highly risky. They are also highly volatile. You can be a millionaire one minute and lose it all the next. This is what happened to Greg as we chatted after our meal.
Greg and April intently stared at their computer screen, hitting buttons, they looked like they were waiting for the right moment. Today, I figure they were waiting for a particular price point in the market, but who knows.
Jump forward a few years and the crypto markets are much more developed, and trusted.
In mid-2020, I started gaining an interest in this cryptocurrency phenomenon. Something about the boredom of coronavirus lockdowns has gotten more and more people into the crypto markets. Go figure.
I doddled around thinking about whether I should throw away $10 and buy some crypto. But I do not plunge into spending money easily. I did some research and gained a little more confidence, but I was not ready to buy yet.
A few more months went by and I kept hearing about crypto, probably due to those algorithms that advertise to people for months and years after they look at anything on the internet. Yet I also had expressed interest and was somewhat continuing to learn.
Crypto rewards for what they call “staking” have recently come into fashion for something else they call “de-fi”. I know what defi stands for, but I would never be able to explain it to you. This is a lot of the crypto world. Things you don’t understand and as far as I can tell don’t really need to understand. Don’t get me wrong, some things benefit from knowing. Let me review a few.
What do you need to know about crypto?
First, crypto stands for cryptocurrency. It is digital money.
You might be thinking, but digital money already exists. We have credit cards and PayPal. We buy and sell things online all the time. You’re right.
So what is the innovation crypto provides? Well, your money is tied to a bank or credit union. Even your credit card is tied to the banking system. Your PayPal too, but maybe not quite as much.
Insofar as I understand it, crypto has the potential to revolutionize the banking system… globally. It is something of a global integration. It gets rid of time. Your banking institution is 9am-5pm. Those are standard working hours. Not with crypto.
It also stands firmly outside regulation, at least it attempts to. This is where a lot of libertarians get all jazzed. Capitalism without the state. Oh joy. Well, not quite. Crypto is finding its way into everyday investing and market regulation. Will that trend continue? Who knows.
There is some science behind crypto. There are these things called blockchains, and the technologically inclined people that work with crypto know all sorts of fancy things about how to mine blockchains to create new crypto or how to write code to create software, contracts, and sales. Whatever, I don’t need to know about that. All I need to know is that it is a method of ensuring accountability.
The crypto world has various ways of ensuring accountability. These are called consensus or consensus mechanism. Because there is no regulatory board overseeing crypto, there needs to be a system for accountability. In this decentralized world this is done through code. The codes have to be precise or you could lose your crypto. For someone new to crypto, the companies you will work with all provide you with a copy-paste link or QR codes.
The most common consensus mechanisms are proof of chain, proof of stake, and proof of work. This all relates to things that a newbie is unlike to have interest in or for someone like me, the capability to do. This part of crypto requires powerful computers and uses a huge amount of energy.
It is not exactly environmentally friendly, but there’s a crypto for that! To be sure, there are likely a few. Scale and efficiency are terms to look out for when looking for more environmentally friendly cryptocurrencies.
Once you have accumulated a sizable sum of crypto, you will want a safe place to store it.
Crypto Wallets are places where you store your crypto off or on line. These could be hard drives (like a thumb drive) or offline apps called Vaults. I will not be going through all this other than the very basics. They are safe places to store your crypto but are typically designed for large sums. Look out for fees!
Crypto is risky. Hacking is real and you can lose your funds this way. Some companies are backed by the FCC. But read up because that doesn’t mean you are backed. It all depends on how the company is set up.
You also need to remember your passwords and codes and other types of information that is designed for ensure security. These can be stored in your wallet or Vault, I think. Like I said, I’m new so I am sharing what I know now. I’ll revise this if necessary.
The Big Players, or two big players
I eventually opened an account with Voyager and Coinbase. Each company offers a different set of cryptocurrencies, with some overlap. I am not one to spend large sums of money, especially not on something I do not quite understand and is known to be volatile. Nonetheless I put $10 on Voyager and completed some tasks in Coinbase to acquire free crypto. I ended up with $39 in various cryptocurrencies after going through the videos and quizzes to acquire the rewards.
Let me tell you what I like about Voyager and Coinbase. And what I do not like.
Lets start with Coinbase. Coinbase is great because of those rewards, you can earn free crypto. When I completed the rewards the market was moving up and I got in just before it really went up. So my free crypto is now twice the value it started as, some of them three times the initial value.
Of course, this could all come crashing down at any moment.
What I do not particularly like about Coinbase is the fees.
Fees, fees, fees. A fee to add money; a fee to withdraw money; a fee to exchange for a different type of crypto. And these fees are not insignificant if you are working in small amounts of money.
What I do like about Coinbase is that there is no minimum amount you can trade. If you want to do a $1 buy and pay the fee, you can. But I won’t be paying half a dollar to buy a dollar of crypto.
This brings us to Voyager.
Voyager does not have those fees. Their fee system is hidden.
Voyager has a setup where, like in the stock market, there is a bid price and an ask price. Also like the stock market, there is a market buy and a limit buy. The ask price is the price you pay to buy, the bid price is the price at which you sell.
For those who need more information, a market buy is the stated ask price for a stock or in this case a crypto coin/token. This is the price you pay is you go with a market buy. A limit buy is different. A limit buy allows you to determine the price at which you buy a crypto or stock.
Limit buys work like this: If the ask price is $35, you can tell the Voyager app that you want to buy at $33.15. In fact you can go out 4 decimal points to $33.1562 if you want. Then you can either say how many you want to purchase or the total price you want to pay. Then it will calculate either the total or quantity of crypto for you, respectively.
After you acquire your crypto, the app will tell you what how much profit or loss you have made. This number is constantly changing because the crypto market is never off. It is a 24 hour market.
I consider crypto and putting money into the crypto market like a casino. You might lose big, you could win big. Always assume you are throwing money away.
The only shortcoming I have found so far with Voyager is that the profit they provide is based on the ask price and not the bid price. This means when you sell your asset, you are selling at a lower price than the assumptions the app makes for your profit/loss.
What I like about the Voyager app is that I can make purchases and sales without those fees, recognizing the difference between bid/ask price. Because there are no fees, the app allows you to use it like a penny slot machine in a casino. I can execute the minimum trade, $10 in Voyager. Sure it is not a penny, but it is a reasonably small amount of money to throw away… if you can afford it. Right now, I can so I am playing around in the crypto market.
Voyager also reportedly has some other reward system in the works. This is all just talk. I will believe it when I see it!
Coinbase and Voyager both offer interest on certain types of crypto. Stablecoins, those pegged to the dollar, have a low interest rate on Coinbase (.15%) and a high interest rate on Voyager (8.5%). As with buys, on Coinbase there is no minimum holding to earn interest. Voyager has minimums required to earn interest, for stable coin USDC the minimum is $100 or 100 coins.
As I write this (3:30pm Friday, 2020 Feb 19), Huffington Post’s headline story reports that Bitcoin has reached $1 trillion dollars. Elon Musk has recently purchased $1.5 billion in Bitcoin.
There are things I do not understand about Bitcoin. It is known to have slow transaction times, a problem other cryptocurrencies (called altcoins) have found ways around. The background to cryptocurrencies is full of technical knowledge and know how that I do not have. I am merely looking at the numbers posted in the crypto market. There is a great deal of knowledge to be gained, but I am no computer scientist so “mining” is not in my future.
For me, crypto is like a casino. Expect to lose big, but hope to win big. I treat it like a penny machine at a casino. I do not have a lot of money to “invest” but I can tolerate losing $10 here or there.
They say crypto is extremely volatile, but so is the regular stock market since it started being deregulated in the 1980s. Remember: crypto is not regulated, but it is subject to government finance laws.
Beware of what you invest in, it could get shut down unexpectedly as happened to the promising crypto Ripple. Ripple is still in the process of working with regulators to figure out how to get back up and running.
Back then I thought crypto was a pipe dream. Money already existed online. But now I recognize that there are limitless opportunities by delinking banks from finance. Dangerous as that may be, or seem.