What is Crypto? Is it a Scam? Or is it here to stay?
Learn the fundamentals of cryptocurrencies, blockchains and their future in society.
In this Course:
1. What is Crypto?
Crypto, short for Cryptocurrency, stands for a currency that is completely digitalized i.e. stored on technological devices, as opposed to being in a physical form.
Cryptocurrencies can be used for all sorts of reasons, such as asset tokenization for companies, payments, applications, networks, gaming, transactions and pretty much anything digital.
Cryptocurrencies use cryptographic technology, commonly referred to as ‘Blockchain technology’. Blockchain technology is what makes these currencies extremely secure. The technology makes all transactions visible, traceable, secure and decentralized.
Decentralization is what makes Crypto truly unique. Essentially, Cryptocurrencies run on a network where there is no central authority controlling it, it’s completely decentralized. Why is this so revolutionary? Well, it protects it from flaws you’d see in the current monetary system. For example: inflation and the ability to print money at an un-capped rate, governments controlling the economy and a middle man in all transactions taking fees from users.
Bitcoin is an example of the first wide-spread Cryptocurrency to exist, founded in 2009. Since then, it has reached an all-time high value of over $68,000, while currently sitting at $23,500.
2. How does Crypto work?
Blockchain technology even at a simple level, has its complexity, but to truly understand Crypto, these principles are a must know:
Digital Wallets
Firstly, digital wallets. Digital wallets are how you store, send and receive Cryptocurrencies. When you buy crypto currencies on exchanges they will automatically be stored in digital wallets on that exchange. Once you have a digital wallet, you will be given a unique wallet address (kind of like a personal email). The unique address will be a long line of randomly generated characters such as: “3GDbgi29cpjq2GjdwV8eyHuJJnkLtktZc5”. All you need to do is copy and paste this address, give it to friends or family or whatever payee, and then they can send you Crypto, and vice versa. The digital wallet must be compatible to the Crypto you wish to send and receive.
Blockchain Technology
Blockchain is the next core component. It is called Blockchain, as all the data on blockchain networks, are stored in blocks, and are all sent in these blocks in chronological order so it’s easy to view, track and secure. Blockchain is essentially a public peer-to-peer network, where transactions are made and it is almost impossible to alter and hack into these transactions. Each digital wallet has something called a private key. This is something used to sign transactions which is proof that the owner authorised the transactions and prevents transactions being altered or hacked into. Transactions are sent off into the network and then within minutes will be confirmed either by protocols, Proof-of-Work or Proof-of-Stake being the main ones.
Mining
Mining (Proof-of-Work) is one way transactions are confirmed, commonly used in Bitcoin. It works by miners solving complex cryptography puzzles/challenges which will then verify each transaction. It means that there is a clear chronological order to the blockchain and provides security and authenticity of transactions. Miners are rewarded for keeping the network running.
Proof-of-Stake
Another newer protocol, Proof-of-Stake, is an alternate way to validate transactions, something Ethereum are switching to. ‘Validators’ or those who volunteer to be network participants, can lock or ‘stake’ their cryptocurrency into the network. Each validator who stakes their crypto will secure the network as collateral for verification of transactions, and are rewarded for doing so. Proof-of-Stake is becoming increasingly favoured as it is believed to be more secure, scalable and energy efficient.
3. Why is Everyone investing into Crypto?
In 2021, we saw one of the largest bull runs in the history of Cryptocurrency. This was where the majority of all cryptocurrencies saw exponential gains, and huge opportunities to make a lot of money. Here, we saw retail investors and corporations like Amazon, Tesla and Google all getting involved. The total market cap reached a peak of around $3 trillion.
Bitcoin is what people believe to be the reason for the rise of cryptocurrency. Those who believed in Bitcoin from its inception in 2009, would have had the chance to buy Bitcoin for a dollar or even less. In 2021, that $1 investment would have risen to a peak of $69,045 per Bitcoin. That’s a 69,045x on your investment! For this reason alone it’s clear to see the growth and belief in the industry. When you pair this with the fundamentals of de-centralization, security and transparency, it’s obvious why there’s so much hype.
For a long time, it was all about Bitcoin. Then, we started to see the rise of alt coins (alternate coins), such as Ethereum in 2015. This was a game changer, as Bitcoin always had the vision of being a currency and payment platform, coins like Ethereum had different intentions, a platform for anything and everything. Utility such as decentralized applications, NFT’s, play to earn games, decentralized finance and much more. The huge success of Ethereum saw its price peak at $4,811 in 2021.
Then, came along meme coins. Dogecoin, the first successful meme coin of its kind, brought millions more investors to the crypto space. Dogecoin was made ‘as a joke’ by the developers, and that’s certainly what it turned out to be, with Twitter and Social media going crazy over this cryptocurrency which had very little use cases. Elon Musk famously pumped the price of Dogecoin, posting dozens of memes regarding the coin, which twitter loved. The coin that was initially a joke, was nothing of the kind eventually to investors, as prices rose to $0.68, minting many millionaires who bought when it was 1000x cheaper.
Thousands of other cryptocurrency types exist. Cryptocurrencies for NFT’s, games, video streaming, AI, sports, finance etc. Over 19,000 in total exist, which can be both a good and bad thing for the Crypto space. On one hand, you have hundreds maybe thousands, that are really useful and can change the world as we know it, and on the other hand, we have those that exist to scam and dump on their investors, something that more regulation is needed to clear up.
4. Is Crypto a Scam?
The truth is that not everyone will feel confident throwing thousands of their hard earn money into Cryptocurrency. Cryptocurrency is still in its infancy, with not much regulation or control over scams and pump and dump schemes. This sometimes leads to investors losing life savings, and in turn you hear about this in the media, but is all of Crypto like this?
Pump and dump schemes are where the developers of a crypto project will hype it up, make false claims and promises, all with the intention to sell all their own tokens as soon as the price rises. They do this just to exploit investors who FOMO into investments, and make money out of them. As the team of these schemes dump all their token, it means that the rest of the investors are left with worthless tokens, and a team who abandons the project. These schemes are what give Crypto a bad name, as they are not representing the true fundamentals Cryptocurrencies stand for.
This is why it’s imperative as an investor, that you always do solid research into the project you’re thinking of investing into. When investing, you should be looking at the following factors: The Project, Utility, Roadmap, Team, Marketing, Community, Tokenomics, Partnerships and Exchange listings. If the team delivers in all these departments, it can be seen as a safe investment.
With time, more regulation will come. As mentioned, Cryptocurrency is still early in its life cycle, only really kicking off in 2009 with the rise of Bitcoin. This means that over time we will see more regulation by governments, which will be a good thing for the space. It will mean that your investments are more protected from these pump and dump schemes, and corrupt activities.
5. The Future of Crypto
Whilst no one can be certain of the future of Cryptocurrency, it certainly seems like it’s here to stay. The current monetary system in today’s society, whilst it has it’s many flaws, it’s unlikely to be replaced by Cryptocurrencies. Despite this, there are many reasons why Crypto can still co-exist alongside it.
Global adoption is one of the reasons. We have seen Cryptocurrencies not only surge in popularity in first-world countries among investors and developers, but also amongst third-world countries. Ethiopia, being one of those countries, as we speak, are trialling the adoption of a Cryptocurrency project called Cardano. The purpose, is to provide digital identities for school kids across the country, to improve their school grades. Alongside this, you have people sending Cryptocurrencies to countries in need, like Ukraine fighting a war, when their own financial systems are failing them, with banks freezing withdrawals.
Corporations investing huge amounts into the Crypto industry is another reason to support its longevity. With the 2021 bull run, we saw industry titans such as Google, Tesla, Facebook and more pumping Billions of dollars into the industry. This shows that the largest corporations are backing the growth of Crypto for the future.
In its essence, the possibilities are endless with Cryptocurrencies. We have seen thousands of new Crypto projects started up, and will see thousands more in the future. Some are already changing the world as we know it with their technology, and will continue to do so in the future.