As a professional trader, in my industry the biggest misconception I hear around cryptocurrencies is that some people mistakenly assume it’s just a fad. However, as the savvy investor knows, just because crypto is still a relatively new asset doesn’t mean we should dismiss it or overlook it as a passing trend.
In the dot com boom of the late 90s and early 2000s, many projects had insane valuations and most disappeared over time. Either way, the internet as an underlying concept turned into what it is today, and standout companies have stood the test of time. Cryptocurrency as a concept is like what the internet was 25 years ago, and a lot of the work being put in will only be fully realised in the future. The most important thing to remember about cryptocurrencies, is that we are still early in its development.
If you’re interested in learning more about cryptocurrencies, here are some reasons why it’s important:
- Cryptocurrency is owned by everyone
There are a couple of fundamental differences between cryptocurrencies and any traditional, national currency (fiat currency). Fiat Currencies are created and regulated by government bodies, all of which represent a debt. Anyone that owns fiat currency holds an “IOU” issued by the respective government.
However, cryptocurrency is owned by everyone, and therefore does not represent a debt. It strictly represents itself, and its value is therefore determined by what someone is willing to trade for it. Cryptocurrency is important because no government body regulates it, and therefore its value is not subject to a country’s political whims or a central bank’s monetary policy.
- Cryptocurrency is almost impossible to forge
Cryptocurrencies operate on a blockchain, which is like a distributed ledger. Understanding blockchain technology is key to understanding the power of digital currencies.
The “block” is composed of encrypted data, and the “chain” is the public database in which the blocks are stored and sequentially related to each other. Every section in the blockchain has a unique code (called a hash) that distinguishes itself from all the other “blocks” in existence. The database of “blocks” is simultaneously distributed worldwide among millions of computers, meaning that if someone wanted to try and forge a single “block” of data, they would need to manipulate all the “blocks” in the chain from a single point in history onwards, while also updating all the computers holding copies of the blockchain data. While this might be theoretically possible, in reality the amount of money and time needed to achieve such a feat would make forging well-established cryptocurrencies impossible.
- Cryptocurrency security grows through time & value
To elaborate on my previous point, a “hack” of the cryptocurrency database would require the hacker to gain control of at least 50% of the computers making up the blockchain network. For well-established cryptocurrencies, like Bitcoin of Ethereum, the networks are so big that a hack to gain majority control would be virtually impossible.
However, what investors in newer cryptocurrencies need to understand is that these networks are smaller and less well established, making them more vulnerable to hacking.
Cryptocurrencies are a very nuanced ecosystem that is constantly evolving. If you want to start trading in cryptocurrencies, you need do your research and keep your eye on the recent developments. A great start is to follow 20-30 active Twitter accounts that cover cryptocurrency and checking in on your feed daily. There are also active Discord communities which you can join for projects that you are interested in. Global Prime offers a Discord which has a dedicated crypto channel.
Do you think cryptocurrencies are the future? Let us know in the comments.
By Jeremy Kinstlinger, Co-Founder and Director of Global Prime
Jeremy Kinstlinger bio:
Prior to his current role, Jeremy enjoyed a decade long career in design and marketing. On the hunt for another challenge, he found mentorship in the online trading space where he immersed himself in the complexities and intricacies of online trading. In 2011, he joined Global Prime as a Co-Founder and Director, alongside his cousin Elan Bension. Jeremy’s intrigue into the world of online trading led to the development of personal trading strategies which he shared on international forums and quickly developed a thousand strong following of clients that have followed him on his journey and trade with him today.