My dad (a retiree) came over for dinner just now, and I was trying to explain Bitcoin and crypto to him. I think I managed to simplify it enough for him to understand, which is good.
I'm taking the same approach for this series of articles I am writing, namely: to keep things short and simple, and largely focused on what laypeople are interested in. (Or what I am interested in, as my blog is called "Anything that Interests Me".)
In this post, I am going to talk about Bitcoin, for absolute beginners.
Cutting through the technicalities, Bitcoin is basically a digital currency.
(As an aside, as far as I understand it, when we are referring to Bitcoin, the proper noun, there is a capital "B", but if we are talking about it as a unit of currency, it is with a small "b".
So, when talking about Bitcoin in broad terms or as software or technology, it is with a capital 'B', but you buy 100 bitcoins with a small 'b'.)
Essentially, Bitcoin is the most successful cryptocurrency (or crypto) out of hundreds if not thousands of attempts to create virtual money.
Currently, Bitcoin's market cap is more than US$1 trillion. [1]
Yes, you read that right.
As at the time of writing, 1 bitcoin (or 1 BTC) was worth about S$77,900, or about US$58,800. [2]
Recently, companies have started investing (but I think the correct word is speculating) in bitcoin.
For instance, South Korean gaming giant Nexon reportedly allocated $100 million into bitcoin, while China's Meitu, the developer of China's wildly popular beauty-enhancing photo app, reportedly accumulated about $100 million worth of bitcoin and Ether. They follow hot on the heels of other companies, like Elon Musk's Tesla, which bought $1.5 billion of bitcoin. [3]
For most laypeople like ourselves, bitcoin is purchased on an exchange, such as Coinbase (https://www.coinbase.com/) or Coinhako (https://www.coinhako.com/).
An exchange is basically like a stock exchange, a place where buyers and sellers come to buy and sell cryptocurrencies, such as bitcoin and ether.
If you buy bitcoin, it will be stored in your wallet (somewhat similar to storing money in a wallet in real life).
I know I promised to talk about Bitcoin for beginners, but really there's some scope for basic economics here.
Since the meteoric rise of the price of Bitcoin, it would not make sense to invest all of your life's savings into this currency. However, if you would like to speculate, this would make a good punt.
If you apply some basic financial principles, such as diversification, you would probably also look into other cryptocurrencies, such as ether (in second place) and other altcoins (alternative cryptocurrencies) to place some bets in, rather than going all in on one type of crypto or the other.
There is also great volatility in the price of bitcoin, which has seen its fair share of rapid rises and equally rapid declines.
Unlike Bitcoin, which can be thought of as a store of value, ether is the token used on the world's currently most used blockchain, Ethereum. Ether has powered the ongoing NFT (non-fungible tokens) craze. And it is also going through upgrades that could boost its price.
I think that's really it.
But I would like to conclude this simple post on Bitcoin for absolute beginners with a well-intentioned piece of nagging.
When it comes to mining, running nodes, and doing computer programming, in my experience knowing what they are about does not protect ordinary speculators (or anyone, for that matter!) from the simple fact that as a layperson you will be facing volatily, soaring highs and crashing lows, if you put money into bitcoin (and other crypto). You could stand to lose a lot, especially if you need to pull out your money urgently.
And no less a luminary than Elon Musk himself has said that people should not invest all their life savings into crypto. That would be unwise.
But if you fancy a punt, as I do, I have taken up some crypto (mainly ether), with some small amount of money that I can afford to lose.
And let's see where this rollercoaster ride will go! Rocketing to the moon, perhaps?
Anything that Interests Me! - More to come on crypto for absolute beginners and laypeople like myself
Sources cited:
[1] https://sg.news.yahoo.com/how-to-decide-whether-to-invest-in-bitcoin-or-ether-020413608.html
[2] Based on a simple Google search. Seriously.
[3] https://asia.nikkei.com/Spotlight/Cryptocurrencies/Asian-companies-accelerate-shift-to-bitcoin-as-price-surges
